With business travel caught between a fading pandemic crisis and an uncertain return, we look for clues to the future
By Lark Gould, Mark Rowh
Open up any newspaper, magazine or travel website these days and you will find no shortage of studies showing just how eager business travelers are to get back on the road. There are companies to rebuild, connections to re-bridge and a level of confidence to rediscover – but all that still lies ahead. For now, we find ourselves in a murky transition, knowing the new normal will be different but not quite sure how.
As planes fill up now, including occupying middle seats and serving passengers drinks, and as hotels and resorts are ratcheting up rates to meet rising occupancies, we look at what’s in store for travel in the coming weeks, months and even years.
So far the news has been good. Domestic flights are nearly 77 percent full, on average, according to trade group Airlines for America. Carriers are ramping up flights and routes, and international travel, however tentative, is set to get a big boost from the European Union as borders open up, one by one, mostly to vaccinated travelers.
“Pre-pandemic, the issue was overcrowding at airports that were operating over their planned capacity,” says Michael Taylor, travel intelligence lead at J.D. Power. “Airlines had done a fantastic job maximizing the load on flights, which is key to profitability. No flier likes a packed aircraft, but that’s not the way to operate a financially successful airline,” Taylor explains.
“Despite this, airlines have made great strides purchasing more comfortable aircraft with better in-flight entertainment and connectivity. Even the food has improved. Now, as we emerge from this pandemic, even with lighter loads, the traveling public has the greatest concern of infection onboard an aircraft. The ability to control who comes in and out of one’s personal space is key to controlling concern over infection,” Taylor says. “That’s hard to accomplish on an aircraft.”
However, adjusting to a new normal is something travelers have negotiated in the past, according to Ralph Kaiser, president and CEO, UATP, the airline-owned travel payment network. “We will adapt to the requirements of COVID on travel just as we adapted to taking our shoes off and limiting the size of liquids on board airplanes over the last two decades,” Kaiser says. “We take this for granted now and we will adapt accordingly in the post-pandemic world.”
Recovery Around the Corner? The travel that’s returning in the early stages is made up of leisure consumers who are mostly about visiting friends and family, and getting out for a short vacation while air fares are still tempting. It has not been about business travel, which, for airlines, usually accounts for 12 percent of bookings but 77 percent of the revenues.
“Domestic leisure travel is back and booming,” Kaiser says. “US airlines have already stated that the summer of 2021 will be record-breaking for leisure travel. We are seeing an increase in business travel but it is slow – we think that Q3 and Q4 will be key and expect more rapid growth then – assuming governments adequately coordinate sensible travel solutions.”
In a recent interview with the Wall Street Journal, Delta CEO Ed Bastion bemoaned a $12.4 billion loss for the airline last year – more than any other US carrier. Still, Bastian says he expects to see the steady return of US business travel as domestic businesses start to open. “We’re only right now at 25 percent to 30 percent of where we should be. I think by the end of the year it will be at least twice that. International business is going to probably be another year from now.”
Bastian sounded an optimistic note about the reasons for a return to travel. “A lot of people are interested in getting back and reclaiming their life,” he said. “Just getting back out is cathartic.”
But what just getting back out looks like among corporations is anyone’s guess. According to the latest polls from the Global Business Travel Association, 77 percent of companies surveyed had undergone a range of layoffs. Of employees still on the job, some three-quarters say they are ready to travel again. Another 10 percent or so indicated they were not willing, or unsure.
Michael McCormick, former executive director and COO of the association, is now heading up the Travel Again project, a non-profit enterprise aimed at uniting the global travel industry to restore consumer and corporate confidence in travel. McCormick believes appropriate legislation and more government involvement in the travel sector can help the country and world ease into the positive new normal the industry seeks.
“In travel we don't come together very much, not holistically, not globally. So we have needed a different approach and more toward government partnerships and cooperation. We are not all on the same page and that makes it challenging to deal with these issues as an aggregate industry,” he says.
In fact, McCormick maintains we're not even at the starting point of recovery yet. We're still in pre-recovery mode. “It's a hard message because people want to be optimistic. They want to feel like, ‘we're back!’ Suppliers are saying, ‘I've got travelers coming on to my planes and into my hotel rooms and it's like, yes! It’s happening!’ But until we get to a better point with vaccine distribution, and an environment that is stable enough and not having setbacks, and until international travel – specifically international business travel – reopens, we’re not living through a true recovery. We've seen downturns before and the driver of the recovery is always international outbound business travel. This is a global economy.”
Making Connections The DHL Global Connectedness Index as reported in the Harvard Business Review this spring underscored that the COVID-19 pandemic is not likely to send the world’s global economies into the troughs seen in the 2008-09 global financial crisis. However, the only part of the index showing an unprecedented collapse due to COVID-19 is people flows. The report notes “managers in multinational corporations should pay special attention over the medium-term to effects of travel restrictions on internal team functioning and learning and innovation. Remember that global teams are more vulnerable than domestic teams to misunderstandings and breakdowns of trust, especially after long periods without in-person contact.”
