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Business Management

Investment assessment

New research has tested the link between business travel and profit, claiming every dollar invested in business travel can
create $12.50 in extra revenue and $3.80 in new profit


The study, conducted by global research firm Oxford Economics, establishes a clear link between business travel and business growth, reinforcing the industry’s long-argued stance that if savings must be made, they should be from efficiencies instead of reduction.

“This study shows that not all spending cuts are smart cuts,” says Adam Sacks, managing director of Oxford Economics. “When companies reduce 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.”

Business travel is often seen as a non-essential area of spending, and in the current climate of savage cost cutting it is regularly at the top of savings lists. “Having the ability to demonstrate the return on travel investment has increasingly become a focus and a key deliverable of our members to their organisations,” says Kevin Maguire, chair of the National Business Travel Association. “We thought it was important… to get past the pro-business travel and anti-business travel rhetoric and test the correlation between business travel and sales and profits.”

Beyond hyperbole
The study found that curbing business travel can have a strong negative impact on corporate profits. The average business in the US would forfeit 17 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,” says Roger Dow, president and CEO of the US Travel Association, which commissioned the study. “In order to grow, businesses have to invest. This research shows that face-to-face meetings and incentive awards to top performers are among the smartest investments companies can make.”

The report points out the significant long-term benefits resulting from business travel. However, in the first six months of 2009, American business travel spending was down by 12.5 percent, and business travel volume was down more than six percent. Savings can still be made, but should focus on controlling, not cutting, costs.

“Companies not only have to understand the optimal mix of travel for their industries and companies,” said Hervé Sedky, vice president of American Express Business Travel, “but they need to know how to best use those dollars by investing in smart travel programmes during the downturn so they are in a better position when the economic recovery takes hold.”

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