Tuesday, February 21, 2012

Euro Debt Crisis Could Cripple U.S. Business Travel- Financial Eyes ...

The economic climate abroad has potentially severe ramifications to U.S. business travel as owners lose interest in European business opportunities.

According to a new report by the Global Business Travel Association Foundation (GBTA), if the European debt crisis deteriorates any further it could have a significantly damaging impact on U.S. business travel, which in turn could greatly impede the economic recovery in the States that?s just now seeing progress.

The U.S. business travel industry has seen considerable gains over the past three years, which Michael W. McCormick, executive director and COO of the GBTA, attributes to the growth of outbound international travel. Last year alone saw business travel spending up 7.6 percent to $251.9 billion.

However, the current economic condition in Europe could cause business travel from the U.S. to Europe to pull back, resulting in a possible slump for top-line growth that?s been fueled by ?putting people on the road to find new business opportunities.? Not to mention the Euro slid to a one-month low earlier this week after Moody?s Investors Service put several European financial firms up for review, spelling bad news for the European banking system, as well as outbound international travel.

?There?s a strong correlation between business travel growth as a leading indicator for the overall health of the economy and for employment figures here in the U.S.,? McCormick says. ?If there?s not a speedy resolution to the European debt crisis, then what we could see is a domino effect that could reach across the waters and start to have a deep effect on the economy in the U.S.?

How deep of an effect? The GBTA?s report paints three possible scenarios:

  • Baseline/Current Scenario: The situation in Europe reaches a point of moderate stability, with continued growth in U.S. business travel reaching $263.5 and $277.3 billion in 2012 and 2013, respectively.
  • Moderate Scenario: A drawn-out crisis causes business travel to plateau and eventually decline by $40 billion or 7 percent between 2012 and 2013.
  • Severe Scenario: Far-reaching defaults, bank failures, and possibly a dissolved European Union would cause a sharp plummet in business travel spending by as much as $88 billion or 16 percent between 2012 and 2013.

With the frangible European crisis far from being resolved, McCormick fears a ?very concerning environment? is on the immediate horizon. ?Right now we?re seeing a 25 percent chance of moving to a moderate scenario and a 10 percent chance of moving to a more severe scenario?those are, unfortunately, very significant odds,? he says.

Despite the ubiquitous headlines that depict a less than favorable view of the crisis abroad, not everyone in the business travel industry is worried just yet. ?Clearly clients are concerned with what trends might exist and what might be happening with the European crisis, but we haven?t had anyone say they want to modify their travel program in any way,? says Brian Hace, vice president of client service for business travel management company Carlson Wagonlit Travel. ?There are still enough unknowns about the European crisis that there isn?t an immediate need to react.?

Should the GBTA?s predictions become a reality, Hace goes on to cite previous setbacks in the business travel industry, such as the Sept. 11 attacks and the 2010 volcanic ash eruptions in Iceland, as prime examples of how the system has been able to calibrate itself even in moments of crisis. ?I think as an industry we have an infrastructure of people and talent to address whatever the need might be on behalf our client, whether it?s an immediate security situation or a more long-term economic situation,? he says.

Although the GBTA?s findings do indeed portray quite the extreme worst-case scenario, McCormick?s urge for business owners and travel agents to err on the side of caution is justifiable given the volatile economic climate in Europe. He says, ?We certainly don?t want to be the bearer of bad news, but it?s one of the those situations now where we have to watch it very closely because it could have a very dramatic impact on business travel and business in general.?


Source: http://www.financialeyesandears.com/2012/02/19/euro-debt-crisis-could-cripple-u-s-business-travel/

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