Skift Take

Tighter, leaner policies could put the brakes on the surge in travel that we've seen in recent months, a warning sign of economic trouble ahead and more bad news for business travel's full recovery.

As travel costs continue on a seemingly unstoppable rise, American companies are cutting their budgets for trips by almost a quarter, according to corporate card and expense platform Ramp.

The U.S. startup launched a travel management platform in February, allowing businesses to create travel and expense policies with spending limits for different areas of travel.

It’s now found that for new travel policies, the total spend to be allowed on business trips in the future is almost 24 percent lower in June 2022 when compared to the same month in 2021. Ramp pins some of the cause on worries of a recession.

The company also analyzed thousands of aggregated, anonymized transactions across its credit cards from May to June this year, as part of its latest transaction data report, and discovered that while future policies will become leaner in the future, business spending on its platform didn’t plummet despite “ubiquitous recession fears”.

Spending was actually up over the past two months, due to greater demand for in-person activities.  Business travel as a share of company spend jumped from 5.4 percent in June 2021 to 10.7 percent in June 2022. Airline spend also jumped 105 percent, and restaurant spend 43 percent.

However, companies cut back in key areas normally associated with growth over the past two months. For example, there was an average spending reduction in electronics of 41 percent, advertising of 18 percent and software purchases of 6 percent.

Small businesses of up to 25 employees have been pulling back even more, with spending on electronics falling 59 percent over the two-month period.

The sharp decline was also put down to companies “front-loading” spend early on in the year because of supply chain concerns.

“Business spending is under intense scrutiny, amidst soaring inflation, rising interest rates, and an official bear market,” Ramp noted in its first-quarter spending insight report, covering Feb. to April 2022. “Many finance teams are being tasked with lowering costs to help their organizations navigate these turbulent economic conditions.”

Annual global business travel spending is now projected to reach pre-pandemic spending levels of $1.4 trillion in mid-2026, warned the Global Business Travel Association last week — 18 months longer than its previous estimate last year. It cited inflation, energy prices, supply chain challenges, labor shortages and “regional developments” impacted by geopolitical conflicts.

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Tags: budget, coronavirus recovery, corporate travel, credit cards, expense management, travel and expense, travel management, travel policy, usa

Photo credit: American companies are cutting their travel budgets by almost a quarter, according to corporate card and expense platform Ramp. Priscilla Du Preez / Unsplash