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By Monica Sanchez

Last week, the GBTA Foundation released our latest quarterly U.S. business travel outlook projecting just over 3 percent growth in business travel spending for 2016 and 2017. Here are three key questions we’ve been hearing about the forecast.

Will airfares drop in 2016?

In 2015, price growth was the lowest we’ve witnessed since the Great Recession. A stronger dollar and plummeting oil prices kept the lid on price increases across the travel sector. Our expectation for price growth in 2016, however, show hotel prices, food and beverage and ground transportation all experiencing a significant rebound, while airfares continue to fall.

It is important to note that this is just the base fare though. Once you factor in fees, the total cost of airfare will likely still be higher as ancillary revenues have been on the rise. From 2010, ancillary revenue for U.S. airlines – just for checked bags and change fees – has climbed from $5.6 billion annually to $6.5 billion in 2014, according to data from the Department of Transportation. It is already at $5.1 billion for the first three quarters of 2015, so it does not appear to be slowing down.

How is group travel performing?

In 2015, group travel outperformed individual travel activity. Average spending on group travel, however, declined slightly from $700 in 2014 to $694 in 2015 per group business trip. Volume growth will pick up the pace over the next two years, growing in the 3 percent range, but spending growth will remain restrained for group business travel through 2016 before loosening up in 2017.

How is the global economy impacting international outbound travel?

International outbound business (IOB) travel continues to face headwinds from poor global macroeconomic fundamentals. Poor consumer and business confidence are holding back global economic growth. Lagging performance and heightened uncertainty in Asia-Pacific, Latin America, the Middle East and Africa have detracted from global growth as well. These headwinds will likely continue to challenge IOB travel performance as we move into 2016 and 2017.

Total IOB travel volume is expected to grow 1.9 percent in 2016 followed by 2.3 percent in 2017, closing in on 8 million trips. Total spending on those trips is projected to grow 2.8 percent this year and another 3.4 percent in 2017, eclipsing $38 billion.

The stronger dollar translates into relatively cheaper travel abroad for U.S. firms, in effect, lowering aggregate spending. The stronger U.S. dollar has the opposite impact on volume, however, as lower costs for travel abroad translates into a higher ROI for U.S. firms sending workers out on international travel. While there is some competing downward pressure from those same firms as they are likely experiencing lower top-line growth from their operations abroad, the net impact of a stronger dollar is better IOB volume performance. Still, we expect economic headwinds to persist over the next two years as growth in emerging markets struggles to regain footing and economic uncertainty continues to handcuff global travel buyers.

About Monica Sanchez

Monica Sanchez joined the GBTA Foundation, the research and education arm of the Global Business Travel Association (GBTA), in 2013 as a Research Project Director. She is responsible for managing and developing Foundation partner research studies in the United States and Globally. Prior to working for GBTA, Monica worked at Experian Marketing Solutions developing consumer behavior models. Monica has more than 10 years of market research experience. Her main areas of expertise are questionnaire design and predictive modeling. She is interested in cross-cultural questionnaire design and its impact on data results. She holds a Bachelor’s in Journalism and a Master’s degree in Survey Research and Methodology from the University of Nebraska - Lincoln. Monica’s favorite season is the Fall when she likes to go hiking and camping with her family.

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