M

1. Measuring the Contribution of
Business Travel to Corporate
Performance
Crowne Plaza, Hollywood Florida
June 11th, 2010
Presented by:
Kenneth McGill
Executive Vice President, Research
Vantage Strategy, Inc
Ken.mcgill@vantagestrategy.com
O: 202 449-9708
M: 610 213-2558

2. Presenter •• Kenneth McGill, EVP Vantage Strategy, Inc. &
Kenneth McGill, EVP Vantage Strategy, Inc. &
Lead Research Consultant for National Business
Lead Research Consultant for National Business
Travel Association (NBTA)
Travel Association (NBTA)
•• Fifteen yrs at IHS Global Insight and its
Fifteen yrs at IHS Global Insight and its
predecessors, most recently as EVP of Global
predecessors, most recently as EVP of Global
Travel & Tourism Practice
Travel & Tourism Practice
•• 20+yrs as an economist & market researcher
20+yrs as an economist & market researcher
•• Extensive experience in travel market analysis,
Extensive experience in travel market analysis,
forecasting, policy evaluation, & economic impact
forecasting, policy evaluation, & economic impact
•• Recently completed landmark study of business
Recently completed landmark study of business
travel ROI –how T&E contributes to corporate
travel ROI –how T&E contributes to corporate
performance
performance

3. Vantage Strategy
Your Trusted Business Advisor
We provide customized, top‐tier sales, marketing, research, and
online strategies to the travel industry.
What makes us unique? We understand your strategic business needs
first, then we deliver unique, innovative, and profitable solutions to
your new sales effectiveness challenges.

4. Purpose
Vantage helps travel companies and DMOʼs achieve order of magnitude change
and implement new solutions to grow profits – all through a personal, hands‐on
approach that you won't find with the big‐box consulting firms.
Vantage Services
Business Strategy
Our fast, nimble
Market Research & Insight service delivers
Brand & Messaging Development
innovative custom
solutions to improve
your ROI ‐ and your
peace of mind.

5. Client Examples
Vantage supports the business growth objectives of the world's most recognized brands
in Travel & Tourism. Our passion is in helping clients successfully increase the reach,
frequency, and quality of their customer interactions to grow their business.
Travel & Tourism Advocates Travel & Tourism Enterprises
CVBs, Associations, Trade Shows Operators, Merchants & Service
Providers

6. 2009 NBTA Research:
What is Value of Business Travel?
• Global business travel topped $929B in 2008
• US biz travel, @$261B, is 28% of the world total
• China, currently #2 ($94B) will add T&E at a rate 8 times
faster than the US over the next 5 years
• On average, US businesses spend about 1¢ of every sales
dollar on biz travel
Sources: 2009 NBTA Business Travel Market Metrics
• A Global Analysis of Business Travel Activity (sponsored by Egencia)
• Are We Investing Enough on Business Travel? (sponsored by American Express)
• Valuing the Contribution of Travel Management (sponsored by American Express)

7. 2009 NBTA Research:
What is Value of Business Travel?
• Biz Travel supports over 4M US jobs and generates $80B in
tax receipts –it is our 13th largest “industry”
• Most US businesses currently underspend on biz travel.
Investing $1 more would yield about $16 more in gross profit
• Strategic Travel Management (STM) saved US companies
about $7.5B in 2008 –about $14 per itinerary
• Mfg companies with STM have an operating margin that is 3%
higher than those that “wing” it
Sources: 2009 NBTA Business Travel Market Metrics
• A Global Analysis of Business Travel Activity (sponsored by Egencia)
• Are We Investing Enough on Business Travel? (sponsored by American Express)
• Valuing the Contribution of Travel Management (sponsored by American Express)

8. Agenda
Valuing Business Travel
2009 NBTA Research Initiative:
DYK?
Business Travel Spend in
Financial Context
The ROI of Business Travel
2010 ROI of Business Travel:
Deeper Dive
Q&A

