301 | The Road Warrior Ahead: Business travel will come back ‘with a vengeance,’ say experts

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The Global Business Travel Association, industry analysts and travel management companies see some green shoots of hope for corporate travel in 2021 as the COVID-19 vaccine rolls out and companies begin to put some of their people on the road again.

Industry analysts expect it to take about three years for corporate travel to get back to pre-pandemic levels

Pre-pandemic, global business travel was a $1.4 trillion industry. Since the novel coronavirus began its sweep around the world in January 2020, $113 billion in business travel spend has been lost and more than 200 million jobs have disappeared.

Though no one in the U.S. hospitality industry can accurately predict when business travel will return, those who keep an eye on corporate travel trends are seeing some green shoots of hope in 2021 as the COVID-19 vaccine rolls out and companies put some of their people on the road again.

Chris Nassetta, president and CEO at Hilton, said during Yahoo Finance’s All Markets Summit in October he fully expects travel to begin a rebound this year, and he made a special point of including business travelers in the mix of pent-up demand.

Business people like to travel, too, he said.

Nassetta echoes the expectations of other industry leaders and analysts who have tracked the impact the coronavirus pandemic has had and is having on the U.S. economy and corporate travel.

Included in that camp is Lisa Censullo, executive vice president at Global Business Travel Association. “We are seeing some optimism for business travel in 2021, especially toward the middle to the end of the year,” she said.

The Global Business Travel Association’s Dec. 17 survey of 16,200 members across 760 companies shows most respondents believe the successful implementation of a COVID-19 vaccine program is key to restoring corporate travel programs.

“We think that as the vaccine rolls out and gains momentum, and if we see a corresponding drop in positive COVID test results, the survey that we have suggests that a return to personal connections and in-person meetings will happen sometime in 2021,” Censullo said.

“Right now, we see a halt in business travel, but we know it will recover. The industry is resilient and it typically comes back with a vengeance. If we look at some of the past experiences and downturns, it typically takes about three years to fully recover. And that’s what C-suites are predicting at this point.”

Black Swan Event

Although the U.S. hotel industry in late 2019 was braced for lackluster business performance in 2020, most analysts expected corporate travel to continue at a healthy clip. In fact, the only thing that would dramatically curb the pace of business travel would be an unexpected catastrophe.

Bram Gallagher, an economist and senior research analyst at CBRE Hotels, recalls discussing the outlook for the hotel industry with colleagues.

“In 2019, we were agonizing in our forecasts over tenths of a percent of growth year over year.  We would have long meetings where we would argue seemingly the very small points,” recalled Gallagher.

He said Jack Corgel, an adviser to CBRE and director of graduate studies at the Baker Program in Real Estate at the Cornell University School of Hotel Administration, said in fall 2019 that he did not foresee a huge downturn in the U.S. economy.

“He said we didn’t have a seeming asset bubble. We didn’t have balance-sheet problems. We didn’t have sort of any kind of looming imbalances about to hit the economy,” Gallagher said.

“Really, the only risk that he could see would be these black-swan events. And, well, he was right.

“It was really going pretty swimmingly until COVID came along and had its dramatic unprecedented effect on the lodging industry. We’ve never seen anything like it. And Robert Mandelbaum (director of research information services at CBRE), he’s got data that goes back to the ’30s and, and we’ve never seen anything like this.”

Gallagher said though he and his colleagues at CBRE anticipated some form of a downturn in performance in lodging and maybe even a bit of a crisis, never in a million years did they imagine something on the scale of what is happening with the coronavirus pandemic.

“All types of travel were really cut down very, very sharply,” he said.

In the second quarter of 2020, hotel occupancies fell as much as 80 percent to 90 percent lower than Q2 2019. The higher the price tier a hotel, the harder it was hit. Properties that depended on business and group travel have been devastated.

“So, while we have seen some recovery in some of the segments, we haven’t seen really any recovery at all from the depths of that collapsed in quarter two. We haven’t really seen any of that come back in business or group travel in a meaningful way,” Gallagher said.

CBRE Hotels Research in late December provided its forecast of U.S. hotel business performance in 2021 through 2024, when average RevPAR is expected to surpass 2019 levels.

Hotels Encourage Travel

In gauging the state of corporate travel and separate it from leisure travel, CBRE looks at the various booking channels. Leisure bookings are typically made on Brand.com, OTAs or property direct while business and group reservations dominate global distribution service or GDS.

Leisure bookings are 60 percent to 70 percent where they were in 2019, Gallagher said.

But business travel has a steeper climb back.

“That global distribution service, that group travel channel, those declined to less than 80 percent of their 2019 levels and are still down about 80 percent year over year from their 2019 levels. So what that suggests to us is that the recovery that we’ve seen as such as it is, it hasn’t been an incredibly fast recovery and we certainly aren’t anywhere near where we were in 2019.”

