Cutting Back on Business Travel Could Cost You 17% of Your Profit

Yeah, I said it. 

Eliminating business travel will cost your company 17% of profits the first year - and it will take more than 3 years before profits recover to match profits from the time you cut business travel.

That's not just me saying it - that's from a new study by the US Travel Association audited by the Wharton School to ensure the methodology was sound.

We don't really have a dog in this fight - but we think the data is significant.

Here at I2I we don't fulfill awards because it causes a conflict between recommending the right solution and recommending something that we get paid to fulfill.  We'd much rather just provide unbiased advice. However, we do think there is value in many of the incentive awards available.  Group incentive travel being one of them.  Also, from an employee engagement and channel engagement standpoint - meetings travel is a great way to reinforce and drive culture and business practices.

But due to the "AIG" hangover the past 10 months the business travel industry has taken a big hit - mostly undeserved (I posted here, here, here and here on this issue.)   But we've got a bit of light at the end of the tunnel.  Actually, pretty bright light.

New Survey From US Travel Association, Destination & Travel Foundation and Oxford Economics, USA

Yesterday I was on a press call with the above mentioned groups who walked us through a new study that proves a causal relationship between spending on business travel and performance and productivity.  The links to the study are here for Executive Summary and here for the Full Report.

The study is really the combination of two separate surveys of corporate executives and business travelers, a review of related research, and an econometric analysis of business travel on corporate performance.

There are some interesting bits of data from the executive surveys - but that is "opinion" - not necessarily fact. 

The key part of the study is the econometric study.  Covering 14 sectors of business over a 13 year period using US Bureau of Labor data the study proved...

• A business will lose 17% of it's profit if it eliminates business travel as a tool!  That loss is pretty much permanent since it creates a new growth curve - below that which you would have had without cutting back.
• There is a positive and causal relationship between spending on travel and corporate performance - $1 in travel spending returns $12.50 in incremental revenue and an average of $3.80 in incremental profit.

That is significant.

Remember - this is based on statistical modeling - not just the "opinion" of the executives (interestingly - their opinion did fall in line with the fact-based models.)

If you were considering cutting budgets for business travel in 2010 - don't.  It will cost you money.

If you want to drive some significant profit growth - think about beefing up your customer visits, your trade show attendance, your employee meetings and your group incentive travel.