Emerging markets drive global business travel spending up 4.5% in 2011 to over $1 Trillion.

The GBTA Foundation, the research and education arm of the Global Business Travel Association (GBTA), today released the 4th annual comprehensive report analyzing the current state of global business travel spend and growth projections for the next five years. The GBTA BTI(TM) Outlook - Annual Global Report and Forecast, Prospects for Global Business Travel 2012-2016, sponsored by Visa Inc., found that business travel spending growth in developed economies is slowing compared to previous forecasts, but emerging markets continue to grow rapidly.

In 2011, emerging markets such as Brazil, Russia, India and China all experienced growth rates over 15% in business travel spending, more than making up for the substantially slower growth rates of the U.S. and Western Europe. The outlook for 2012 is for global business travel spending to grow at 4.6% to $1.07 trillion, followed by significant growth in 2013, advancing another 8.1%.

Notably, China will surpass the U.S. in total business travel spending by 2014 - a year earlier than previously forecast. This is due to slower U.S. spending growth and continued robust spending in China.

“These are complicated economic times,” noted Michael W. McCormick, GBTA executive director and COO. “Our projections last year suggested that the economic recovery was affecting certain types of countries and markets very differently than others, and the data we have this year reinforce those trends. The continued growth in emerging markets should continue to generate significant expansion in business travel, as more people will need to meet face-to-face to make deals benefiting their companies. Conditions are more uncertain in the developed markets, in part due to the ongoing European debt crisis. Until that crisis is resolved, business travel is unlikely to grow at its pre-recession rate.”

“Emerging markets are proving to be a big draw for business and leisure travelers alike,“said Tad Fordyce, head of global commercial solutions at Visa Inc. “For example, in 2011, we saw Brazilian Visa account holders increase international tourism spend by 32 percent to $6.3 billion and inbound travel increased 10 percent to $2.3 billion.”

In the more developed regions of the world, such as the United States and Western Europe, important drivers of domestic and international outbound business travel have slowed. Corporate profit growth and business equipment spending have both slowed markedly since last fall. Along with them, business confidence has dropped back from levels achieved earlier this year. This has ushered in a more cautious stance on hiring, equipment purchases and business travel. Companies are still dispatching their road warriors, but are doing so at a more cautious pace.

A Tale of Two Economies

Inertia will play a major role in the rise and fall in business travel markets over the next few years. It is becoming increasingly clear that short-run economic growth will be sluggish in the developed world. Countries like the U.S., Germany, the U.K. and Japan are all expected to see sub-3% growth in the near-term. In such a scenario, spending growth on business travel in the developed world will also be sluggish.

Since the turn of the millennium, spending on global business travel has grown at an annual rate of 4.5% to a 2011 level of $1.02 trillion USD. Average annual growth has swung wildly - from a loss of -11.4% in 2001 as the 9/11 attacks compounded the downward pressure from the early-2000s recession - to 15.9% in 2007, the peak of a global expansion. Corporate spending on business travel hit the brakes in 2009, falling 7.5% as a result of the Great Recession.

In 2012 the business travel market continues to be dominated by a few major players - over two-thirds of global spending stems from the U.S., China and Western Europe. Spending on business travel is projected to hit $1.07 trillion this year, 4.6% growth over 2011. GBTA expects spending to advance another 8.1% in 2013 as the economy works through its current doldrums. By 2016, GBTA projects total spending on business travel will hit $1.4 trillion, representing a compound annual growth of 7.7%. However, the downside risks to the outlook for global business travel are abnormally high, hinging on the direction and severity of the crisis in the Euro-zone.

GBTA BTI(TM) - A Tale of Two Recoveries

GBTA has constructed a headline measure of the current and projected level of business travel - the GBTA BTI(TM). This index of business travel activity has been created for total global business travel as well as every major business travel market in the world. The GBTA BTI(TM) is derived from total business travel spending and has been indexed on a base year of 2005.

Global GBTA BTI(TM) has been extremely strong over the last couple of years, hitting 145 in 2011. In fact, the Global GBTA BTI(TM) realized two of its best years on record in 2010 and 2011. During this period the index grew 23 points as the world recovered from the Great Recession.

The GBTA BTI(TM) trends show stark differences from country to country. The developed nations of Germany and the U.S. have both experienced modest growth in business travel - 27% and 15%, respectively, since the GBTA BTI(TM) base year of 2005. Meanwhile, the emerging business travel market of India has more than doubled to 228 and China has more than tripled its 2005 value of 100 to 312.

These trends will persist through the end of the outlook’s horizon in 2016, when China’s GBTA BTI(TM) value will again double to 660. Likewise, India’s current GBTA BTI(TM) value will more than double over the next five years to 482. The mature travel markets of Germany and the U.S. will see much more modest growth over the period - Germany’s GBTA BTI(TM) will grow another 24% to 158 and the GBTA BTI(TM) in the U.S. will grow another 18% to 135.

The GBTA BTI(TM) provides a way to distill market performance and the outlook for business travel into a single metric that can be tracked over time.