COVID-19 The New Normal for Business Travel
Airlines and hotels are going to have to work hard to get business travelers back, but it won’t be impossible.
Business travel has come to a halt during the COVID-19 pandemic, as stay-at-home restrictions have required companies to hold more virtual meetings. While the outbreak is not yet over, experts have started to project a potential rebound for corporate travel.
An April poll from the Global Business Travel Association (GBTA) found that 98 percent of its member companies had canceled international business trips, and 92 percent axed all or most domestic travel. But in a May follow-up poll, more than half the respondents said they plan to resume travel in the near future.
Those results should not come as much of a surprise, given the importance of business travel. Certify, a corporate expense report and travel software provider, estimates that around 445 million business trips take place each year, valued at $251 billion (the GBTA puts that number closer to $345 billion annually for travel and meeting expenditures). An Oxford Economics study found that each dollar invested in business travel can result in as much as $12.50 in revenue. Add it all up, and it’s a tremendous potential amount of money that corporations rely on to stay in business.
In fact, a recent survey by consulting firm Oliver Wyman found that around three-quarters of business travelers expect to travel the same amount or even more after the pandemic, due to a resurgence of business activity, relatively low travel costs once lockdowns begin to ease, and pent-up demand after teleconferencing for months.
Yet even as travel begins to resume, the prospect of taking a business trip is a trigger for many workers whose main worry remains avoiding the disease. To get a better sense of how corporate travel might change due to COVID-19 and how business travel will restart.
Business travel will rebound slowly
Domestic business travel is likely to pick up quicker than international. But any uptick in business travel will be dictated by prevailing economic conditions. In previous economic crises, the travel industry has recovered in around two to three years.
Most businesses are still in a wait-and-see mode,however, within the last few weeks, we have seen a flurry of clients expressing a desire to hold face-to-face meetings with clients and colleagues, with U.S. domestic air travel bookings for June and July are slowly on the rise.
Several frequent corporate travelers from various industries including retail, finance, and entertainment—all of whom asked to speak anonymously—say business travel will eventually resume because virtual options such as Zoom and teleconferencing are not sufficient for some of their needs.
One individual suggested mergers and acquisitions will spike in the coming quarter, and that deals worth hundreds of millions of dollars often require an in-person handshake (or at least, an elbow bump). Logistics are also part of it, Steiner says. “Try coordinating a global conference and accommodating all those time zones.”
CORPORATE TRAVEL COULD RECOVER AS MUCH AS 70 PERCENT OVERALL BY THIS TIME NEXT YEAR, ASSUMING A BEST-CASE SCENARIO.
Certain industries might ramp their travel back up more quickly than others, too. One of our corporate clients works throughout Europe and North America they were hiring before the shutdown and expect to be traveling a lot as restrictions are lifted.
Venture capitalists and management consultants, who might be called upon to help companies cope with pressures from the pandemic-caused recession, will also be among the first corporate travelers to hit the road again.
Corporate travel could recover as much as 70 percent overall by this time next year, assuming a best-case scenario, says Chip Rogers, president and CEO of the American Hotel & Lodging Association. But he does not expect large meetings, conferences, and conventions to rebound more than 50 percent before early next year. If and when they do, they could help stabilize and even raise airfares and hotel rates. “Business travelers generate the most revenue for the travel industry, and are less price-sensitive than leisure travelers,” Rogers says.
Cleanliness is key
Travel companies will need to implement new sanitation and hygiene measures that make being on the road feel safe. Safety is the new loyalty, and consumers will choose brands that prioritize their well being travel.
Corporations and employees will also have to agree upon new, so-called “duty-of-care” policies that ensure workers’ welfare while conducting company business.
Traditionally, corporate travel programs have focused on costs and compliance as key metrics. However, travelers’ safety will be the top priority. Travel managers will look very closely at their suppliers’ policies and practices around hygiene and distancing, and restrict their list of preferred providers to those they feel most confident about.
GIVEN HOW MUCH AIRLINES HAVE SLASHED THEIR SCHEDULES, SOME FIRMS HAVE ALSO TURNED TO CHARTERS.
Corporations are going to have to factor the costs of new health policies into their travel budgets and planning, says Dale Buckner, CEO of Global Guardian, a firm that offers security, emergency, and medical response services. “Businesses will reevaluate whether travel is fundamentally required,” he says. “In cases where it is, a firm will have to sponsor an employee or executive to travel knowing the risks, like that they might be burning money having to put them up at a luxury hotel during a 14-day quarantine.”
During the last major economic downturn, many companies downgraded mid- and lower-level executives to flying coach, but still allowed C-suiters and top brass to book business or first class. Despite the current recession, we do not expect that to change. Because of COVID-related safety concerns, corporate travelers are going to want to be sequestered in a business-class pod, which feels like a much safer and more private environment than your typical economy seat.
That is also just practical, traveler comfort directly relates to productivity. Luxury properties might post room rates closer to their budget counterparts for some time to come, too, easing the financial burden of corporate travel departments.
Given how much airlines have slashed their schedules, some firms have also turned to charters. We expect to see a rise in demand for charters as businesses and cities reopen, and people have more places they can travel to confidently. People are going to seek alternative ways to travel, especially when it means avoiding crowded airports and packed planes.
Loyalty programs are even more important
In addition to promoting new public health measures, airlines and hotels will turn to their loyalty programs to win back business travelers and their most frequent customers. For the past half dozen years, airlines have flown mostly full, so there hasn’t been a need to invest in loyalty programs to fill empty seats. That is going to change. We expect to see bonuses for travel and there will probably be promotions to earn elite status, such as double qualifying miles, status-match offers, and possibly other new benefits like available middle-seat blocking.
More benefits are on the way for business fliers and we are likely to see more perks being included in corporate agreements. But don’t expect these extra perks to last too long.
Airlines and hotels are going to be very careful how they promote added benefits to their loyalty programs since many will be dealing with reduced inventory that may coincide with pent-up demand when people begin traveling again. So while travelers will probably be able to redeem their airline miles and hotel points for plentiful reward flights and nights in the short term, once people begin traveling in larger numbers, free travel and elite perks might be harder to come by.
Making the traveler feel valued and special will be the key, and that applies to all travelers, business and leisure. When airlines and hotels can do that, while convincing people it is safe to take trips, business travel might finally be on its way to a rebound.
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