As we pivot from virology to military analysis, one thing we can be certain of is that the world of travel is in a bad place. The threat of nuclear war is not conducive to international travel, and so for the third year in a row, people are hunkering down and staying at home (excepting those displaced by the war).
Business travel took a huge hit during the pandemic and it was clear that corporate travel faced a slower return than leisure, just as international travel lags behind domestic.
Conferences and trade shows accounted for a significant portion of business trips and they remain mostly virtual. Companies could not decently ask employees to travel abroad during a pandemic, nor can they during a war in Europe. Anyway, many of their clients, vendors and partners have not yet opened their doors to employees, let alone visitors.
During the past two years, many business leaders have understood the value of face-to-face interaction, but as with the return to the office, many business travelers vary from an eager return to airports and foreign hotels, to those convinced they can work just as effectively on Zoom.
Until WWW 3 became a distinct possibility, it looked like business travel would fall somewhere in the middle of the spectrum; competition and growth were necessitating a return to business travel, re-evaluated on their effect on the environment, the bottom line and how well they can be replaced by technology.
At the end of last year, Deloitte produced a major report on the global corporate travel industry and it makes for interesting reading.
Their report surveyed 150 travel managers responsible for travel budgets and they interviewed executives at companies whose 2019 air spend averaged US$123 million.
Most US-based companies’ travel budgets declined by 90% or more in 2020, compared to 2019. Companies restricted travel to essential trips, and added layers of executive approval. Client-requested visits, servicing of equipment, and fulfillment of government contracts constituted much of the travel that was deemed essential.
Travel segment share shifted, as many opted to drive instead of fly and sometimes extended trips to minimize the number of flights taken.
As companies plan for the coming quarters, most have not identified formal triggers for opening up travel, but leaders have their eyes on a few key developments. Public health milestones lead the way. In interviews, executives reported closely watching vaccination and infection rates. Survey respondents also gave public health indicators the highest importance, with about four in 10 ranking each of these among the top three developments that could boost their companies’ travel volume. The reopening of offices—for companies and their client bases—will also unleash some travel demand.
Among all options, survey respondents gave the lowest importance to digital health passports. Several airlines and nations have adopted different protocols, but there is no widely accepted standard. This is not a barrier to domestic travel, which accounts for about 68% of respondents’ spend. Interoperable digital health passports have a larger role to play to enable overseas business travel at scale, by reducing or eliminating the need for quarantine on arrival. The easing of entry restrictions was among respondents’ top four triggers for increased travel.
Looking ahead, companies see several factors potentially slowing corporate travel’s return. Persistent travel restrictions could create the most drag. While the CDC has cleared vaccinated people to travel freely within the United States, the organisation expresses higher concern regarding international trips. And more demanding, and sometimes unpredictable, entry requirements across countries and regions further complicate cross-border trips.
Beyond public health requirements, employee discomfort with travel, as well as clients’ discomfort with in-person interaction, could slow travel’s return. Additional external drag factors include the continued delay or cancellation of industry events, as well as higher airfares and hotel room rates.
Both current spend and projections indicate that the smaller companies in the survey will resume travel at a faster rate than the bigger companies included in the interviews.
Companies have begun to loosen travel restrictions, no longer only allowing essential travel. Nearly all conferences remain virtual, while some trade shows and exhibitions return to a live or hybrid format.
With the beginning of what could be the first full year without COVID-19 as a primary daily concern, most companies will remove pandemic-era executive approval requirements for domestic trips. But travel managers rank employee and client resistance to travel and in-person meetings as one of the biggest potential factors to slow the return. This resistance will likely reach its peak as a factor this winter.
Travel managers expect a big release of pent-up demand in the second half of 2022. More clarity about both the health situation and the ongoing state of office versus remote work will better support both trips planned in advance and last-minute visits to seal deals and execute projects.
International travel will continue to improve, bringing better connectivity with many of the United States’ key trading partners. But much of Asia will still be difficult to visit. Reports suggest the Chinese government has already decided to keep its borders effectively closed through the end of 2022. India’s struggle with COVID-195 and Japan’s rocky experience as the Olympics’ hosts are likely to leave both countries with little political will to accelerate reopening.
Conferences will continue to evolve as organizers work to create formats that maximize return on in-person interaction, while integrating technology to enable virtual participation. The majority of surveyed companies are optimistic that their travel spend will reach 2019 levels by this time—nine in 10 expect to be at or above 75%. Just over half of the respondents expect to return within three years to 2019 spend levels.
