U.S. business travel to slow on Europe's woes, group says

ByABC News
July 10, 2012, 7:44 PM

— -- Europe's economic woes are putting a chill on U.S. business travel more so than the higher airfares and hotel rates that many corporate trekkers are paying this year.

That's the latest assessment out Tuesday from the Global Business Travel Association (GBTA), which predicts spending on corporate trips will only rise 2.2% this year in comparison to 2011.

That's 1.4 percentage points less than what the GBTA previously forecast in the spring.

The continuing economic crisis in Europe is most likely to blame for a slowdown, says Michael McCormick, executive director of the GBTA, an organization of business travel and meeting managers. .

"International travel is still the biggest driver of whatever growth we are seeing in business travel expenditures,'' he says. "But … it's growing at a slower and slower rate.''

Corporate hotel bookings have already dipped. In May, the most recent month available, they were down 5.7% globally and 8.8% in North America compared to a year ago, according to Pegasus Solutions, the largest processor of electronic hotel transactions.

The ups and downs of the financial markets, looming elections in the U.S., as well as Europe's crisis are all "weighing on companies,'' says Julie Parodi, editor of the monthly Pegasus report that looks at rates, bookings and revenue. "That's causing more selectivity . . . which meetings companies are attending and when they're attending them, how many people they're sending and length of stay are all being looked (at).''

Still, when corporate trekkers take to the road, they're often paying significantly more for a room and a flight than they did a year ago. Rick Seaney, of the fare-tracking site www.farecompare.com has said that while some round-trip flights to Europe last year could cost under $700, a ticket this summer will set most travelers back at least $1,000.

And McCormick says that much of the growth in business travel spending can be attributed to those higher ticket prices rather than a big spike in the number of corporate trips.

Hotel rates paid by corporate trekkers have also been on the rise. The average daily rate in North America for May was 7.6% higher than May of last year, and up almost 4% globally according to Pegasus Solutions. s That could change. "It's the bookings that will be struggling more so than the rates,'' Parodi says, "but certainly we could see an ease in the growth pace of rates as well.''

While managers need to decide what's best for their businesses, McCormick says he hopes companies won't pull back as severely as they did during the depths of the recession.

"What we hope is that companies will make adjustments where appropriate. but not overreacting to the situation and causing a further slow down,'' he says. "In order to drive business and drive growth, business travel is a key ingredient … even in more challenging times.''