The job of a travel manager isn’t just to drive down business travel costs, but also to know how to use travel to drive top-line growth. That, according to Christa Degnan Manning, director, eXpert insights and research, Advisory Services, American Express Global Business Travel, is the principle behind new research conducted by AEGBT and the Global Business Travel Association Foundation, which explores the link between spending on business travel and improved business outcomes.
As the cost of business travel continues to climb—domestic economy airline rates are expected to rise between 2 percent and 8 percent in 2011, with hotel rates also headed up—the question, says Manning, is “How can they [travel managers] change the conversation around travel? How can they get management to see it as an investment?”
The new study, ”Return on Investment Refresh: Travel as a Competitive Advantage,” revisits research done by the two organizations in 2009 tying travel investments to business outcomes. In addition to quantifying the return on investment of business travel, the new study, among other things, looks at the optimal level of travel spending that will drive revenue under both expansionary and recessionary economic conditions, and in various industries.
The report is based on sales revenue and business travel spending data for nearly 900 public companies between 1998 and 2009. It looks at 14 industries specifically.
As in 2009, the study concludes that there is a positive relationship between sales and business travel spending of about 20 to 1. That is, for every dollar spent on travel, a company can expect a return of $20 in sales revenues.
While the law of diminishing returns applies—new travel spending is only profitable up to a point—the report shows that most companies underspend on business travel, meaning that more travel spending would correlate with new sales in excess of the additional travel costs. “The level of underspending varies by industry, but most fall in the 2 percent to 5 percent range,” the study says.
The 36-page report identifies optimal travel expenditures as a percentage of sales in a variety of industries and finds some sectors, notably business services, entertainment, and sports, operating close to optimal levels, while others, including banking and finance, pharmaceutical, and retail, that would benefit from spending more on business travel.