Trump’s Travel Ban Jeopardizes International Business Travel

Photo via Wikimedia/Rene Ehrhardt
Photo via Wikimedia/Rene Ehrhardt

The business travel forecast comes with a lot of downside risk, as some of the policies proposed by the incoming Trump administration are likely to have stimulative impacts on business travel, while others may hamper growth, according to the Global Business Travel Association (GBTA) Foundation’s latest U.S. business travel forecast (“2016 Q4 GBTA BTI”) for the United States.

Completed after the election, but before President Trump took office, the GBTA forecast — which projects a 4.4% increase in business travel spending in 2017 totaling $296.1 billion, following a 0.2% drop in 2016 — is now in jeopardy. This will be especially true if we continue to see losses like we witnessed in the week following the travel ban.

In the week following Trump’s travel ban, approximately $185 million in business travel bookings were lost as the uncertainty surrounding travel in general had a rippling effect on traveler confidence, according to the report.

Ultimately, the direction of these policies will be the largest drivers of business travel performance over the forecast horizon — and currently things are not looking promising, says GBTA.

Looking beyond the executive order on travel, the forecast identifies key policy priorities for President Trump’s first 100 days carried over from the campaign, and it looks to assess their potential impact on business travel. First, GBTA takes a look at the areas that could have a positive impact first:

Lower corporate tax rates: Lower corporate tax rates would likely boost business spending and investment. Given the correlation between profits and business travel, this suggests a positive boost in travel spending, as well, providing the new-found gains are not used to buy back company stock or raise dividend payments.

Lower business regulation: Cutting the regulatory burden on U.S. companies would help to support more efficiency, higher levels of employment and stronger bottom-line corporate growth — all positive for the health of the business travel sector.

Increased infrastructure spending: An increase in infrastructure spending would have a stimulative impact on the U.S. economy in the short-run, which would benefit domestic business travel. There would also be longer-run effects on competitiveness and efficiency of the business travel sector for funds directed toward improving ports, roads, and bridges.

According to GBTA, the concern lies in whether or not the positive impacts from these policies will be outweighed by the potential negative impacts of the following policy priorities:

Protectionist trade policy: So-called border adjustment taxes or direct tariffs could drastically restrict the free movement of goods, services, and people around the world. This would be particularly negative for international outbound business travel. While such policy could force production to the United States potentially producing a positive impact on domestic business travel, international retaliation would be highly likely, and the overall net impact could possibly be negative.

Cutting the federal workforce: Cutting bloat in the federal workforce would likely help to lead to more government efficiency and a diversion of resources into the private sector. While this could be a good long-run policy for business travel, we would expect negative impacts on government spending in the short-run, which accounts for approximately 8% of total U.S. business travel spend.

In the short-term, GBTA urges President Trump and his administration to make clear their intentions around restricting travel moving forward. Uncertainty is bad for business and bad for the economy, according to GBTA.

The ultimate concern is that the lasting impact of the travel ban, and any future appeals around it, could cause other countries to think twice about planning meetings and events in the United States, says GBTA. This could create a huge impact as each inbound international business trip increases U.S. merchandise exports to the visited country by $36,000 per year and each overseas traveler spends approximately $5,000 when they visit.

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