By the end of 2022, US corporate travel may near its new normal, the level it will sustain for the next several years. Assuming significantly reduced quarantine on arrival for Europe, the Middle East, and the Americas, and several months of a stable health situation, US corporate travel could reach 80% of 2019 levels. This would represent more than 4x growth from where it was in summer 2021, and more than 2x growth from the 35% projected for the last quarter of 2021.
Still, all of the current barriers to robust corporate travel are complex and those working to remove them face significant challenges. If public health outcomes improve more slowly than expected, and solutions to enable international movement continue to encounter political roadblocks, corporate travel spend by the end of 2022 could be much lower. Reaching just 65% of 2019 spend levels would imply a scenario with still very limited international movement, as well as a stalled return on the domestic side.
Assuming a stable global health situation by the end of 2022, US corporate travel’s new normal will begin to take shape. Companies’ and workers’ approaches to post–COVID-19 travel will be clearer. Borders will likely be more open, though onerous border policies may remain in parts of the world. As the pandemic-related barriers to travel recede, second-order effects will become the more prominent headwinds to corporate travel growth.
While companies recognise that travel is crucial to business success, they will seek to hold onto some of the cost savings brought by the pandemic pause. Controlled travel growth will also contribute to another goal that has grown in importance in corporate America: reducing carbon emissions. Bottom-line and environmental priorities will be supported by technology and behaviour changes brought on by more than a year of virtual-only meetings and events. The embrace of tech platforms for meetings and collaboration will mitigate the need for certain trips, and these platforms will continue to evolve to better meet some of the needs that travel used to fill.
As the threat of illness, hospitalisation, and death from COVID-19 wanes, corporate travel demand will likely begin to bump up against two significant limiting factors: sustainability commitments and cost controls.
Sustainability has moved into the corporate mainstream, with more than 400 companies signing a pledge at 2021’s Davos World Economic Forum to decarbonise by 2050. This number comprises some of the biggest companies in the world, and smaller companies are making similar commitments.
Companies looking to curb travel-related emissions say they will do so mostly by limiting trip frequency, drawing on lessons learned during the pandemic. Keeping more internal meetings online, and optimising schedules to reduce the number of flights taken are the top ways companies plan to improve their sustainable travel profiles.
While sustainability has grown as a corporate priority, and that will continue to bring scrutiny to travel, many companies still lack a clear strategy for reducing travel-related emissions. They are hoping that travel partners can play a supporting role. About a quarter of respondents say they will look to travel management companies (TMCs) for guidance in reducing their environmental impact. A similar share say they will prioritise suppliers investing in sustainability. As travel returns, suppliers that show a real commitment to reducing their carbon footprint, and intermediaries who can help corporate travelers and travel managers identify and measure the most sustainable trip options can be better positioned to compete for corporate travel money.
For more than a year, conferencing and collaboration technology platforms took the place of flights, hotels, and board rooms. The inability to get together face-to-face challenged business success in many ways. As the pandemic situation continues to improve, as travelers calm their first-trip jitters, and as industry events resume in-person, business leaders and corporate travelers will face a new calculus in determining whether to get on a plane or just get online.
At least in the medium term, there is limited upside for both tech and travel providers. The onsite monitoring that is most crucial to business success tended to continue during the pandemic, so little bounce back can be expected for this use case. Conferences and exhibitions face a more complicated future.
To support attendance numbers, many events will experiment with hybrid formats. The most simplistic version of a hybrid event, with some attendees in a ballroom and some in front of a screen, will do little to address changing needs. To thrive, conference organisers should be more creative and find ways to facilitate a greater range of interactions and experiences. What once was a convention bringing together thousands of professionals in one city could become a widely distributed affair. Hundreds attend the central event, while others meet in smaller satellite settings, beaming in not just to passively consume, but also to participate. Those for whom the networking is least important can take in the content from their own desks.
Travel providers should adapt to a new reality of fewer overall trips, greater need to integrate face to face with virtual in a hybrid format, and a greater emphasis on the relationship-building nature of corporate travel. While the full recovery of US corporate travel is still more than a year away, the coming months will be a time of opportunity to strengthen relationships and demonstrate the ability to excel in business travel’s transformed world.
As you can see, Deloiitte have prepared an extensive and expensive document on the current and projected state of corporate travel, both within the US and internationally.
A cynic would say that it was a complete waste of time and money as world events, this time the threat of full-scale nuclear war, will freeze international travel once again and business travel and exhibitions and conferences will remain online for the foreseeable, or until the end of the world.
