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Business travel increases company profitability: study

30 October, 2009

Research conducted by leading global research firm Oxford Economics has established the first clear link between business travel and business growth.

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. It is the first time that the return on investment of business travel has been successfully measured.

"This study shows that not all spending cuts are smart cuts," said Adam Sacks, managing director of Oxford Economics. "When companies cut 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."

The study comes at an opportune time for businesses that are planning their 2010 budgets, and finds that curbing business travel can have a strong negative impact on corporate profits. Corporations could forfeit up to 15 per cent of profits in the first year of eliminating business travel, and it would take more than three years for profits to recover.

"Business travel IS economic stimulus," said Roger Dow, president and CEO of the U.S. Travel Association, which commissioned the study. "In order to grow, businesses have to invest. This study shows that face-to-face meetings and incentive awards to top performers are among the smartest investments companies can make."

"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."

Both executives and business travelers estimate that 28 per cent of current business would be lost without in-person meetings. Roughly 40 per cent of prospective customers are converted to new customers with an in-person meeting, compared to 16 per cent 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.

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