One trend altering the outlook for business travel in the COVID-19 is growth in the number of people who are working from home and connecting with colleagues and clients on virtual platforms.

Gallagher does not see an end to the practice anytime soon but he does share Nassetta’s prediction that the desire and the need to meet face-to-face will revive business travel this year.

“Regardless of whether we are working from home or working from the office, that face-to-face collaboration is still going to be just as important as it ever was,” he said. “And if we do have less office capacity, where are we going to be doing those meetings? Hotels are really well-poised to provide those types of accommodations to meetings that we’re going to need.

“I’m very bullish on travel regardless of where we’re working. If anything, the personal meetings, the group conferences, those are going to be even more important as we go forward. To share the ideas; to get that personal time. That is valuable. The future of hotels looks bright in my eyes.”

In a recent report, The State of Corporate Travel and Expense 2021: The Path to Recovery, TripActions and Skift surveyed business travelers and corporate travel managers to gauge the sentiment around business travel for 2021. As the left chart shows, more than half of the several hundred people who responded to the survey are reluctant to travel during the coronavirus pandemic. Meanwhile, the right chart shows the majority of respondents believe business travel is essential to their business.

Who’s Traveling Today

TripActions is an online travel manager with more than 4,000 businesses as clients, including large corporations such as Netflix.

Meagen Eisenberg, chief marketing officer, said the company is seeing an interesting change in who is traveling for business these days.

“We certainly in March saw a significant decrease in travel, a 95-percent drop in bookings. But since then, we’re at about 20 percent levels on average. We’re seeing, three to five percent week-over-week growth.

“We’re seeing a large increase in health care, pharmaceuticals and biotech – which makes a lot of sense.” TripActions is also tracking a surge in travelers in manufacturing, business services and retail.

“Just to give you an example, in the health care-pharmaceutical-biotech sector, it’s a dramatic increase, with a peak in May at a share of 21 percent of our overall bookings. With health care being at 15 percent last year, it’s a 13-percentage-point increase year over year just in that sector.”

Most of these sectors are traveling out of necessity, Eisenberg said. That includes retail execs who need to check their stores and oversee local marketing efforts as well as shipping programs.

As pharmaceutical companies work with public health agencies to roll out the COVID-19 vaccine, Eisenberg expects to see a parallel resurgence in business travel. TripActions is beginning to hear from travel managers looking ahead at domestic travel.

“We think we’ll hit 50 percent levels in Q2 compared to 2020,” she said. “I think a mainstream vaccine will be out there to everyone that wants it by April. And we’ll see 75 percent levels by the end of the year.”

Business travel might look different this year, Eisenberg said, but it will return because our economy depends on travel. She cites a 2009 Oxford Economics study done for the U.S. Travel Association that said for every dollar spent on business travel, companies realize $12.50 in incremental revenue.

“From a business standpoint, it’s hard to sell a million-dollar deal over a phone,” she said.

“We also think as as your competitors are out there traveling, if you start to lose business or a deal to a competitor that goes in person, you’re going to accelerate your in-person relationships and travel to maintain your customers and to capture new customers. So I think it’s going to be a competitive advantage if you’re back out on the road.”

Three-Year Comeback

Censullo of the Global Business Travel Association, said worldwide business travel is a $1.4 trillion industry. GBTA members are business-travel professionals who control more than $345 billion in business travel and meeting expenditures.

To keep a handle on the state of business travel both now and in the near future, GBTA surveys its members about once a month. The latest poll taken in mid-December shows business travel around the world is at a standstill.

“According to our members, 90 percent have suspended or canceled all business travel regardless of location,” Censullo said. “GBTA estimates that the potential monthly revenue loss is approximately $113 billion in business travel spend. So it’s having a very big impact on our economy.

“With job losses for 2020 projected at nearly 200 million, the business travel industry has been devastated by the pandemic and is one of the hardest-hit areas.”

A Dec. 17 survey of 760 companies by Global Business Travel Association shows how drastically respondents pulled back on trips in 2020. It also shows about a quarter of the companies expect to get employees back on the road in the next few months.

Though Censullo echoes others interviewed for this report on the comeback of business travel, GBTA expects it will take two to three years to return to pre-pandemic levels.

“If we look at history, when 9-11 happened in 2001, the global business travel spend fell about 11 percent from the prior year, and it wasn’t until 2004 that business travel spend actually reached 2001 levels,” she said.

“During the financial crisis or collapse in 2008, global business travel spend declined about seven and a half percent and didn’t return to previous levels until about 2011.

“So three years seems to be the typical amount of time it takes for business travel to regain its previous levels.

“Although we have seen some green shoots of recovery, especially in domestic travel, we have interviewed many GBTA members, industry CEOs, and from feedback from our polls, everyone is in agreement that leisure travel will recover first followed by business travel domestically and then internationally.”

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