The travel industry is one of key sectors that took a severe hit as the COVID-19 pandemic raged across the globe. With lockdowns and border closures all over the world, traveling became virtually non-existent. The highly valued segment of corporate travel came to a screeching halt, as according to a report by McKinsey, the total global business travel expenses decreased by 52% while managed business travel spending in the US dropped 71% or $94 billion in 2020. McKinsey is a trusted advisory firm with a history of providing insights to global businesses.
Dubai Investment Fund (DIF) Research indicates that the rebound for global travelling might take subsequently longer than anticipated due to changing trends across work.
Now, as the pandemic is easing in many parts of the world, thanks to the rapid progress in vaccine development and distribution, the travel sector is looking for an exponential rebound to make up for the lost time and opportunities. Even though domestic leisure travel has greatly returned, corporate travel faces a slow return due to a far more complex set of considerations and circumstances. Many believe that the future of business travel has now changed considerably in our post-pandemic world, even as the vaccine rollout increases.
Corporate travelers are re-evaluating their priorities and their return to pre-pandemic numbers remains to be seen. Travel companies are now thinking beyond traditional approaches to offer new value propositions to their customers.
Impact of Pandemic on Business Travel
Although the rising vaccination rates have alleviated some of the travel anxiety, organizations are still currently figuring out the future of work, which includes the role of business travel. The conventional strategies for corporate travel have been severely impacted which has resulted in a number of changes in this sector including:
Decreased Trip Frequencies with Longer Stay Durations
Business travelers are making fewer trips as compared to pre-pandemic levels because of the quarantine rules during the pandemic. However, since the pandemic, there has been an increase in the length of stays. Travelers are looking to get maximum value out of their travel experiences and business travelers are extending their trips by additional days to get impactful experiences. This has resulted in multiple journeys culminating into a single one.
Decrease In Travel for Meetings
With advancements in telecommunication technologies and web conferencing becoming the new norm, there has been a marked decrease in physical travel for meetings. Business Executives are avoiding travel unless it is necessary. Travel budgets have been slashed by companies and trips, for instance, a 1-hour meeting, are increasingly being seen as a waste of time and resources when there are more viable virtual options available.
Decrease in International Travel
Although international travelers make up a significant percentage of the travel and hospitality sector, their numbers have seen a steep decline after the pandemic. Virtual engagements have been the key factor in bridging the gap of international collaborations, as the popularity of webinars and web conferencing grows.
Breaking Down the Recovery of Business Travel
As the pandemic continued to peak, travel industry leaders were quick to observe one thing about its corporate travelers: their business operations continued even during lockdowns. The need for employees to come to the office for many companies was eliminated and remote working started to look like the new normal. Business trips were not seen as essential, except under very specific circumstances. Virtual meetings were now being preferred and provided companies with viable engagement options.
According to a February 2022 report by the U.S. Bureau of Labor Statistics forecasting employment demand in various industries: “The pandemic has led to extensive use of videoconferencing and virtual meetings, and many companies expect virtual work to persist over the long term.” The labor bureau predicted that various types of business trips would be replaced by virtual meetings, although some in-person trips, such as sales pitches and trade conferences, would return to pre-pandemic normal.
The primary challenge for the business travel sector is that even if the pandemic eventually subsides, Zoom and other video conferencing options will persist. A breakdown of corporate trips into different segments can help travel planners and suppliers to plan the return of business travel more effectively. Although this segment mix of four categories may vary from company to company, it is possible for all four to coexist within the same organization. Some of them might be more predominant in some organizations and less in others:
The “Never Left” Segment – These are employees for whom travel is essential for conducting business. Their trips resumed as soon as lockdowns ended. This segment made up 15% of all corporate travel expenses in 2019 and includes field-operation workers and managers in manufacturing companies having a wide distribution of factories.
The “Never Returning” Segment – This category contributed to one-fifth of business travel spending in 2019. Organizations have seen this as an opportunity to slash their travel budgets. Employees who are able to maintain significant effectiveness while remotely working may never return to business travel. Technological advancements have also made it easier to monitor such remote work, thus reducing the need for corporate travel and subsequently reducing costs.
The “Fear of Missing Out” Segment – This segment accounted for 60% of business travel expenses in 2019. This category is more than likely to cause a rebound in corporate travel. It includes people who prefer traveling in order to strengthen client relationships. SMEs, driven by intense competition, are more than likely to increase corporate travel at much faster rates in order to seize the first-mover advantage over their rivals. A Global Business Travel Association (GBTA) member survey in April reported that more than 50% of the participants are developing or intend to develop a timeframe for resuming traveling, updated travel policies, or new safety resources and information for business travelers.
The “Wait and See” Segment – This category includes employees working in noncompetitive industries and roles, primarily in the public sector, professional associations, and non-profits. This segment accounted for 5% of total business travel expenses in 2019. Professional associations have effectively adapted to the change and embraced virtual engagements instead of in-person conferences during the pandemic and will be more cautious in returning to conventional business traveling.
According to McKinsey’s report, the direction of all four categories confirms the projection of an uneven recovery for business travel, and a 20% reduction in corporate travel spending can be expected by 2023. DIF study subsequently backs the results shared by McKinsey.