9. Measuring ROI…
• Easy to describe, difficult to execute
• Typically left up to managerial intuition,
experience, feel
• Its about cause (and cost) and effect (conversion)
There are generally four approaches:
There are generally four approaches:
a. Management Opinion Surveys –measure awareness, priority,
a. Management Opinion Surveys –measure awareness, priority,
present trade-offs
present trade-offs
b. Meeting //Trip Goal Attainment Audit – pre-state objectives,
b. Meeting Trip Goal Attainment Audit – pre-state objectives,
then follow up post-trip to assess success
then follow up post-trip to assess success
c. Individual Conversion Studies -good for specific campaign
c. Individual Conversion Studies -good for specific campaign
measurement but difficult to apply to all travel activity
measurement but difficult to apply to all travel activity
d. Elasticity Analysis – better for measuring overall ROI but
d. Elasticity Analysis – better for measuring overall ROI but
finding adequate data can prove difficult and costly
finding adequate data can prove difficult and costly

10. 2009 ROI of Business Travel
• In 2009, NBTA & American Express Business Travel sponsored a
landmark study of the size, growth, & contribution of business travel
• Objective: Is there a correlation between business travel & corporate
performance? And if so, can we determine the optimal level of
business travel? Corollary: how far can we cut before real damage is
inflicted?
• Approach: Using data for 15 U.S. industries over the period 1998-
2008, we examined the correlation between changes in business
travel spend and changes in corporate sales & profits.
•• Key Finding: While ititvaries by industry, on average there is 16:1
Key Finding: While varies by industry, on average there is 16:1
return on investment for each additional dollar spent on business
return on investment for each additional dollar spent on business
travel
travel

11. U.S Business Travel
in Financial Context

12. U.S. Business Travel Spending & Travel-Intensity
Top 20 Industries Ranked on Travel Spend
• Total US Business Travel
Spend in 2008 was $261B
• Businesses spend about 1¢ of
every sales dollar on business
travel
• High? Equipment rental &
leasing @ 4¢
• Business Services -1.3¢
• Low? Mining at < a tenth of a
cent
Source: IHS Global Insight, US Bureau of Economic
Analysis –National Input/Output Accounts

13. Business Travel Expenses in Perspective
Industry Profit & Loss Analysis
US Economy –All Industries
5-year 10-year
(Millions of $) 1998 2003 2007 2008 % CAGR CAGR
Sales $ 14,505,111 $ 17,890,895 $ 23,407,509 $ 24,086,545 2.9% 6.1% 5.2%
Cost of Goods Sold
Labor Cost $ 4,190,188 $ 5,245,850 $ 6,484,017 $ 6,676,055 3.0% 4.9% 4.8%
Material & Service Purchases $ 6,698,946 $ 8,111,543 $ 11,072,796 $ 11,339,429 2.4% 6.9% 5.4%
Business Travel $ 213,206 $ 215,499 $ 268,629 $ 261,362 -2.7% 3.9% 2.1%
Other Costs & Expenses $ 627,828 $ 792,395 $ 1,000,945 $ 1,027,515 2.7% 5.3% 5.0%
Total Cost $ 11,516,961 $ 14,149,787 $ 18,557,758 $ 19,042,999 2.6% 6.1% 5.2%
Gross Operating Profit $ 2,988,150 $ 3,741,108 $ 4,849,751 $ 5,043,546 4.0% 6.2% 5.4%
Gross Margin% 20.6% 20.9% 20.7% 20.9%
Business Travel as a Percentage of
Sales 1.47% 1.20% 1.15% 1.09%
B-Travel as a Percentage of Material
& Service Costs 3.18% 2.66% 2.43% 2.30%
Business Travel as a Percentage of
Profits 7.14% 5.76% 5.54% 5.18%

14. Business Travel Expenses in Perspective
Industry Profit & Loss Analysis
US Manufacturing Sector
5-year 10-year
(Millions of $) 1998 2003 2007 2008 % CAGR CAGR
Sales $ 4,054,468 $ 4,201,111 $ 5,339,571 $ 5,362,765 0.4% 5.0% 2.8%
Cost of Goods Sold
Labor Cost $ 870,035 $ 943,261 $ 1,028,272 $ 1,022,119 -0.6% 1.6% 1.6%
Material & Service Purchases $ 2,637,829 $ 2,758,142 $ 3,624,576 $ 3,640,320 0.4% 5.7% 3.3%
Business Travel $ 39,119 $ 38,445 $ 43,968 $ 43,414 -1.3% 2.5% 1.0%
Other Costs & Expenses $ 39,206 $ 49,236 $ 60,650 $ 60,913 0.4% 4.3% 4.5%
Total Cost $ 3,547,070 $ 3,750,639 $ 4,713,497 $ 4,723,352 0.2% 4.7% 2.9%
Gross Operating Profit $ 507,398 $ 450,472 $ 626,074 $ 639,412 2.1% 7.3% 2.3%
Gross Margin% 12.5% 10.7% 11.7% 11.9%
Business Travel as a Percentage of
Sales 0.96% 0.92% 0.82% 0.81%
B-Travel as a Percentage of Material
& Service Costs 1.48% 1.39% 1.21% 1.19%
Business Travel as a Percentage of
Profits 7.71% 8.53% 7.02% 6.79%

