News for the Hospitality Executive
WASHINGTON, D.C. – New research conducted by leading global research firm Oxford Economics establishes the first clear link between business travel and business growth. For every dollar invested in business travel, businesses experience an average $12.50 in increased revenue and $3.80 in new profits, according to the study. It is the first time that the return on investment of business travel has been successfully measured.
“This study shows that not all spending cuts are smart cuts,” said Adam Sacks, managing director of Oxford Economics. “When companies cut their travel budgets, there are negative consequences that we can now quantify, in terms of lost revenue and profit growth, and in terms of giving competitors a distinct advantage.”
The study comes at an opportune time for American businesses that are planning their 2010 budgets and for federal policymakers looking to stimulate a struggling American economy. The study found that curbing business travel can have a strong negative impact on corporate profits. The average business in the U.S. would forfeit 15 percent of its profits in the first year of eliminating business travel, and it would take more than three years for profits to recover.
“Business travel IS economic stimulus,” said Roger Dow, president and CEO of the U.S. Travel Association, which commissioned the study. “In order to grow, businesses have to invest. This study shows that face-to-face meetings and incentive awards to top performers are among the smartest investments companies can make.”
Business travel in the U.S. is responsible for $240 billion in spending and 2.4 million American jobs; $100 billion of this spending and 1 million American jobs are linked directly to meetings and events. In the first six months of 2009, business travel is down by 12.5 percent. A 10 percent increase in business travel spending would increase multi-factor productivity, leading to a U.S. GDP increase between 1.5 percent and 2.8 percent.
“In tough economic times, many business executives have an understandable short-run focus on managing costs. The report points out the less visible - but significant - long-term benefits resulting from business travel, such as partnership building and new business opportunities,” said Dr. Martin A. Asher, adjunct professor of finance at the Wharton School. “Increased business travel in this economy can actually increase sales and reduce the financial decline companies might otherwise suffer.”
Both executives and business travelers estimate that 28 percent of current business would be lost without in-person meetings. Roughly 40 percent of prospective customers are converted to new customers with an in-person meeting, compared to 16 percent without such a meeting. Executives cited customer meetings as having the greatest returns, approximately $15-$19.99 per dollar invested, with conference and trade show participation returns ranging from $4-$5.99 per dollar invested.
The Oxford Economics Business Travel study is sponsored in part by the Destination & Travel Foundation, a combined effort of the U.S. Travel Association and Destination Marketing Association International. The mission of the Destination & Travel Foundation is to enhance the destination marketing and travel professions through research, education, visioning and development of resources and partnerships for those efforts. For more information, visit www.destinationtravel.org.
Oxford Economics: The Return on Investment of Business Travel Key Messages
First-of-its-Kind Study Proves Business Travel Drives Revenue, Profit Growth
The U.S. Travel Association is the national, non-profit organization representing all components of the $770 billion travel industry. U.S. Travel’s mission is to promote and facilitate increased travel to and within the United States. For more information, visit www.ustravel.org.
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