VOL. 127 | NO. 198 | Wednesday, October 10, 2012
Economic Uncertainty Hurts Business Travel
SAMANTHA BOMKAMP | AP Travel Industry Writer
NEW YORK (AP) – U.S. companies are continuing to cut back on employee travel plans amid uncertainty surrounding the health of the economy.
Americans are expected to take 438.1 million business trips this year, down 2 percent from last year, the Global Business Travel Association said Tuesday. Overall business travel spending is expected to be up 2.6 percent, but that's only because trips are more expensive.
"Corporations are in a wait-and-see mode and holding back on investment decisions that would help boost the economy," said Michael W. McCormick, the trade group's executive director and chief operating officer.
The group cites a lack of significant job creation in the sectors that would spur business travel and worries about whether a package of steep tax increases and sharp government spending cuts can be avoided as major factors hurting business travel plans.
The economy is adding jobs and the unemployment rate recently dipped below 8 percent for the first time in four years. But jobs have been concentrated in sectors like retail, restaurant and manufacturing – areas where employees don't tend to travel much. As a result, business travel is not getting the bounce that was typical of past recoveries.
The travel group said fears of the so-called "fiscal cliff" scheduled to kick in at the beginning of next year without action to stop it are "the darkest cloud" on the economic horizon. It predicts the economy will slide back into recession if government officials don't soften the blow.
"This is an economy in need of some good news to shore up business confidence and encourage more travel," McCormick said.
Next year, the outlook for business travel is somewhat brighter. GBTA forecasts total spending will rise 4.9 percent to $270 billion, a slight increase from their forecast three months ago. Total trips, though, are expected to fall 1.1 percent.
The organization expects trips from the U.S. overseas will also be constrained by worries overseas, including recession in Europe and slower growth in China.
GBTA projects international outbound spending to grow 2.5 percent this year. Less than a year ago, GBTA forecast growth of more than twice that.
Hesitation among business travelers is hurting airlines, who count on the well-heeled set to hold up their bottom lines. Business travelers tend pay more because they tend buy airline tickets closer in to their departure date than vacationers. They're also, of course, more likely to sit in the front of the plane.
On Monday, United Airlines said traffic and passenger revenue fell in September. United, the world's largest airline, is operated by United Continental Holdings Inc. Passenger revenue, which measures how much money the airlines make from fares and fees, either declined or rose less than expected among major carriers last month.
Samantha Bomkamp can be reached at www.twitter.com/SamWillTravel
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