How The State of Travel Effects Events

The Current Outlook of Business Travel

The Current Outlook of Business Travel

There are varying opinions on whether or not the travel industry is still on the mend from the recession or if it is seeing growth. Many optimistic reports are relying specifically on past data and trends to forecast future figures but airlines and the travel industry may not be experiencing greener pastures quite yet.

The current state of travel is a key component in the events industry; event planners should keep themselves aware of predictions and reports to avoid possible challenges down the line.

Multiple Factors Influencing the Travel Industry

The travel industry is highly effected by global issues, logistics, transportation infrastructure, government regulations, and international relations. Essentially, industry growth has been slow and cautious. The Global Business Travel Association recently released a report suggesting that the business travel industry is growing at an extremely slow pace due to global uncertainty. For the second quarter in a row, the GBTA has “downgraded the forecast for U.S originating business travel due to a number of domestic and international factors causing global uncertainty and corporate caution.”

Tax Hikes Costing the Consumer

One of the major reasons that business travel is growing cautiously is because of the recent policies, tax increases and pricing structures. In recent years the aviation security tax has increased despite opposition from multiple groups including consumers, the Global Business Travel Association (GBTA), congressional leaders, and airlines. This increase means that passengers are now footing the bill of over a billion dollars in higher taxes and fees in ticket prices.

The tax hike resulted from the Travel Security Administration needing additional funding for the increased security measures within airports. The TSA is advised to screen a higher number of passengers but with the same amount of staff. Taxes from passengers only support about 30 percent of the TSA’s budget. Many people believe that the TSA needs to start creating efficiencies to deal with costs, instead of continually increasing the budget, at the taxpayer’s expense.

Increasing taxes and fees mean that fewer businesses are sending their employees on the road because of the expense. Taxes on travel-related services increased by 58% in 2013. This means that businesses and the U.S economy are the ones footing the majority of the bill.  The fight to decrease this tax is ongoing in order to reach the goal of the opposing groups, which is to make travel safe, affordable, and efficient.  

Oil Prices Affecting International Travel

The stronger dollar and low oil prices have been a major positive for consumers in their daily lives. However, the lower oil costs and a more valuable dollar is causing confusion within the airline industry. This is directly affecting the travel industry by putting a limit on price increases. And due to this limited increase in pricing, exports have slowed, which is also affecting U.S outbound international travel. Recently, the U.S has seen the least amount of growth in international travel than it has in the last seven years.

Emergence and Growth of Budget Airlines

In the past years, we’ve seen the emergence of many discount or budget airlines that provide more affordable fares. Though the flights may come with their “drawbacks” i.e. no beverages or peanuts. These budget airlines have allowed travelers to fly more affordably and have been able to keep the prices of their tickets reasonable throughout the recession. Many business people are beginning to use the budget airlines to keep travel expenses lower, especially when flying to multiple destinations or cities.

Restructured Multi-Fare Prices Costing Business Travelers

Last week, the three major airlines have completely restructured their pricing structure for multi-city fares. This is a move that will directly affect business travelers. Travelers could end up paying 6 to 7 times more than what they would pay in the past. American, Delta, and United airlines made the changes to be able to compete with low-cost markets.

In the past, travelers would combine nonrefundable tickets for one-way flights However, with the new model the airlines only allow the combination of refundable tickets which often cost several times more than a nonrefundable tickets. There has been an increase in discount airlines and flight prices, such as Frontier and Spirit Airlines, and in order to compete, the three large airlines dropped their standard, economy flights. The three major airlines realized that lowering the basic prices meant they would lose revenues because many people link together one-way trips.

Now instead of being able to connect one-way nonstop flights by yourself to cut costs, it will now cost much more than previous one-way multi-city trips. Previous to this change, travelers could book multiple tickets to multiple cities under a single reservation. Now these costs are being footed by consumers and it’s also possible that travel agencies will be paying the difference in this model change as well. This is going to take the biggest stab at a business traveler’s wallet since many business travelers’ itinerary consist of multiple destinations in one, single trip.

Global Uncertainty and Fear of Traveling

The volatility of the financial market has increased in response to a weaker global economy. The global economy has impacted prices, exchange rates, and business’s profits. Stock share prices are shifting and yields from bonds are decreasing causing more businesses to institute cost control practices and shifting their budgets.

As we all are aware, terrorist activity around the world has been increasing and happening much too frequently. With explosions and attacks in France, Belgium, Denmark, Jerusalem, Indonesia, and many other countries, the fear of traveling safely is a prime concern for many travelers The increasing issues around the world are causing travelers to become very cautious in considering international travel destinations. Previously targeted locations take a significant hit following an attack. It is difficult to regain a once positive perception for the area.  For instance, 65% of people in a recent study stated that fear of traveling to that destination starts to subside by three months, while 6% of travelers say the fear last indefinitely.

While many people have fears when traveling, their privacy concerns related to the industry are fading. With the “danger” of travel increasing, people are more willing to relinquish their privacy in order to feel more comfortable and safe while traveling.

Slowly….. But Surely!

Despite the current events and circumstances, the outlook for the travel industry is optimistic and positive. While growth is very slow and uncertain, the upward trend is expected continue and stabilize in the future. The travel industry will struggle on its upward path, but the issues factoring into the overall global economy are predicted to likely resolve themselves later this year according to Michael McCormick, the executive director of GBTA, thus creating a higher level of confidence in both business and leisure travelers.

The travel industry is highly effected by global situations, terrorist activities, oil and gasoline prices, airline policies and prices, as well as, the general outlook of the economy. The GTBA’s McCormick stated “the outlook for business travel in the coming months and years still remains positive. It is estimated that there will be over 500 million business travel trips taken in 2016, and more than 295 billion spent on business trips just in the US market. Though these numbers to not represent year over year growth, the do represent a positive foundation for an improved business travel outlook in 2017.”

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