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Business Travel - Where will we be in 12 months’ time …?

Updated: Jan 25, 2022

Guest Column for BTN - 14/12/20

Just 12 months ago, the outlook for the new decade with a new year called 2020 held so much promise. Now, after a year that seems to have lasted forever, how optimistic dare we be?

When gazing into the future we usually consider macro-economic factors, geopolitical issues and current trends, be they tech-driven or otherwise. Looking to 2021 requires us to really focus on the customer. How will companies and organisations change their behaviours as a result of COVID, and how will their staff feel about travelling on business?

We are all in a very different place.

Economically, 2021 will be challenging with the post Brexit changes to work through and a rise in unemployment to a forecast 7.5% by end Q2, meaning some 2.6m out of work, almost double compared to June 2020.

How the US emerges from COVID and under its new leadership will have a material impact on global prosperity, alongside the status of their key international trading and political relationships, especially with China. Right now, they are struggling to contain the spread of COVID, and remain divided, not helped by the current balance of power in the Senate, yet to be resolved.

How then will companies and organisations behave?

There will be much greater scrutiny of spending on travel based on the economic value to be gained. Travel will also be assessed against alternative means of digitally enabled communication. Plus it will increasingly be viewed through the lens of sustainability, as companies collectively take greater responsibility for our environment and the world around us.

The way many used to work has changed and changed forever. For those who can, time will be split between work-office and the home-office. Office footprints will shrink along with their costs of operation. New digitally enabled behaviours are here to stay. Finance directors will be pleased.

Employees are worried about safe travel, and the risk of being stranded in the wrong country at the wrong time. They do not want to have to quarantine. They do not want to put their families at risk. Some will have enjoyed their new work-life balance. Personal well-being is now top of the agenda.

Companies appreciate this. Directors have a legal duty of care to their employees. They also know the value of doing business in person, whether to win new prospects, retain their customers, negotiate new supplier deals and partnerships, and a host of other activities. Business travel is positively correlated with economic growth, and so vital to the UK’s well-being too.

Confidence is key. A new contract needs to be struck. One that balances all needs.

Will vaccines be the universal panacea? The probable answer is that they are all we’ve got and so will have to be. However, it will take time for their roll-out, with the vulnerable and front-line staff first in line in the coming months. An estimated 70% of the population needs to be vaccinated in order to effectively manage the virus. This is a huge logistical ask that will take time. We do not know yet when follow-up jabs will be needed, and what the bumps in the road will be. There will be international variations and issues to contend with too.

Therefore, the numbers likely to travel on business internationally in H1 2021 will remain low. There may also be a further surge in cases through January, post the Christmas-New Year period, leading to restrictions on movement in the UK and elsewhere. There will be continuing reluctance to risk more cases with travel to/from places with relatively high rates of infection. The option for a series of tests pre and post travel allied to the stringent safety measures taken by airlines, hotels and others, may yet enable some business flying, which would suggest a slow increase through Q2 to c 20% of where the industry was in 2019.

Whilst there is an expectation that we might be able to travel abroad for a summer holiday, the volume of summertime business travel is likely to be similar to the end Q2 levels until we reach September, based on seasonality. It may be possible to see an increase to 50% of Q4 2019 international travel in the final quarter of 2021, although this feels optimistic if we are at c 20% in August.

Overall, my current view is that we should expect domestic business demand to be running up to 50% of 2019 levels on average in 2021, and international business travel closer to 25% on average, with Q1 remaining below 10% and Q4 achieving c 40%. 2022 will then be brighter, with levels around 75% plus of domestic travel and meetings, and 60% plus international travel, compared to 2019. IATA’s latest forecast expects air travel to not equal 2019 actuals until 2024, with leisure doing better than business travel in terms of the recovery.

Whilst this is arguably a pessimistic scenario, it is surely better to plan for the worst and hope for the best. It is easier to add back cost as activity levels rise; it is so much tougher to manage a business with too much cost. Cash/access to funding has already been a huge challenge, eased by the furlough scheme and CIBLs. Of course, the former has an expiry date of end Q1.

TMCs are under enormous pressure to change fast, embracing technology to deliver efficient and safe services. Understanding what their customers now think and want is key. Some will adapt and thrive. Some will not. Decisions have to be made quickly. We will see more M&A activity to achieve economies of scale, and the scale required to access travel content that underpins their customer value proposition. Companies must grasp the nettle now. TMCs that smartly reset and closely collaborate with their customers will cope with a weak 2021 and benefit from the momentum as business travel slowly recovers.

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