Quantifying the return on investment of business travel may not be an exact science, but a recent study by Oxford Economics sheds light on what happens to companies when they reduce or eliminate travel: They lose both profits and market share.

According to an analysis of two surveys conducted earlier this year — one of 300 C-suite executives and a separate survey of 500 business travelers — the effects of travel cutbacks are both severe and long-lasting.

An econometric analysis by Oxford for the U.S. Travel Association showed that for every dollar invested in business travel, companies realize $12.50 in incremental revenue.

Oxford also found:

• The average business in the U.S. forfeits 17 percent of its profits in the first year of eliminating business travel, and it takes more than three years to recover these losses.
• Both the corporate executives and the business travelers estimate that 28 percent of their existing business would be lost without face-to-face meetings.
• Both groups estimate that about 40 percent of their prospective customers are turned into new clients through an in-person meeting, compared to a 16-percent conversion rate without such a meeting.
• More than 50 percent of business travelers say that anywhere from 5 percent to 20 percent of their company’s new customers are the results of trade show participation.
• More than three-fourths of customers require or prefer face-to-face meetings, according to business travelers, while 81 percent of C-suite executives say that a slow economy requires more contact with clients, not less.
• Corporate executives say that without in-person meetings, 28 percent of their business would be lost.

While these survey findings are significant, perhaps the most glaring result was this: in the first year of a company-wide ban on travel, the typical firm experiences a profit decline of 12 percent.

“The negative impact on profits peaks in the year after the two-year travel hiatus,” the report states. “It then takes several years after travel is reinstated for profits to stabilize.”

How Broad is Your Bandwidth?
If that finding was not enough of a wake-up call, then this one should be: 71 percent of travel managers are spending less on business travel this year than last, and only 8 percent are spending more, while 56 percent of corporate planners are canceling one or more meetings or incentive trips this year.

Clearly, the hospitality industry is not the only sector of the economy being hurt by travel bans or reductions. The companies that are either eliminating or cutting back their travel are also being hurt.

A related study supports this conclusion. A Harvard Business Review survey of 2,300 business leaders in the U.S., Europe and Asia in August found that 95 percent of executives believe that in-person meetings “are key to the success of long-term relationships” and 89 percent believe that face-to-face contact is “essential for sealing the deal.” Furthermore, 60 percent said that “business relationships have suffered because of travel budget cuts.”

And yet they are cutting anyway. Why?

Most will cite the pressure to produce a better bottom line on the next quarterly statement as the No. 1 reason for reducing travel expenses, but a contributing factor is the widespread myth that technology can somehow replace human interaction.

As our reliance upon electronic gadgets for communicating with each other has increased, perhaps we have lost sight of a timeless truth: Trust cannot be manufactured in an email, text or webinar.

“Harvard Business Review” research editor Angela Herrin may have said it best when she noted, “Face-to-face is the broadest bandwidth communication that you can have.”

At the Industrial Asset Management Council Professional Forum in Minneapolis last month, nearly 300 attendees experienced that “broadband” interaction firsthand.

Whether facing travel limits or not, they came to the Twin Cities at a pace that made the 2009 Fall Forum the second-most-attended fall meeting in IAMC history. Among corporate end-users, the Minnesota event ranked as the most-attended IAMC Forum ever.

The upbeat vibe of the Minnesota Forum was evident from the start, and it was validated in post-Forum survey comments like these:

• “Great positive buzz at this event.”
• “Very pleased with the total experience.”
• “Personally, I thought the Minneapolis-St. Paul Forum was great. The program committee continues to outdo themselves on program content.”

‘Business is All About Trust’
On a scale of 1 to 10, with 10 being the highest mark possible, Active members gave the Minneapolis Forum an overall rating of 8.6 and its networking environment a score of 9.2. The statement, “At the Forum, I was able to meet and talk to the people I wanted to meet,” received a 91 percent approval rating.

Judging from these results, it’s safe to say that IAMC members considered the time and expense required to travel to Minnesota to be well spent, and their employers will experience a good return on that investment.

As Robert Lang and Mark Muro of the Brookings Institution wrote recently, “Give many high-end white-collar workers a 3G iPhone or BlackBerry and they can pretty much do their entire job from anywhere in the world. But in the end, business is all about trust, and that still requires face-to-face encounters.”

Personal meetings are all about building that trust through countless interactions. A smile, a handshake, the right tone of voice and simple face time can still do for business what no amount of technology can ever deliver.

The energy, excitement and enthusiasm that are shared over four or five days at an IAMC Forum — the kind of interaction that fosters idea-sharing and passion for improving companies and communities — can never be replicated in a conference call or webinar.

Oxford Economics may not be able to measure all that, but then again some things can’t always be quantified. They can only be experienced to know they are real.