We are all aware that life has changed in many ways and maybe none more so that business travel. Working from home has become normal, use of videoconferencing is commonplace, and almost every company is having to tighten its belt as a recession looms. That all equates to a lot less business travel for the foreseeable future.
This will affect full service airlines more than low cost airlines as generally they derive most of their profits from business travellers. For instance, in 2019 Delta Air Lines reported that 30% of its ticket revenue came from SkyMiles Medallion elite members, which is typically made up of frequent business travellers. This means that nearly one third of its profits came from approximately 2½ -5% of its passengers. That is a lot of profit to lose.
Businesses are all reporting that they have begun the process of revising their travel policies with short day trips likely to be replaced by videoconferencing and flights reserved for those meetings that are high value and require face to face interaction and relationship building.
Business travel won’t disappear as there will always be a need for those higher value meetings, but it is likely that videoconferencing will replace many trips, not only because companies have now understood that it’s possible to do that, but also as they try to keep a lid on costs.
The global consultancy ICF International recently surveyed 100 business travel managers in the US to capture their views on how their business travel will be affected by the pandemic. It is of little surprise that 57% of companies have suspended all business travel due to the pandemic, and 41% have limited travel to essential only.
What is interesting is that a quarter (25%) of companies responded that their business had not been adversely affected by the pandemic and 41% said that it had less impact than they had expected. This response indicates that the majority of businesses were able to continue their work without the need for travel. This may be that they used videoconferencing successfully or found other ways to negate the need for travel.
Around two thirds of companies responding to the survey indicated that normal business travel will not resume until there is a vaccine or treatment for the virus. However apparently fewer than one in three adults in the US say they are likely to get the vaccine once it is available, and around half said they would wait for at least six months before seeking vaccination.
As to when business travel may resume to pre-pandemic levels, only 6% of respondents indicated that would be in the autumn of 2020, less than one in five (18%) indicated Jan-Mar-2021 and the vast majority (61%) said they were unable to predict at this point. For business travel in Aug-2020, 55% said only essential travel would take place, with 29% saying there would be no business travel at all in Aug-2020.
With low economic growth forecast across the globe, it’s likely that most companies will be implementing cost cutting measures. According to ICF’s survey, two thirds of travel managers expect their companies to revise travel policies to permanently reduce the travel budget. The same percentage also indicated that business travel would not resume until after the pandemic is over.
The reduction in business travel doesn’t just affect airlines of course, but airports are also badly impacted. Car parking and food and beverage are two areas where business travellers tend to pay more. Leisure travellers are more likely to seek off-airport parking that is cheaper, while according to a recent ICF survey of airports, business travellers pay on average 20% more for food and beverages while waiting at an airport.
It has long been predicted that leisure travel will rebound much quicker than business travel, but these findings indicate that it’s unlikely that business travel will get back to previous levels, at least in the next few years and maybe never. Companies are looking at ways to become leaner and unfortunately it appears that business travel will be an early casualty.