Corporate travel rebounding but will shrink by a third in 2021

In an environment where business travel conditions have changed dramatically in the space of just a few short months, Flight Centre Travel Group have commenced a series of global surveys to better understand the prevailing sentiment and views of our customers. 

Engaging with our customers on COVID-19 has revealed that while all businesses are being impacted by the same pandemic, the fallout across different industry groups and geographic locations is somewhat varied. However, almost all respondents to our survey agreed that the nature of business travel has changed irrevocably.

 “Never before have we seen such a wide-reaching global impact on travel and business confidence – and one surrounded by a level of uncertainty that has created more questions, than answers.” Chris Galanty, Corporate CEO, Flight Centre Travel Group. 

Looking back at significant events which have impacted business travel, there are only two other parallels:

  • The events of 9-11 and SARS, both of which caused reduced travel demand due to health and safety concerns. 
  •  9-11 in 2001 resulted in an average -31% reduction in air traffic from September 2001 to January 2002. • SARS in 2003 caused a -18% reduction in air traffic in April 2003. 

By comparison, COVID-19 has resulted in a -71.2% reduction in air traffic demand May 2020, and currently has had an upward shift to -51.6% in August 2020. The uncertainty of the virus and its impact on us as individuals, communities and businesses, became real very quickly as different scenarios unfolded globally from January 2020

Understanding the impact of COVID-19 on businesses has become key to mapping out the necessary return to travel frameworks across key industry groups and also the pathway of recovery for business travel in general. 

Of businesses interviewed we asked what changes they had made since April 2020: 

  • 66% had changes to their organisation’s structure 
  • 33% had headcount reduction and office downsizing 
  • Large global enterprise businesses were more likely to have restructured and reduce employees. 
  • Whilst small-medium enterprise businesses were more likely to have only reduced employee numbers. 
  • Employee headcount increases were reported in Science & Technology Services, Financial & Insurance Institutions and Information Media & Telecommunications.

The travel rebound has already begun

50% are now travelling Industries who continued to travel or recommenced travel the fastest were Mining & Wholesale. When reviewing business travel programs in August 2020, 50% of customers had employees travelling or booking to travel in the immediate future. Resuming travel will be different for everyone. 

In the research conducted over the past months, over 90% of businesses plan to travel domestically and short-haul continental/international, within 3 months of borders opening. However, long-haul international travel is being reassessed, with no strong plans of when business will return. 

The global average of number of business trips a traveller would generally take is anticipated to reduce 2021-2023. Pre-COVID the average number of business trips per traveller was 6-8 per year, and this is forecast to fall to 3-4 trips annum for the medium term.

Returning to business travel

Across the three intervals of research conducted, 26% of businesses are planning to return to the same preCOVID-19 levels for domestic travel during 2021. The remaining 74% of businesses predict reduced domestic travel for the immediate year ahead. 

When discussing the frequency of short and long haul international travel in the future 7% of respondents advised they are likely not to travel during 2021, and 30% of respondents were still unsure due to current government restrictions. 

A very patchy return likely

An indication of the very patchy return to travel can be observed in airline schedules and seat capacity reporting, comparing 2020 to 2019. Domestic air travel has been on the gradual rebound since February and March 2020, when seats drop dramatically between -50% to -90%, compared to volumes in 2019. Since this time airline seats have risen and fallen week to week in what has been a very volatile process taken by airlines to decipher the demand, traveller confidence and future government restrictions

Shift in hotel supply and demand

Whilst corporate hotel rate fluctuations are ongoing, understanding to what extent variations will occur is dependent on supply and demand per property and city. We are several months on from the trough of demand, and whilst we see significant losses and increased operating costs that need to be recovered the supply is outweighing the demand. 

  • Mining, Construction, Food, Finance & Insurance and Wholesale are the top industries travelling today. 
  • For the first time in some 10 years, these industry groups are benefiting from significant partnership leverage with hotels for the year ahead. 
  • Global hotel rates in key cities are set to reduce by an average of -4.5% in 2021
  • Over 50% of hotels are offering a combination of fixed negotiated rates combined with a dynamic discount rate off Best Available Rate (BAR) enabling travellers to select the most favourable rate option.

Top travel consideration

Since the emergence of COVID-19, the reshaping of business travel programs has been almost immediate. We asked customers what are the most important business drivers for their future travel program.

  • 84% of businesses interviewed have active travel policies, either at a national or global level. Smaller businesses were less likely to have formalised policies and rather review the need to travel inline with budgets. 
  • 50% of businesses interviewed in August 2020 have lifted bans on travel as border restrictions relaxed, and a growing need for business critical travel has occurred.

By Corporate Traveler, State of the market Business travel perspective, September 2020 report

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