What Is the ROI of Business Travel?

By Gregg Schoenberg Monday, March 12, 2012

As you are working on your business’s budget for the new year, you may be looking for expenditures that you can afford to cut back on. One item that may look tempting to your cost-cutting axe is your travel budget. After all, with the preponderance of no, or low-cost, web-based solutions for everything from client meetings to employee training, how much value are you really getting for your business-travel dollar?

While this might sound like a purely theoretical question, the research firm of Oxford Economics actually commissioned an exhaustive study based on two separate surveys of corporate executives and business travelers—and on an advanced econometric analysis—to provide us with a real-world answer, and that answer will be probably surprise quite a few of you.  They found that for every dollar invested in business travel, companies realize $12.50 in incremental revenue and $3.80 in profits. That is the kind of return on investment (ROI) that should have you thinking twice before making any drastic cuts.

The study also found that cutting back on business travel can have serious and long-lasting negative repercussions. For example, if a company were to completely eliminate business travel for two years it would experience a 17% decline in profits in the first year of the shutdown, the negative impact would get worse over the next two years, and it would take several years after travel is reinstated for profits to stabilize.

Of course, not all business travel is created equal and you still have to work with a finite budget, so you’ll want to analyze which business trips provide the greatest benefit for your company. In order to achieve this you’ll want to focus on travel that can help in one or more of these four areas:

  • Keeping clients
  • Converting prospects into clients
  • Increasing your network of business contacts
  • Improving the skills of your employees

Visiting existing clients and making sales trips to see prospects are two obvious types of business travel to cover areas one and two, and not surprisingly they also deliver the highest ROI (estimated at $15-$20 in incremental revenue for each dollar spent). In addition, executives and business travelers say that 40% of their prospects are converted to clients with a face-to-face meeting compared to 16% without a meeting, offering proof that even in the digital age there is no good substitute for an old-fashioned sit-down with prospective clients.

Think twice about canceling your trade shows and conferences. In addition to helping with all four of the key areas in a single trip, they too offer a respectable ROI -- estimated at $4-$6 in incremental revenue for each dollar spent. In fact, a majority of business travelers stated that 5 to twenty percent of their new clients were the result of participation in trade shows.

When you compare the overall ROI of business travel to other possible uses of your corporate dollar—as well as the negative consequences of cutting back on travel—you’ll probably find that business travel stacks up pretty favorably, and you may find yourself swinging that axe somewhere else.

*Disclaimer*: Harvard Business Services, Inc. is neither a law firm nor an accounting firm and, even in cases where the author is an attorney, or a tax professional, nothing in this article constitutes legal or tax advice. This article provides general commentary on, and analysis of, the subject addressed. We strongly advise that you consult an attorney or tax professional to receive legal or tax guidance tailored to your specific circumstances. Any action taken or not taken based on this article is at your own risk. If an article cites or provides a link to third-party sources or websites, Harvard Business Services, Inc. is not responsible for and makes no representations regarding such source’s content or accuracy. Opinions expressed in this article do not necessarily reflect those of Harvard Business Services, Inc.

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