In my last blog, A Recipe for Recovery, I pointed out that history proves that greatness emerges even when things seem darkest. While it’s difficult to consider how this translates to corporate travel as we continue to witness our industry crumble, the “what’s next” question deserves a lot of thought if you consider how corporate travel functions today and the simple math that frames the opportunity before us.
Data Doesn’t Lie
Last year the Global Business Travel Association (GBTA) forecasted global corporate travel to top $1.6 trillion. If we consider that roughly $100 billion of that is formally managed by traditional travel management companies (TMC), then either our business opportunity is massive or the billions of dollars the industry has seen in new product development, investment, and disruptive technology has it all wrong. These high-level numbers, at least in my mind, paint a picture of lost opportunity and enormous potential. 6% of all corporate travel is managed? We can do better.
Other than anecdotal predictions, I have seen no empirical evidence to support the notion that corporate travel will never fully return. 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. In 2019, TravelPerk did a study that pointed out that unlike Gen X who view travel as a necessity, Millennials love to travel and view corporate travel as a perk, an opportunity to see new places, and grow their social network. In fact, Millennials prefer face to face business meetings over platforms like Zoom.
And guess who makes up our traveling population today? According to a recent PWC study, about 50% of the workforce is now comprised of Millennials. Boston Consulting Group estimates 50% of all corporate travel spend in 2020 coming from Millennials. They also tend to travel more often than Gen X and spend more money. Putting aside statistics, it also just makes sense. By now, all of us have deep experience with the pitfalls of video-conferencing and anyone in a sales role will tell you that “being there” is half the battle in business dealings.
Framing the Opportunity
For almost 20 years I have owned and operated a successful corporate travel consulting business and last month took some time to aggregate hundreds of corporate travel surveys conducted over this time frame. In these surveys we consistently asked two questions. The first question was “How often do you follow corporate travel policy?” The second question, purposely found much later on in the survey was “How often do you follow corporate policy having nothing to do with travel?” In aggregate, 60% of the respondents reported they followed corporate travel policy 90% of the time or more and 95% of the respondents reported they followed policy having nothing to do with corporate travel 90% of the time or more. Certainly, we provided this line of questioning to both prove a point and to be self-serving. We understand as corporate travel consultants that policy compliance in our industry is difficult at best. The best pathway to gain compliance is by creating an overwhelming value proposition to the traveler that drives user behavior. While a good portion of the $1.6 trillion can never be formally captured under a managed model for various reasons, the data shows lost opportunity within our existing managed business and green pasture for as far as the eye can see. We can do better – and the vast majority of my surveys were not to Millennials who will demand better technology and better process or will look elsewhere. Creating that overwhelming value proposition is the code to crack.
The Future Is Now
Corny and worn out as the famous football quote may be, I think it’s appropriate for our time. The opportunity to change our industry is here and we are seeing some of what may be taking shape. As a few examples, TripActions has gained unprecedented funding, shocking valuation, and phenomenal growth as an alternative to the norm. Google is skirting the edges of the industry, a whisker from leveraging its core competency which is the lynchpin of corporate travel – search capabilities (just Google it). Coupa software has acquired Yapta and ETA and you can read the writing on the wall in terms of what they are looking to accomplish. And even SAP Concur is re-writing and re-vamping its product offering because they are smart enough to read that writing. The list goes on. As travel volume starts to return, the winners will be those who are considering how to grow the segment of corporate travel we call “managed”, and not just with an eye toward recouping that 6%. We’re starting to see a lot of industry consolidation which is important but is also just an asset reshuffle that gets us back to 6%. Both market leaders and new entrants are re-thinking our business model because they understand we can do better and data doesn’t lie.
Certainly, my business is not immune by any measure and I am saddened to read daily announcements of yet more layoffs. But I think we are also smart enough to hold two thoughts at once – recovery and rejuvenation. A $1.6 trillion bogey is big and even small moves make a big difference when dealing with percentage points against that significant a number. Can our industry capture 10% of it? 15%? Why not?
I think we can. I know we will.
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