• by Jack Loechner , Staff Writer @mp_research, October 1, 2009

According to new research conducted by Oxford Economics there is a clear link between business travel and business growth as American businesses are planning their 2010 budgets and federal policymakers are looking to stimulate the American economy. For every dollar invested in business travel, businesses experience an average $12.50 in increased revenue and $3.80 in new profits, according to the study.

Based on a combination of two separate surveys of corporate executives and business travelers, a review of related research, and an econometric analysis of the effects of business travel on corporate performance, the results of this analysis show a robust and irrefutable relationship between a company's investment in business travel, including internal meetings, trade shows, conferences, incentives, and sales, and its profitability.

Adam Sacks, managing director of Oxford Economics, said "...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."

• Curbing business travel can reduce a company's profits for years. The average business in the U.S. 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 customers 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 by 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 

The study shows that business travel in the U.S. is responsible for $246 billion in spending and 2.3 million American jobs; $100 billion of this spending and 1 million American jobs are linked directly to meetings and events. In the first six months of 2009, business travel spending is down by 12.5% and business travel volume is down more than 6% . A 10% increase in business travel spending would increase multi-factor productivity, leading to a U.S. GDP increase between 1.5% and 2.8%.

Roger Dow, president and CEO of the U.S. Travel Association, says "... Business travel IS economic stimulus... this research shows that face-to-face meetings and incentive awards to top performers are among the smartest investments companies can make."

More than 75% of customers either require or prefer in-person meetings, according to business travelers surveyed in April 2009. And 81% of corporate executives believe a slow economy calls for more contact with clients, not less.

According to business travelers across all industries, 25% of existing customers and 28% of revenue could be lost to competitors if customers were not met in-person. This risk appears to be most acute within the manufacturing sector, where 36% of customers and 38% of revenue could be lost to competitors.

Travel and sales are inextricably linked, says the report. Prospects are more than twice as likely to become new customers with an in-person meeting. Both executives and business travelers estimate that roughly 40% of their prospective customers are converted to new customers with an in-person meeting compared to 16% without such a meeting.

 

Conversion Rate of Prospects to Customers (% of Segment Respondents)
	Executives	Business Travelers
With in-person meetings	42%	40%
Without in-person meetings	16%	16%
Source: US Travel Association, Survey of Business Executives, September 2009

Cooperative relationships are integral to company performance. And both executives and travelers confirm travel to be a catalyst to the development

of relationships on every level. For example, networking with vendors (48%) and prospects (43%) were among the top cited purposes of attending trade shows.

The relationship between business sales and trade show participation is particularly strong. More than half of business travelers stated that 5-20% of their company's new customers were the result of trade show participation.

Customers Gained From Participation In Trade Shows
% customers gained	0-4%	5-10%	11-20%	21-50%	51-75%	Over 75%
% of respondents	20%	36%	23%	11%	6%	4%
Source: US Travel Association, Survey of Business Executives, September 2009

Both executives and business travelers estimate that 28% of current business would be lost without in-person meetings. Roughly 40% of prospective customers are converted to new customers with an in-person meeting, compared to 16% without such a meeting. Executives cited customer meetings as having the greatest returns, approximately $15-$19.99 per dollar invested, with conference and trade show participation returns ranging from $4-$5.99 per dollar invested.

"In tough economic times, many business executives have an understandable short-run focus on managing costs. The report points out the less visible - but significant - long-term benefits resulting from business travel, such as partnership building and new business opportunities," said Dr. Martin A. Asher, adjunct professor of finance at the Wharton School. "Increased business travel in this economy can actually increase sales and reduce the financial decline companies might otherwise suffer."

Given the central importance of this question to corporate strategy, says the report, both corporate executives were surveyed and an econometric model was developed to assess the relationships between business travel spending and company performance.

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-$5.99 for each dollar spent. Incentive travel investments yield an ROI of more than $4+.

Corporate Executives ROI of Business Travel (% Of Total Travel Budget)
Purpose of Trip	% of Travel Budget	Return on $1 of Investment
Customer meetings	34%	$15 -19.99
Client office work	22%	-
Internal meetings	11%	-
Trade shows	10%	$4-5.99
Conferences	10%	$4-5.99
Internal training	7%	-
Incentives	5%	$4+
Other	2%	-
Source: US Travel Association, September 2009

For additional information, and access to the full report as a PDF file, please visit the US Travel Association here.