The pandemic changed the present as well as the future of travel — especially business travel. Leisure travel is picking up again, but businesses are reconsidering their travel plans, with airlines and hotels watching closely for signs of what is to come.
A Slow Recovery
More Zoom calls and fewer in-person meeting are expected this fall. High-profile businesses are relying on technology instead of travel, not only because of the pandemic — Mars, a family-owned snack and pet food company, claims cost, environmental and health considerations are why the company is keeping travel to less than half of pre-pandemic levels. This equates to 145,000 fewer flights every year.
Nici Bush, a global vice president at Mars, believes less travel will make job opportunities more alluring. Instead of 100 people attending an in-person event, 700 or more can attend a virtual meeting. “You can really be more surgical about when you travel,” Bush said in a Reuters article.
Niklas Andreen, COO of global corporate travel management firm CWT, said he thinks it is unlikely that business travel will rebound quickly.
“It’s going to take several years before we’re back,” Andreen said. According to a CWT poll, currently only 58% of businesses want to resume expenses-paid junkets.
US spending on corporate travel may only reach 25% to 35% of 2019 levels by the end of 2021, and a year from now, possibly 65% to 80%, according to a Deloitte survey of 150 travel managers.
“As companies look forward, they are thinking about how to keep some of the cost savings they have realised,” said Anthony Jackson, head of Deloitte’s US aviation practice.
A July survey of Global Business Travel Association members noted that 68% of companies were looking to resume business travel sometime in the next three months. In August, that figure dropped to 35%.
“Delaying back-to-office has an effect on business travel,” said Philip Baggaley, chief credit analyst of transportation companies for Standard & Poor’s, citing the trend toward remote work. “It’s harder to put together a trip where you see a bunch of different clients. And company travel policy can become more cautious.”
The Return of Leisure Travel
Leisure travel is bouncing back faster — this summer saw three times the number of travelers compared to summer 2020. American Airlines has said it is confident business travel will catch up with leisure travelers next year.
“Business customers are telling us that they’re eager to travel,” said Robert Isom, president of American Airlines. “Critically, the majority have shared their expectation for travel to pick up moving into the fall. We now expect a full business travel recovery in 2022.”
Still, losses are expected after 2022. The Global Business Travel Association predicts corporate business travel expenses will reach $1.24 trillion in 2024, but that’s lower than the $1.43 trillion witnessed in 2019. In a Bloomberg survey of 45 large businesses across the US, Europe, and Asia, 84% of the respondents said they plan to reduce travel costs post-pandemic; a travel budget reduction somewhere between 20% and 40% is expected.
Some in the hotel sector remain optimistic. Hilton, for example, is confident based on signs of recovery in the UK.
“I think you get after Labor Day, I do believe — I’m not a health expert, but I’m talking to a lot of them — I do believe we will have powered through the Delta thing, if you look at the stats on hospitalization and the like, they’re really not terrible,” said Hilton CEO Christopher Nassetta. “If you look at what’s happened in the UK and we’re sort of three or four weeks behind them, the patterns there right now are quite good.”
Nassetta has seen progress, but still, expresses caution. “In June, business transient room night demand was 70% of 2019 levels with rates over 80% of 2019 levels. We continue to see progress in July, with similar room night demand and rates at 90% of 2019 levels,” he added. “When you get 60, 90 days out, business transient stats — a lot of the bookings haven’t occurred.”
The Future of International Travel
As for international business travel, certain hotel chains are expecting a slow recovery.
“Overall, our view is that domestic business travel will be back in the third quarter to at least 50% to 60% of pre-COVID numbers,” said Sanjay Sethi, the CEO of India-based hotel development and management firm Chalet Hotels. “International travel, however, will probably have a lag of a couple of quarters after that.”
Marriott CEO Tony Capuano is looking to China, Marriott’s second biggest market, to get a sense of the future for business and leisure travel.
“We hope that the shape of the recovery curve in China provides a bit of a blueprint of how the rest of the world may recover,” Capuano said. “We saw revpar [revenue per available room] back to above pre-pandemic levels across the greater China market, but we saw it by segment back to pre-pandemic levels. So not only was leisure significantly above where we were above pre-pandemic, but business travel and even groups had effectively returned to pre-pandemic levels. So that was encouraging.”
Others are hopeful as well, including Steve Hill, CEO and president of the Las Vegas Convention and Visitors Authority. Hill said he believes 2022 will show an improvement with more business travelers returning now and in the future. There is a popular opinion among business owners that business still gets done best in-person, he said.
A 112-year-old and Cincinnati-based business, Fern, builds exhibits for over 1,400 business events a year. Its revenue dropped 90% last year, but Aaron Bludworth, Fern’s president and CEO, says virtual calls will never replace the value of in-person business.
“Maybe you can do education virtually, but when a buyer and seller connect and go out and have dinner, that cannot happen virtually,” he said in an AP article. “Our community realizes we’ve got to get together and sell products and make this commerce happen.”
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