15. Business Travel Productivity Has Risen Markedly
1.47%
1.50% 1.43% Travel Spend as a Percent of Sales
Travel Spend as a Percent of Sales
All US Industries
All US Industries
1.40%
1.32%
1.28%
1.30%
1.20% 1.19%
1.20% 1.13% 1.13% 1.15%
1.12%
1.10%
1.00%
1998 1999 2001 2002 2003 2004 2005 2006 2007 2008
More efficient, more “dense” trips
Rising penetration and effectiveness of managed travel programs
Travel prices rising more slowly than other costs
Growing technological alternatives to more marginal travel

16. The ROI of Business
Travel

17. Business Travel’s Contribution to the Bottom Line
Methodology: Can we find a correlation between T&E and
sales/profits?
10 yrs of data for 15
10 yrs of data for 15
industries…
industries…
Econometric approach that isolated
the statistical relationship between Travel spend, sales, labor &
Travel spend, sales, labor &
travel spend & sales/profit other costs, operating profit,
other costs, operating profit,
inflation, and industry demand
inflation, and industry demand
drivers
drivers
Industry sales was regressed against Modeled using aaquadratic
Modeled using quadratic
travel spend, demand factors, & functional form –increases in
functional form –increases in
travel spend will increase sales
travel spend will increase sales
supply variables in order to isolate but the payoff diminishes
but the payoff diminishes
the influence of each driver
Model helped compare the cost of
increased travel spend with resulting Most, but not all,
Most, but not all,
industries were
industries were
increases in sales to calculate the below their optimal
below their optimal
optimal level of business travel for levels in 2008
levels in 2008
each industry

18. Business Travel’s Contribution to the Bottom Line
For the statisticians and economists in the audience…
Model Specification: Model attempts to explain the
Model attempts to explain the
variation in sales over time
variation in sales over time
as a function of key drivers:
as a function of key drivers:
industry affiliation
industry affiliation
product/service demand
product/service demand
cost and inflation
cost and inflation
business travel spend
business travel spend
business travel spend22
business travel spend
other unspecified drivers
other unspecified drivers

19. Business Travel is Associated With Increased Sales
Elasticity Effect of Business Travel on Sales
2.5%
All figures are inflation-adjusted
2.0%
The return on travel slows,
Percent Increase in Sales
indicating a diminishing Additional travel fails
marginal effect to yield additional
1.5% gains in sales
1.0%
0.5%
Strong initial gains in sales from
increasing business travel
0.0%
8
27
54
72
99
26
44
71
0
9
09
18
36
45
63
81
08
17
35
53
62
89
98
07
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Percent Increase in Travel Expenditures

20. Where is the Optimal Level of Travel Spend?
All figures are inflation-adjusted
Incremental Yield to
Promotional Spending
Incremental Cost of
Promotional Spend

21. Some Sectors Have Ample Room
to Raise Travel Spend Profitably…

22. While Others are Already Near Their Optimal Level…

23. Travel Spend Maximization Point by US Industry
Incremental Real Percent Changes
Maximization Point by US Industry
Source: NBTA, American Express

24. Is There Room for US Businesses
to Grow Sales (Profitably) by Traveling More?
Source: IHS Global Insight, Compustat, US Bureau of Economic Analysis –National Input/Output Accounts, American Express
* Numbers do not sum due to double counting

25. ROI of Business Travel: Findings
• Finding1: Business
Travel Productivity is
rising
• Finding2: Increases
in travel spend do
lead to incremental
sales & profits, albeit
at a diminishing rate

