In 2022, business travel finally started to recover from the pandemic that took hold in 2020, forcing travel to a standstill. Throughout the last couple of years, most suppliers kept the terms of their contracts in place from 2019 and simply rolled them over year-to-year, utilizing that year’s travel spend as their baseline. This trend continued into mid-2022 when many extension terms were reduced from twelve to six months as suppliers realized corporate spend was not returning to pre-pandemic levels in the short-term and were hesitant to extend 2019 deals in the long-term.
So what’s on the horizon for 2023?

Rental Cars
Historically, the car rental industry has been flat year-over-year with no major increases in rates. The major suppliers have consistently been competitive in their pricing and many times the business was won based on company culture, long standing relationships, or the location of rental facilities.

Unfortunately, in the last couple of years rental car suppliers have been hit with a lack of vehicles in their fleets. It has been no secret that issues with computer chips and other supply chain problems have plagued all of us even in our personal lives – this has directly affected the rental car industry as well. It is much harder to purchase a one-way rental than in the past as rental locations want to keep their fleet at their location. The dearth of vehicles has even made it tough to find a car to rent in many locations.

Another issue is the age and mileage of these vehicles. Many are older than what travelers were accustomed to seeing in years past. Car rental suppliers have communicated that pricing will go up with all new agreements and will most likely remain elevated for the foreseeable future.

Lodging
Hotels were among the first suppliers to make a comeback in the last couple of years. During the pandemic, many of them had to close their properties or only had limited service when it came to housekeeping, meals, lounge access and even availability.

However, as the world began to emerge from its long COVID-induced confinement, leisure travel demand rose dramatically. Once borders started to reopen, people flocked to diverse destinations for their personal vacations, and it hasn’t eased up throughout 2022. Corporate hotel rates, which were rolled over from 2019, are nowhere to be seen in 2023 negotiations – there is no incentive in many regions or locations to provide strong competitive corporate rates when leisure travelers are paying the higher prices and filling up a hotel. I feel this trend will eventually level out as corporate travel increases, but I don’t foresee anything but higher rates for the next couple of years.

Airlines
Like hotels, airlines have seen an incredible boost of leisure travelers in the past year. In the depths of the pandemic, corporate airline agreements were rolled over with the same terms since 2019, but now these extensions have been shortened. In the early fall of last year, some air carriers started insisting on new agreements with less favorable terms as corporate travel still has not reached 2019 volumes.

Leisure travel has impacted airlines capacity as well and people are willing to pay top dollar for a seat today as opposed to years past. Air suppliers changed many of their routes to accommodate leisure travel destinations ensuring their flights are flying at full capacity. Many of the perks usually associated with having a corporate airline agreement, such as soft dollars or instant airline status nominations, have been reduced.

Airlines have begun to water down their new corporate agreements when compared to 2019 contract terms. They understand that much of the spend is leisure-based and would rather sell these seats to travelers willing to pay full fare as opposed to giving away free upgrades. Until corporate air travel meets or exceeds 2019 volumes and/or leisure travel slows, corporate buyers will struggle with new pricing agreements.

It’s no secret that the pandemic wreaked havoc on all of us in the travel industry. Many of my friends and former colleagues no longer work in travel as layoffs or pay cuts were required to keep businesses afloat – all travel suppliers took a financial hit and many were lucky to survive. It makes sense that travel suppliers have to increase their profitability not only to make up their losses but survive with higher costs that have us all in a chokehold.

There is no question about it – we are in a seller’s market for the foreseeable future. But as we work through this post-pandemic period, it is important to remember the historical impact of corporate travel on the bottom line of all travel suppliers. Corporate travel will eventually surpass 2019 volumes and force the industry to pivot once again.