Along with the other complexities of modern business brought on by the pandemic, new ways to interact have emerged that can offer viable options to traditional travel. “Stakes are higher than ever for companies to maximize the ROI for every business trip or relocation,” Steve Black, CSO at Topia, a company specializing in global talent mobility. “Instead of an employee flying fifteen hours for a short meeting with a client or customer, companies will demand more ROI and a stronger business case.” At the same time, travelers may need to plan for longer business trips, schedule more meetings and pack more value in a given trip to justify the expense and the potential risk of traveling.
“The Zoom factor isn’t going anywhere, for now,” Kaiser predicts. “A lot of companies have adopted the video conferencing tools out of necessity but business travel will return slowly but surely as borders open and confidence returns.” That means while the cost of doing business by phone or online may be a fraction of the expense involved in attending in person, the undisputed value of conducting business face-to-face, person-to-person – especially as business recovers and competition heats up – may be more critical than ever.
“At the end of the day, it’s important to understand that this is an exceptional time and that at some point most of the old ways of doing business will return,” notes Katya Yerpo, international business and management consultant for Osprey Consulting. While current travel limitations make negotiations through digital platforms more socially and politically acceptable, that will never be the whole story. “Face-to-face negotiations will never go out of style since they’re the most effective way to do business in general,” she says. “And they’ll start to become necessary in certain scenarios again soon enough.”
Seeking Value Certainly all trips don’t offer equal potential. And as the restrictions imposed by the pandemic are eased, gauging the anticipated value of any trip may be even more important than in the past.
Karen Tiber Leland, founder and president of Sterling Marketing Group, believes that post-COVID business travel will go from something of an automatic decision to a conscious choice. This means evaluating at what point in the relationship with the investor, customer or employee there is enough benefit in meeting in person to justify getting on a plane or train to go see them.
Such judgments will necessarily include cost estimates. “While face-to-face negotiations are the best for building long lasting and trustworthy business relationships, they’re also the most expensive ones to carry out,” Yerpo notes. Each party will have to determine if the kind of business they’re doing demands a more personal approach, which may be preferred for delicate or large-scale negotiations. Or maybe it’s worth taking the risk of a less personal and less costly option, which might be best for everyday interactions that are more routine or smaller in scope, she says.
“Trip justification will be paramount,” Kaiser advises. “Is this mission critical? If so, can we combine trips or reduce the total number of participants? Duty of care considerations and even travel insurance coverage will be important factors for both companies and travelers, too. A lot more thought will go into the business travel planning and execution.”
In deciding which option works best, the same considerations for determining the return on investment will apply that held true before the pandemic, according to Dr. Richard L. Weinberger, chief executive officer of the Association of Accredited Small Business Consultants. What effect will the particular decision have on the bottom line? If travel is initiated, will sales and net profit increase when comparing pre- and post-COVID periods? “The calculation can be quite simple,” he says. “What additional travel expenses will be incurred, and what additional revenue and net profit will be produced?”
Ultimately any business choice – whether that’s travel, marketing, location, services or something else – comes down to the effect that decision is expected to have on the bottom line. “Now that the US is heading into a post-COVID period, a decision for many businesses is whether to return to pre-pandemic policies or introduce new policies while seeking to achieve pre-COVID sales and net profit goals,” Weinberger says. Less tangible but perhaps also worth considering are some of the side benefits travel can bring. For example, provided travel meets the major objectives at hand, it can also serve as something of a morale builder for staff who enjoy it. In fact, a recent global survey from insurance giant Chubb found that more than four out of five business travelers (84 percent) say they cannot wait to travel again for work, and nearly three out of four (74 percent) say they are less effective in their job due to the pandemic and severely limited travel opportunities.
At a recent Ernst & Young hospitality conference, Chris Nassetta, president and chief executive officer of Hilton Corporation, offered his own set of travel predictions: • Things will be a lot like how they once were, but it’s hard to know exactly which ones will be, and which ones won’t. Certainly there will be some structural changes; for example there may be more leisure travel. • Meetings and events: There will be more hybrid meetings in the future, with larger virtual presence, because it’s effective at getting messaging out to broader audiences. • The trends that were already underway will only be accelerated post-pandemic. There will be greater use of technology (what Nassetta called ‘physigital’ – physical and digital) interacting with a physical experience, for example contactless services. • Capital spending within corporate America trends will lead to growth in room nights. • Megatrends: people are interested in buying experiences over things and as pent up demand is unleashed, more leisure travel should increase.
“The pandemic made people question if the Golden Age of travel was dead. The new era of travel is coming,” Nassetta emphasized. “Recovery is going to be fast. People haven’t lost their desire for experiences. There’s a pent up demand. Globalization will pick up steam again. Hospitality will create immense growth and opportunity around the world.”