Business Travel Will Never Bounce Back To Pre-Pandemic Levels
For individuals anticipating a complete rebound of corporate travel to its pre-pandemic status, there are multiple factors that may impact this outcome positively or negatively.
No Complete Rebound Of Corporate Travel To Its Pre-Pandemic Status
According to a recent survey commissioned by Deloitte, a professional services network, which collected responses from 334 travel managers and executives worldwide, it is projected that corporate travel expenditures may not return to 2019 levels until the conclusion of 2024. However, the poll also indicated that the overall travel spending pie could be 10% to 20% smaller than it was before the COVID-19 pandemic due to inflation. While Deloitte’s survey offered an optimistic outlook for the potential revival of business travel, this view has not been shared across the industry.
Business Travel Woes
In a February analysis, Morning Consult, a research firm, conducted a poll of 4,400 US consumers and concluded that business travel would never fully recover. A paper entitled “Business, but Not as Usual” revealed that tighter corporate budgets and new forms of remote working have permanently altered the landscape of business travel, marking the end of an era of extravagant corporate travel. Despite the easing of COVID-19 lockdowns around the world, the tourism sector has bounced back, but corporate travel has not. Airlines may need to adapt their business models to account for the loss of one of their most profitable services as they continue to navigate the challenges of a tumultuous two years.
Business travel is an important source of revenue for airlines, as business travellers typically pay higher rates and fly more frequently than leisure travellers. However, the COVID-19 pandemic caused a sharp decline in business travel spending, which is expected to have a lasting impact on the industry.
While leisure travel has largely returned to pre-pandemic levels, business travel has been slower to recover due to concerns about safety, the availability of virtual conferencing, and other factors. A new report suggests that the “new normal” for the industry will include smaller volumes of business travel, with spending projected to reach two-thirds of 2019 levels by the end of 2023 but likely remaining smaller in real terms due to lost growth and inflation. International trips are expected to grow as challenges decline for visiting parts of the world
According to a recent poll conducted by Morning Consult, over 40% of professionals who engage in business travel believe that changes in their travel schedules are primarily due to financial considerations. The poll found that many American corporations have curtailed business travel in an effort to reduce costs, either by limiting the number of trips or more closely monitoring travel expenses. As a result, fewer individuals are travelling for business, and those who do are doing so less frequently.
Consequently, business travel in the United States only increased by a marginal 1% in 2022 compared to pre-pandemic levels. The adoption of virtual meetings, employee wellness initiatives, and other cost-cutting measures are among the factors driving this trend. However, an analysis by Deloitte suggests that corporate travel spending actually increased in the US and Europe last year, nearly doubling, due to flexible booking policies and workers’ preferences for luxurious business trips. The analysis further predicts that by late 2024 or early 2025, business travel spending will return to pre-pandemic levels.
Corporate Travel
Corporate travel gains are expected to be affected by climate concerns for the foreseeable future, with one in seven US companies and one in five European companies anticipating reduced travel due to sustainability efforts in 2023. Many companies are aiming to reduce employee travel spending by more than 20% to meet their 2030 climate goals. Airlines and hotels are also making efforts to reduce emissions to attract and retain corporate clients. A significant number of companies are implementing structures to assign carbon-emission budgets to teams alongside financial budgets.
The rise of remote and hybrid work policies has led to a decrease in the need for business travel, as many firms have found that effective work can be done via virtual meetings. As a result, the number of people travelling for business has declined, while those travelling for leisure has increased. The face of the business traveller has also changed, with a majority earning less than $50,000 per year and being young, male, and flying in economy class. This shift in business travel may impact airlines as households scale back on non-essential spending.
The pandemic has caused a substantial reduction in business travel. A recent survey by Morning Consult reveals that four in ten American business travellers have no intention of embarking on any future work trips. Instead, many employees who must travel opt for shorter, local commutes. The decline in business travel varies across different countries, with France, Britain, and Germany reporting a more significant reduction.
In these nations, over half of the business travellers who frequently travelled prior to the pandemic now state they will never travel for work again. Nevertheless, the majority of American workers seem content with their current travel arrangements. In comparison to pre-pandemic times, there has been a significant 18% decrease in the number of US adults travelling for work.
According to reports, business travel is making a robust return, with the easing of travel restrictions and live events expected to drive the recovery. Deloitte predicts that international business trip spending will pick up in 2023, mainly in Europe for client work and in the US for connecting with global colleagues at conferences. However, travel in 2023 and 2024 will still be impacted by higher airfares and room rates, and travel managers will face tough supplier negotiations. In addition, sustainable and climate-friendly travel is becoming increasingly important, and “bleisure” travel (a blend of business and leisure) is on the rise.
Companies have made permanent cuts to travel budgets, and employees are more selective about which occasions warrant travel. Travel brands must adapt to the shifting demographics of business travellers, including young and low-income workers, and tailor their products and services to their needs. Brands must also be aware of the types of occasions for which workers are travelling, as incentive travel and company retreats may decrease in the coming years.
Travel companies must also be aware of who holds the purse strings when booking, as some travellers are funnelled through centralized tools and platforms. Finally, brands must adapt to blended travel, as the new flexibility around where, when, and how people work has allowed them to combine business and pleasure in new ways.
The phrase “new normal” is likely to apply to corporate travel in 2023 and 2024, with cautionary notes about potential crises and instability. Corporate travel may see a temporary rebound before returning to pre-pandemic growth levels. Changes in how work is done and sustainability commitments will limit growth, but collaboration between travel buyers and suppliers may lead to greener travel. The balance between cost, value, and strategic positioning of travel is also shifting, providing opportunities for partnerships and collaborations to maximize travel’s advantages and minimize its downsides.
Proofread, Edited & Published By Naveenika Chauhan
