While the corporate travel industry may still be facing a multi-year return to normalcy, I think we are seeing a lot of evidence that points to a faster recovery than predicted and one that positions business travel to prosper beyond our expectations.
Recent news of three highly effective vaccines may not only help wipe COVID-19 out of existence but also help us all psychologically get back to normal. A recent CNN article discussed that some leisure agencies reported an uptick in vacation bookings on the heels of the vaccine announcement. The Global Business Travel Association (GBTA) just released a study that says 50% of its travel buyers are willing to travel for business in the current environment. By many accounts, people are itching to get back to travel and there is a lot of data to support the motivation.
An Oxford Economics white paper from 2009 did a study focusing on the relationship between business travel and corporate return on investment (ROI). In short, it found that for every dollar spent on corporate travel, the company saw a $12.50 revenue increase. Further, it showed that curbing business travel could have an adverse revenue impact for years forfeiting 17% of profitability year over year. And both executives and business travelers estimated that 28% of their business would be lost without in person meetings. The fact that the study is now 12 years old is important because it was conducted at a time that heavy travelers were of the Gen X demographic who widely viewed business travel dimly, as a necessity.
Millennials Are the Largest Percentage of the Workforce
Today, Millennials make up the largest percentage of our workforce. Most of the major management consulting firms including PWC and Boston Consulting have done studies on Millennials’ corporate travel habits and the results are revealing. Based on these studies, we know that millennials love to travel for work and tend to spend more money than their predecessors. A Hilton Hotel study from 2018 found that 75% of this demographic see business travel as a major job perk, 65% see travel as a status symbol, 56% create reasons for business travel, and 39% say that they wouldn’t take a job that disallowed travel. A 2019 study by TravelPerk went a step further indicating that Millennials prefer face to face business meetings over platforms like Zoom.
What Does This Mean for Corporate Travel?
These statistics bode well not only for the corporate travel industry, but for businesses alike. In short, businesses see a significant return on investment by traveling and Millennials are more than happy to oblige. Even better, the pandemic has pushed major organizations to implement permanent work from home policies. Might we see corporate travel budgets increase as a result of decreased office overhead? A recent CNBC article discusses the impact office shut-downs at major companies like Nationwide, Barclays, Morgan Stanley, and others will have on business practices and corporate real estate. The impact in March 2020 to corporate real estate was an unprecedented 1.3% decline according to Green Street’s Commercial Property Price Index. The article points out that technology investment over the years has helped enable at-home work, workers tend to work more when working from home, and take fewer sick days when working from home. And unlike corporate travel, I can find no empirical evidence that possessing physical office space yields a compelling return on investment. Millennials have their home offices, want to travel, show a significant return on investment by doing so, and may have unprecedented budget as companies shed infrastructure. Getting past the pandemic may open the flood-gates.
There is no doubt that we have a long way to go and that the worst is most likely right in front of us. I am hopeful however that we are closer to the end of our nightmare than the beginning and it does seem like the industry has a lot of the right ingredients for a strong turnaround. It’s easy to forget the massive investments made in the industry pre-pandemic, anticipating building better solutions around existing practices and leveraging the untapped small to mid-market business demand for corporate travel services. The corporate travel industry would be in a hyper growth mode right now but for the pandemic.
What’s to Come in 2021?
For now, I remain hopeful that 2021 surprises us all and hope that everyone stays safe and healthy.