As 'AIG Effect' Lingers, Resorts Must Spell Out Value of Face-to-Face Meetings for Businesses
By Robert Gilbert President & CEO, Hospitality Sales & Marketing Association Int. (HSMAI) | March 15, 2010
Business travel continues to be scrutinized, especially as companies look to cut costs in this current economy and as corporations shy away from incentive travel as public focus lingers on the so-called "AIG effect."
The 2009 decline in U.S. business travel will be about 10.3 percent compared to 2008, according to the National Business Travel Association (NBTA), a group that represents 15,000 business travel professionals. Spending on business travel in the U.S. is expected to dip to $234 billion in 2009.
But cutting back on business travel, no matter the reason, can curb profits, prevent deal-closing meetings and reduce return on investment, according to an Oxford Economics study released in September. Face-to-face encounters create relationships in a way unmatched by any other form of communication, whether at trade shows or other industry gatherings. Emerging high-tech conferencing technologies permit parties to see and hear one another remotely, but they cannot replace the trust, bonds and chemistry created by in-person meetings.
The Oxford study said that a 10-percent increase in spending on business travel would boost the country's gross domestic product (GDP) by 1 percent. The study indicates that such an increase could shift the economy out of recession, said Adam Sacks, managing director at Oxford Economics.
"Cutting back on business travel can, in the short run, have some benefits, but even over a 12-month period, cutting back can create significant negative effects on corporate performance," Sacks said. "As companies perform, so does the U.S. economy.
"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."