Corporate business travel is making a steady comeback, yet this time around, things will be looking a lot different than what they did during the pre-pandemic years when businesses globally spent a robust $1.4 trillion on travel and accommodation for traveling employees.
Grinding to a near halt at the start of the COVID-19 pandemic outbreak in 2020, companies slashed their business travel budgets as health and travel restrictions were imposed, and countries closed up their borders.
Now, close to three years after the outbreak and global shutdown, corporate business travel is once again lifting its head out of the ashes. Only now, companies are not spending as much as they used to, as airfares reach stratospheric levels and accommodation prices continue to rise due to inflationary concerns.
With the fragile post-pandemic economy hinging on the edge of a recession, businesses and organizations willing to take the risk on corporate business travel once again are seeing prolonged timelines for recovery and have for now halted non-essential business trips.
The Figures Show The True State Of Business Travel
The shockwave of lockdowns and travel restrictions during the height of the pandemic led the tourism industry, including business travel, to be one of the hardest hit in the years to come.
At its peak, 86% of business executives and employees canceled all work-related international travel plans, as countries closed their borders and initiated widespread lockdowns. Close to 70% of businesses canceled all domestic work travel plans too.
Still, nearly 18 months after the pandemic started, corporate travel spending was only around 10% of pre-pandemic levels in June 2021 according to Deloitte.
Now, even more than three years later, things are still looking somewhat bleak, as rising travel costs due to inflationary pressures and airline operational problems create further headwinds for the business travel industry.
At the end of 2022, United Airlines CEO Scott Kirby said that much of the business travel they expected during the fourth quarter of last year had already started to plateau by mid-2022.
President of Delta Airlines, Glen Hauenstein noted that corporate travel demand was somewhat steadily improving in January 2023, while domestic corporate sales were able to recover by 80% of fourth quarter 2019 levels.
Rocky economic conditions, slowing consumer spending, and a slew of tech layoffs in Silicon Valley meant that some big-tech companies were cutting down on unnecessary business travel spending to help improve their bottom line.
That’s at least what Alaska Airlines CEO Ben Minicucci reported, saying that many of these companies “turned off” their business travel plans in late 2022 already.
This comes as no surprise, as one tech giant after the other announced cutting back on its headcount, or making organizational changes to continue its operations against a slowing economy and looming recession.
In mid-2022, Google was gaining a lot of media coverage after it announced that it was downsizing its travel budget, in what the company called “business critical” trips.
Now, as dilapidated economic conditions persist, and costs continue to rise, it’s hard to look back at the more than $1.4 trillion spent on global business travel in 2019, and think how the industry will once again reach those glory days in the coming years.
Price Increases Are Perhaps The Biggest Concern
Global disruptions that took place over the last several years have caused an economic slowdown on a widespread scale, with central banks hiking up interest rates in an attempt to push down stubbornly high inflation.
Dwindling market conditions and operational chaos have only added further fuel to the fire, and after years of shutdown, prices have suddenly reached stratospheric heights.
Business travel is no shy contender when it comes to seeing severe price increases over the last year, with 2022 seeing the peak thereof, only to slowly come down by the start of this year.
Accommodation, lodging, and flight prices were nearly 60.2% higher in the second and third quarters of 2022 compared to the same period in 2021. There has however in more recent times been a decrease in business travel inflation, with quarterly reductions of 8% since the fourth quarter of 2022.
Still, despite the steady decrease and stabilization of conditions, business travel fares are 20% higher than what they were in 2019 on average. Experts have suggested that even as conditions slowly improve, and companies reinstate their corporate travel plans, or even look to spend more than the previous post-pandemic years, prices will remain elevated for much of 2023.
Even with the slight decrease, and with most, if not all countries dropping their remaining pandemic-related restrictions, the recovery of business travel remains an eerie forecast.
This comes as a growing number of companies and organizations are adopting remote working policies in light of recent events. Many have realized that it’s not only easier and more convenient to conduct business via the virtual office, but it’s helped them cut down on office-related expenses.
And the numbers speak for themselves, once again.
A report by Lemon.io found that companies that offer remote work options for most, if not all of their employees could save up to $10,600 per employee annually.