26. ROI of Business Travel: Findings
• Finding3a: Most U.S. industries are currently
underspending on business travel…

27. ROI of Business Travel: Findings (cont.)
Finding3b: Some industries are at/near optimal

28. ROI of Business Travel? …about 16-to-1
After Maximizing
Sales from
Additional Business
in Millions of Current $ 2008 Travel Difference
Sales $ 24,086,545 $ 24,981,252 $ 894,707
Cost of Goods Sold
Labor Cost $ 6,676,055 $ 6,875,974 $ 199,919
Material & Service Costs $ 11,339,429 $ 11,776,559 $ 437,130
Business Travel Expenses $ 261,362 $ 275,318 $ 13,956
Other Costs & Expenses $ 1,027,515 $ 1,060,740 $ 33,225
Total Costs $ 19,042,999 $ 19,713,273 $ 670,274
Gross Operating Profits $ 5,043,546 $ 5,267,979 $ 224,433
Operating Margin % 20.9% 21.1% 0.2%
Finding4: If all sectors were to reach their optimum, U.S. travel spend
Finding4: If all sectors were to reach their optimum, U.S. travel spend
would increase by $14B (+2.2%),,resulting in a $900B (+3.7%) increase
would increase by $14B (+2.2%) resulting in a $900B (+3.7%) increase
in sales, a $224B (+4.4%) rise in profits, and a 0.2% uptick in gross
in sales, a $224B (+4.4%) rise in profits, and a 0.2% uptick in gross
margin.
margin.

29. What Does This Imply For Management of T&E?
Max Sales
Hypothetical US MFG Company from
Business
(Millions of $) 2008 Travel Difference
Sales $ 500.00 $ 519.73 $ 19.73
Cost of Goods Sold
Labor Cost $ 95.30 $ 96.51 $ 1.22
Material & Service Purchase $ 339.41 $ 354.87 $ 15.46
Business Travel $ 4.05 $ 4.27 $ 0.22
Other Costs & Expenses $ 5.68 $ 5.87 $ 0.19
Total Cost $ 440.38 $ 457.26 $ 16.87
Gross Operating Profit $ 59.62 $ 62.48 $ 2.86
Gross Margin% 11.9% 12.0%
••Travel spend is expanded by $220k for our $500m manufacturing company
Travel spend is expanded by $220k for our $500m manufacturing company
••Accounting for inflation and input productivity trends, the yield is +$20m in sales
Accounting for inflation and input productivity trends, the yield is +$20m in sales
and +$2.9m in Operating Profit. Margin improves by 0.1%
and +$2.9m in Operating Profit. Margin improves by 0.1%
••ROI of additional travel spend is about 13 to 1
ROI of additional travel spend is about 13 to 1

30. 2009 ROI of Business Travel Research
• Unique Proposition of the NBTA/AEBT Research:
– Econometric model of sector (15) sales accounted for all critical
sales drivers including…travel spend
– This allowed us to isolate the incremental impact of travel spend
– And apply a defensible number to the question of ROI
• Caveat: Findings are exciting, but optimal sector averages are not
easily applied to individual companies. Why? Simply belonging to a
sector is not enough information to determine a true company optimal
• Solution: 2010 ROI Deeper Dive –Company Level
Analysis of T&E, Sales, and Profit

31. 2010 ROI Deeper Dive –Company Level Analysis*
• Will the inclusion of 2009 results materially alter the original industry-
level findings? How do recessions change the ROI picture?
• Will the application of this approach on company-level numbers
reveal a similar story?
• Can we also include other critical company attributes –size, number
of locations, global-v-local reach, sub-sector, corporate hierarchy…?
• Can we incorporate a way for individual companies to compare their
metrics to an applicable theoretical optimal?
• End Game: A Benchmarking Tool to Assist Corporate & Travel
Managers
* Sponsored by NBTA and American Express Business Travel

32. 2010 ROI Deeper Dive –Company Level Analysis*
• Currently in process. Top line results to be presented at NBTA
International Convention in Houston (Aug 2010)
• Based on data for 850+ public companies across a broad array of
sectors and representing all size classes
Note: Air Spend Only
* Sponsored by NBTA and American Express Business Travel

33. Thank You!
R E S E A R C H
Kenneth McGill
Phone: (202) 449-9708
Fax: (202) 449-1370
Mobile: (610) 213-2558
Email:ken.mcgill@vantagestrategy.com
93 Main Street, Suite 200
Annapolis, MD 21401
www.vantagestrategy.com