Cutting Back on Travel Hampers Corporate Growth and Performance

As companies look for ways to combat weakening profits and achieve cost savings, it's tempting to slash business travel as a means for reducing budgets. And while it's true that (as with any cost), there are potential savings that can be realized through more careful allocations of corporate travel, it's risky to cut back too much. In fact, companies that continue to invest in travel reap returns that more than justify the expense.
These are findings of a new study conducted by global research firm Oxford Economics: The Return on Investment of U.S. Business Travel. Commissioned by the U.S. Travel Association, it establishes for the first time a clear link between business travel and corporate performance and growth.

Key Research Findings:
• Econometric analysis and executive surveys both confirmed a high delivery of ROI: for every dollar invested in business travel, companies realize $12.50 in incremental revenue.
• Curbing business travel can reduce a company's profits for years. The average U.S. business would forfeit 17% of its profits in the first year of eliminating business travel. It would take more than three years for profits to recover.
• Both executives and business travelers estimate that 28% of current business would be lost without in-person meetings.
• Both executives and business travelers estimate that roughly 40% of their prospective customers are converted to new buyers with an in-person meeting compared to 16% without such a meeting.
• More than half of business travelers stated that 5-20% of their company's new customers were the result of trade show participation.
• Executives stated that in order to achieve the same effect of incentive travel, an employee's total base compensation would need to be increased 8.5%.
• An increase in government travel spending of $1 million will increase government worker productivity and therefore output by between $4.6 million and $6.3 million.

"This study shows that not all spending cuts are smart cuts. When companies cut 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."
-Adam Sacks, Managing Director, Oxford Economics

What Does Travel Mean for the Bottom Line?
• Executives indicated that the average return of business travel on revenue was between $10 and $14.99 per dollar invested across four types of trips.
• Customer meetings were cited as having the greatest returns, in the range of $15-$19.99 per dollar invested.
• Executives indicated returns for conferences and trade shows in the range of $4-$5.00 for each dollar spent.
• Incentive travel investments yielded an ROI of more than $4.00 for each dollar invested.
• While the highest returns related to broader business travel such as meetings and conventions, the research model did take into account that such trips often have an incentive component, even if it is just the fact that the meeting takes place at a resort