Furthermore, it is important to note that even within these categories, the recovery of corporate travel will be varied, depending upon the purpose and distance of the trips. For example, even for the “never left” category, overseas travel for attending international conferences has not returned due to restrictions by governments in light of public health concerns. In addition, the rollout of vaccines internationally has been uneven due to which international travel may still be restricted to a lot of regions where there is delayed or limited vaccine availability. On the other hand, the “never return” category may make exceptions on travel for important events held regionally.
Adapting to the Future of Corporate Travel
Devising an efficient and effective strategy for embracing changes in the future of corporate travel requires collaboration from all key players in the travel and hospitality sector, including suppliers (airlines, hotels, car rentals, rideshare companies), corporate travel planners, travel intermediaries such as online travel agencies (OTAs), global-distribution-system (GDS) providers, and the travelers themselves. All these players will need to learn a few critical skills to adapt to the dynamic future of corporate travel:
Capitalize on Real-Time Data
As the return of business travel is predicted to be uneven, it has become imperative for organizations to leverage real-time data to make informed decisions. Companies can invest in data capabilities for identifying and overseeing the first indications of an increase in business travel. Travel intermediaries such as OTAs and GDS can be utilized as data sources to provide aggregate data for different industries. For example, a lot of corporate travel planners are concerned regarding fluctuations in costs and the availability of tickets. These intermediaries are able to provide information on flights that are likely to stay on an airline’s schedule, thus helping clients to build more agility while intermediaries themselves may be able to create a revenue stream from this data.
This real-time data will also prove to be beneficial for suppliers, such as air carriers and hotels, helping them operate more quickly and effectively. Once business travel returns, suppliers will need to quickly allocate proper resources in real-time to meet demand, which may change abruptly. Companies can discuss this data-driven information to align their next moves.
Agility in Planning
Having an effective roadmap and strategy for different recovery scenarios of corporate travel will help organizations in dealing with unexpected circumstances once demand picks up again. Corporate planners will need to keep certain considerations in mind:
- Decision on increasing corporate travel: Organizations will need to assess different factors such as local and regional infection levels, consumer demand, and competitive actions.
- Data for evaluation of these factors: This can include public health indicators, customer surveys, information from travel partners regarding trends in the industry, behavior of competitors, and real-time pricing.
- Organizational policies on corporate travel: Key things to consider include types of distance-based policies, use of rental cars, rideshares, taxis, or flights, when to wear masks or have group gatherings, and analyzing activities in which vaccinated and unvaccinated employees can take part in.
- Information required by travelers: It includes websites, travel help desks, and messaging.
Safety and Comfort-based Personalized Experiences
Safety and comfort are the top priorities for any traveler today. Employers and travel companies can devise strategies to improve the comfort and convenience of passengers, giving travelers greater control over decisions that impact their safety and comfort. For example, airlines can personalize flight experiences for their travelers by enhancing the functionality of their mobile apps, allowing passengers to make special requests. Furthermore, there is a need for additional services that are more sustainable and have a positive influence on society, as well as increased flexibility to cancel, refund or reschedule travel plans on short notice without incurring penalties.
Traveling has changed drastically in the post-pandemic world. Regulations and instructions around wearing masks, boarding procedures, hygiene requirements, and border restrictions are ever-changing, which is why company policies regarding corporate travel for every stage of the journey need to be clearly and effectively communicated by the organization. It is essential that companies keep channels of communication open for employee feedback and addressing their concerns.
Organizations should take particular care to communicate any type of change, whether it concerns broad strategic principles or more specific information like the company’s preferred ridesharing or car-rental alternatives for business trips. Companies can make extra efforts to maintain the availability of amenities when modifications are made to operations.
Utilization of Space
The hospitality sector needs to re-evaluate the utilization of its space to ensure hotels are able to provide a multidimensional solution for their corporate clients. This can be done by:
- Providing corporate clients with specialized digital tools including high-speed internet connectivity, hardware resources, and design reorganization to ensure that technical corporate clients can explore the full range of benefits from their hotel interactions
- Repurposing areas of the hotels to serve as alternative office spaces to accommodate meeting and working needs. The demand for specialized working arrangements within hotels is rising as virtual working options become more prevalent
- Hotels must provide clients with options for longer stays by providing value-added packages. Due to the nature of the pandemic, hotel guests frequently favor longer stays. By offering a superior technical experience above and beyond what customers may find at their home offices, hotels can become destinations of value.
Changing with Times – DIF Perspective
The hospitality industry is about to face several impending realities, including less frequent travel and digital connectivity tools. Global business travel is expected to decline as a result of the digital revolution, according to DIF. Businesses should take a proactive approach by developing distinctive value propositions and providing meaningful travel experiences, as the length of average hotel stay durations increases. According to DIF, business travel improvements are predicted to lag behind those of other segments, with leisure travel taking the lead in the rebound.
DIF is a global leader in investment insights and economic directives for global leaders. With roots in the middle east, the initiative has been supporting the development of companies in the hospitality sector.
While some business travelers will find that they need to adjust immediately to the many changes in corporate travel, others will have the luxury of gradually acclimating. Although uncertainty will always be a part of life, one thing is certain: if everyone plays their part (and wisely, by utilizing the tools and procedures at their disposal), the return of corporate travel is possible.