Downsizing office space, and cutting rental costs alone could save companies $5,580 per employee annually. On top of this is the $2,000 in utilities per employee, $1,600 per worker in one-off office expenses such as equipment, and $1,300 in office snacks per employee that companies will be able to save. A crucial estimate in light of turbulent economic conditions.
A new Zoom nation of workers has meant that companies no longer require the need for business and corporate travel, and for those that have continued their travel efforts, budgets can now be slashed even further and funds redirected towards other facets of the company.
A combination of tumultuous issues, running from inflation, soaring prices, remote work, and even sustainability efforts have seized the former glory of business travel, despite much of the pandemic headwinds now in the rearview.
Could Fintech Be The Solution Needed To Restore The Industry?
In more recent times, there have been ongoing talks on whether several innovative industries, including tech and fintech, respectively, could help restore business travel to what it once was before the pandemic and other workplace trends gripped the industry by the throat.
A conference management firm for clients in the biotech and pharmaceutical industry says that although business travel is slow to return, companies will be required to take a more modern-day approach that can help build simplified solutions for the modern-day traveler.
“The pandemic taught us how technology and software can help replace legacy systems that are no longer a viable solution in the modern workplace. Companies need to be more open to adapt, innovate and integrate technological solutions that not only help improve operational activities but also help them and their employees succeed in a new era of travel,” says Murphy.
Although fintech can be considered a possible option to help restore what was once a celebrated industry - the technological applications are nothing new to the travel industry.
Today, fintech applications and software platforms can help people make more seamless cross-border transactions. Money can be digitally exchanged, from one currency to another, without ever having to visit a foreign exchange office.
People can transfer funds, issue cards, make digital payments at several merchants abroad, and open accounts on several different platforms without having to visit a bank or legacy financial institution.
With all these uses already a possibility, how can they contribute to the rebuilding and restoration of the business travel industry?
Murphy says that perhaps the most notable contribution it has is that it can provide businesses with more flexibility, and freedom to access key data metrics it requires to help adjust and set up forward-looking budgets.
“If companies can better track and monetary regulatory expenses on business travel, it will give them a better idea of how they will need to adjust their budgets in the coming years,” she says.
Having better access to the data provided on these applications and platforms, companies can better understand, and utilize data that can help them make more defined and informative decisions.
Going about this alone isn’t easy, and due to the complexity of these data sets and measurement thereof, fintech companies and startups are now providing more than software to businesses, but rather offering them a more service-based approach to their data needs.
Instead of relying on outdated infrastructure, fintech companies now provide a more avant-garde approach to companies' business travel needs. A better understanding of how budgets can directly correlate to travel expenses will help them to more accurately predict future needs.
Then there is the back-end implementation, which means that companies can connect fintech partners with administrative and accounting services to have an all-in-one integrated network that provides them with more accurate data points.
Having these different components connected, and allowing them more flexible access to primary information means that instead of unreliable legacy models, company executives will know exactly how to execute and implement financial strategies relating to business travel.
Perhaps less seen, but these systems are designed to manage and control mundane workloads, helping to alleviate employees from the burdens of duties and tasks that take up a large portion of their workday.
This is a crucial addition for travel companies, aggregators, and those that make use of their services for business travel.
Faster and more reliable systems would help translate to more accurate customer service and booking experiences for travel companies.
Now, instead of businesses clicking on their favorite booking site, or setting up itineraries through travel websites, fintech platforms can give them direct access to the best and most affordable travel packages and put them in direct contact with the service providers they require.
The full-scale integration of these efforts requires not only the expertise, but the monetary and financial resources to get these systems up and running, and for smaller businesses, this may come at a price point outside of their traditional range.
Although the offset thereof is still in the development phase and requires more institutional investment from fintech, the concept is already alive and well, helping corporate companies better understand the future of business travel and how changes in the economy can impact their business strategies.
Although travel has made an outstanding return, business and corporate travel however still requires some formal reclamation before it can be restored to the once-booming industry it was.
There have however been more efforts coming from several sectors of the digital economy, including fintech among others that look to become a more pivotal solution for companies hoping to regain a better understanding of business travel and the future thereof.
While not everything is certain these days, it’s helpful to know that even in a time when most companies disregard the importance of corporate business travel due to soaring inflationary pressure, labor market conditions, and virtual offices - business travel remains a crucial, functional facet of the corporate world.