A glimmer of hope is emerging for a potential rebound. And one of the rebound’s potential drivers may be coming from where its least expected: Business travel. According to a new survey, the severe cutback of travel at corporations may have been a knee jerk reaction rather than a well thought out strategy.
Now, indices are emerging that companies are starting to feel they need to travel again. It’s critical, these business leaders said, in order to maintain relationships and forge new ones. It’s a competitive advantage over those that have essentially eliminated travel due to the fear of the expense or because of negative public perception.
In fact, a new survey commissioned by the U.S. Travel Association and conducted by APCO Insight shows the vast majority of businesses are starting to rethink their rationale for sitting on the sidelines.
Incredibly, nearly three-quarters (72 percent) of businesses surveyed say that increasing travel while others are cutting back creates an opportunity to build market share and new customer relationships. More than half (53 percent) also believe that companies that reduce their business travel will cede advantage to competitors who maintain their travel commitment.
So does that mean companies are getting ready to loosen the strings on travel budgets and get their people back on the road?
“There is a tug of war going on between long term business impact and short term cost cutting,” said Kellogg Business School Professor Daniel Diermeier, a Distinguished Professor of Regulation and Competitive Practice, noting that almost 80 percent of respondents agreed with the sentiment that an increase in travel can achieve definable business results. “In tough times face-to-face interaction may be more important than it was before. Dealing with clients, suppliers and distributors becomes more important. What it means for most companies is it is important to have good understanding and rationale to adjust travel policies.”
Diermeier said the key point is that companies need to be clear on managing their budget smartly to manage the short term, but must also take into consideration the health of the organization in the long term. That’s where travel spending becomes critical for many organizations.
According to Dr. Suzanne Cook, U.S. Travel’s Senior Vice President of Research a small percentage of companies interviewed have actually increased travel because of the competitive advantage these corporate executives feel can be attained by getting out. “There are a few forward looking companies that see this as an opportunity to gain competitive advantage,” said Cook.
Cook said business travel represents a whopping $240 billion in economic activity and she isn’t surprised to see companies pulling in the reins on spending. “It’s no news to [corporate business travel] has been cut back. It’s partly because of bottom line consideration but also the wish to avoid criticism from political circles,” she said.
The survey of business executives at companies with more than $50 million in annual sales found that:
- Yet, top executives worry about the long-term costs of these short-term savings. Nearly all businesses (82%) say travel is important to producing positive results for their organization. What is more, a third of executives at businesses where cuts have been made (31%) think cuts to travel budgets will have a negative effect on the company’s bottom line.
- In fact, large majorities of all companies surveyed say face-to-face interactions are key to growing relationships with clients (88%) and a slow economy calls for increased contact with current and potential customers, not less (81%). Half (47%) believe that cuts in corporate travel in an economic downturn will leave a company ill prepared to seize opportunities when the economy turns around.
- A strong majority (59 percent) strongly agree that in-person contact grows their business
- 72 percent of businesses believe that increasing travel while others are cutting back creates an opportunity to build market share and new customer relationships.
- Companies acknowledge that cutting travel may be a necessity in an economic downturn and are making these cuts to try to save employee’s jobs and salaries.
- At the same time, companies think other’s travel cuts may work to their advantage. Roughly three-quarters (72%) of businesses surveyed say that increasing travel while others are cutting back creates an opportunity to build market share and new customer relationships.
“Travel plays an important role in business growth in a down economy, by helping businesses connect with their customers,” said Dr. Suzanne Cook, U.S. Travel’s Senior Vice President of Research. “It’s also clear from our survey results that the old maxim remains true; if you don’t take care of your customers, someone else will.”
The survey was commissioned by the U.S. Travel Association, and conducted by APCO Insight. Telephone and web-based interviews of 401 business executives were conducted from February 3-18, with a margin of error of + 5 percentage points. They only interviewed executives at companies with more than $50 million in annual sales.