Future growth in business travel spending and the number of trips taken would be impacted – but would not force an overall market decline – by a short-term oil price spike, according to new research from the Global Business Travel Association Foundation (GBTA), the research arm of the Global Business Travel Association. The findings show that the critical contribution business travel makes to economic growth would likely support to continued investment in travel, even in the face of substantially higher fuel costs.
These findings were released in a new report, What Does Triple Digit Oil Mean for Business Travel, announced at the GBTA Strategic Travel Symposium event in New York City.
The Impact of an Oil Price
The research identified scenarios in which oil prices would remain above $125, $150 and $200 per barrel throughout 2011, with prices returning to a baseline level by 2013. It found that business travel spending and, to a lesser extent, number of trips taken, would continue to grow in all of these situations – but also that high oil prices would take a substantial toll on the rate of projected business travel growth over time.
* Oil priced at $125 bbl would result in a reduction of nearly $5.8 billion or 1.5 percent in total U.S. business travel spending and roughly 700,000 trips forecast between 2011 and 2013.
* Oil priced at $150 bbl would result in a reduction of nearly $6.9 billion or 1.8 percent in total U.S. business travel spending and roughly 1.8 million trips forecast between 2011 and 2013.
* Oil priced at $200 bbl, the extreme shock scenario, would result in a reduction of almost $9 billion or about 2.5 percent in total U.S. business travel spending and roughly 2.7 million trips forecast between 2011 and 2013.
“In light of current developments in the Middle East and the highs we’re now seeing in oil prices, this research shows business travel is more resilient than the conventional thinking might suggest,” said Michael W. McCormick, Executive Director and COO, GBTA. “It underscores the point that business travel is, very simply, central to economically productive activity overall. So, although an oil price spike would be very painful for the travel industry, essential travel would clearly go on and in fact the number of trips taken would continue to increase.”
“By providing this data-driven forecast on the effects of higher priced oil on the economy and business travel spending, travel managers and suppliers can better anticipate the potential impact on their own programs and investment plans,” he added. “This information is an important addition to the Business Travel Index reports that the GBTA Foundation recently introduced, as well as another component of the Middle East crisis research and discussions currently being facilitated by the GBTA.”
The research was conducted through an analysis and econometric model used in GBTA’s Business Travel Quarterly Outlook reports which was altered or “shocked” to assume conditions of elevated oil prices during 2011 and 2012.