Theodore Koumelis – Monday, February 21, 2011
New research conducted by American Express Global Business Travel and the GBTA Foundation (Global Business Travel Association) benchmarks the travel spending businesses require to help support their growth. It further explores the change in this suggested optimal spending level depending on the economic conditions and business characteristics, including industry. The study suggests that travel can be an overlooked means to gain competitive advantage, and those companies that regard travel expenditures as indirect costs to be minimized cut into a key established expansion driver.
This new study, Return on Investment Refresh: Travel as a Competitive Advantage, is the continuation of research initiated in 2009 which first explored the link between travel and business growth. This latest research offers further evidence of travel’s compelling link to corporate growth, and through benchmarking data provides guidance to businesses on the ideal level of travel spending needed to drive revenue in both expansionary and recessionary periods. Additionally it identifies industries in which the optimal level has likely been reached and industries where opportunities remain to reach their potential.
Competitive Advantage: Approaching Business Travel as a Key Growth Driver
The research analyzed business travel spending from a sample of nearly 900 public companies across the past decade of economic cycles. The findings indicate business travel is a contributing factor in helping companies drive revenue:
To reach optimal revenue potential, keeping all other factors constant, the study indicates U.S. industries could increase business travel spending by an average of just over four percent (4%).
This translates to an average of just over $70 dollars more per worker.
The percentage of under-spend varies when looking at specific industry sectors — business services, entertainment and sports sectors typically already operate closer to optimal levels while banking and finance, pharmaceutical and retail companies could likely benefit from greater business travel spending growth.
The economy-wide average return on investment to business travel spending is about 20-to-1, meaning that for every $1 strategically invested in business travel, businesses have seen an average of $20 in additional gross profit.
Company Characteristics Considered When Evaluating Optimal Travel
The research also looked at key company attributes as a way to help quantify factors that affect total travel expenditures in the marketplace today. The characteristics for consideration when identifying optimal travel spending include, but are not limited to:
Size of the business
How far the company’s locations are from its supply chain and demand markets
The use of technology
How productive the firm is in managing its travel spending.
“This study further affirms the link between business travel spending and corporate growth, giving businesses a reason to think about travel as an essential investment and not just a bottom-line expense to incrementally reduce year after year,” said Christa Degnan Manning, director, eXpert insights and Research, Advisory Services, American Express Global Business Travel. “Companies can use this study as a guidepost in evaluating optimal levels of spending appropriate for their business objectives based on corporate characteristics, as well as benchmarking themselves relative to their peers. Considering optimal spending within a managed travel program that also includes virtual meeting solutions is a key component to achieving a balanced, successful program.”
“With this research corporations have the ability to take their managed program to the next level and use the benchmarking data to competitively manage their budget, by understanding if they are operating at their optimal level. Business travel is a key component to the success of a company and business travel buyers must play a role by working directly with the C-level to drive revenue growth,” said Craig Banikowski, president & CEO, Global Business Travel Association. “Now that the economy is in recovery, companies have a chance to optimize their travel spending, creating new connections and new growth.”