European woes would hurt U.S. travel industry

Europe’s pain is our pain, too, a new study says.

If Europe’s economy worsens, U.S. travel industries such as airlines, hotels, car-rental companies and restaurants will see a downturn, too, according to the Global Business Travel Association.

“This data serves as a wake-up call to the entire industry as we watch European policymakers work to contain the debt crisis,” said Michael McCormick, executive director at GBTA.

“While these problems are happening abroad, they most certainly can have an effect at home. We’ve seen a resurgence in business travel investment, meaning slow but strong economic recovery for the U.S.” he said. “However, in a severe situation where the eurozone may even break apart, business travel would drop dramatically, severely impeding economic growth overall.”

Business travel is a leading economic indicator of job growth - or loss.

“No one really seems to know what the financial fallout might be,” said Joe Bates, senior director of research at GBTA. “If you see business travel start to suffer, that’s an indicator that the economy is also suffering. If travel increases, then the following quarter employment is expected to increase.”

The worst-case scenario - a severe crisis in Europe that leads to widespread debt, bank failures, or even the dissolution of the European Union - could cut into business travel spending by as much as $88 billion, according to the study.

“We would see a global recession on par with what happened in 2008,” Mr. Bates said.

In less severe scenarios - if, for example, Italy, Spain and France default on their debt - a prolonged European recession would flatten U.S. business travel. Trips might be cut by 42 million rides, or 5 percent. Spending could decline by $40 billion, or 7 percent.

“If things get a little bit worse, and we see a more serious recession in Europe, then it will have an impact,” Mr. Bates said.

If European leaders, however, can contain the debt crisis and emerge from a short-lived recession, as projected, U.S. business travel would increase slightly to 443 million trips in 2012 and 443 million trips in 2013, with spending growing to $263 billion in 2012 and $277 billion in 2013.

“As long as things don’t get worse than they are now, we’ll be fine,” Mr. Bates said. “It won’t cause a recession here or a problem with business travel spending in the U.S.”

“There’s a lot of people talking about the sky falling,” he added. “Well, it’s not. Things are not great in Europe. But if it doesn’t get any worse, things are going to be fine in the United States, and in fact, we’ll see growth.”

Rising fuel prices have prompted U.S. airlines to raise prices in recent days by about $10 per round-trip ticket.

© Copyright 2012 The Washington Times, LLC. Click here for reprint permission.