A vision of business travel after COVID-19
The COVID-19 health crisis is unprecedented. Its footprint and impact will be long and wide, and the business travel industry was one of its first and most hard-hit victims. It is important to discuss the repercussions of the pandemic — economic, ecological, and commercial — on this 1.5 trillion-dollar industry. How will professional travel be impacted in the short-, medium-, and long-term? Here is our analysis.
Short- to medium-term (2021): Fewer trips and, above all, different trips
Marked by COVID-19, the first half of 2020 will undoubtedly leave its mark in the annals of modern history. The outbreak has impacted almost all sectors of the economy and business travel is obviously no exception. The wide-reaching lockdowns and restrictions (affecting over 4 billion people in April alone) have led to an unprecedented, out-of-wartime slowdown in global commercial activity.
This slowdown has put at risk cash inflows for companies that must nonetheless continue to fund salaries and fixed costs. Additionally, this exceptional situation coincides with a time when humanity is seriously questioning our consumption patterns and our dedication to social and environmental responsibility.
A decrease in the volume of business trips by 2021
Despite significant improvements in COVID-related health outcomes in Europe (as of July 2020), business travel will resume only gradually. This is due to two major factors:
- The economic pressure on the operational and financial performance of companies: 2020 will be marked by a deep global recession and recovery is not expected until 2021. Companies will have to make significant effort to ensure they remain economically viable, especially by cutting costs. They will seek to reduce their travel spend by eliminating non-essential trips. Remote work made mandatory during confinement has also accelerated the adoption of teleconferencing tools (e.g., Zoom), thus reducing the immediate need for travel.
- Public health instability and regulatory volatility: Even if the outbreak seems to have abated and is less frightening than it was during its initial months, there remains significant instability on a regional and global scale. As it currently stands, it is difficult to imagine a return to the level of free movement of people we grew to accept and appreciate before COVID-19. Government restrictions and travel regulations will vary depending on the destination or origin country of the traveller and will also continue to change over time. This volatility in health protection policies will be even more significant in the second half of 2020, when, rather than following a joint approach, each country will independently make its own frequently changing travel recommendations and conditions of stay. The difficulty of planning travel will remain high in the near future, discouraging travellers from making all but the most essential trips.
An increasing share of shorter journeys
In the short- and medium-term, we expect travel to skew towards domestic and/or short-haul trips. A trend towards more regional travel should accelerate for two main reasons: (1) national/regional recovery strategies and (2) the growth of commercial protectionism.
- Faced with this record recession, we expect governments to accelerate their reforms for economic recovery from 2020 onwards by prioritising their home and core markets. A restart of the local economy first has become a central theme in the post-crisis period. The situation has undermined the economic and health sovereignty of many countries, developed and undeveloped alike, and their governments will aim to quickly regain a semblance of independence and insulation from future shocks.
- Furthermore, the trend towards new protectionism should also intensify. Just as the 90s and 2000s marked an exceptional boom in international trade, a pattern of trade protectionism has started and accelerated since 2010 (e.g., America First led by Donald Trump). This will have an overall effect on professional travel due to a realignment of commercial motivations.
Long-term: Greater impact from environmental awareness rather than economic trends
Economic effects should fade over the long-term
The business travel industry is thick-skinned. Previous crises have shown demand drops sharply but over a very limited period. In fact, during the last 20 years, business travel has experienced only two years without growth, both resulting from one-off events (the 9/11 attacks and the subprime crisis). Since 2000, the global business travel market has grown faster than the world economy. Any dips have had exceptionally short recovery times compared to other sectors.
Also, the use of videoconferencing tools (e.g., Zoom, LiveStorm) as a replacement for professional travel seems unrealistic in the long-term. Setting aside that such tools have shown limitations that could become problematic for businesses (e.g, technical failures, cybersecurity vulnerabilities), human contact is still very much anchored in our social relationships and even more so in our commercial ones. In fact, during a period of deep confinement and high-levels of uncertainty, more than 80% of our customers indicated that post-crisis they would travel at least as much as they did before (see the results here).
Therefore, it seems unlikely the pandemic will create a lasting change in habits within companies which are obliged to collaborate with dispersed customers, stakeholders, and partners in order to grow and remain competitive.
Sustainability: A major concern for tomorrow’s business travel
There is an opportunity from the crisis for many individuals and companies to reorganise their activities and lifestyles in a more sustainable way. The change from our regular routines invites us to ask ourselves more generally about our consumption patterns and this applies equally to business travel.
“We have a historic opportunity to rebuild our economy and our society on new foundations, to reinvent ourselves, to invest in a low-carbon future.”
— Emmanuel Macron, President of France, 5 June 2020
Tourism accounts for nearly 8% of total carbon emissions worldwide. The crisis should catalyse the trend towards more responsible travel policies. These policies will encourage more eco-responsible behaviours, such as:
- Carpooling whenever possible
- Prioritising the use of “clean” alternatives (e.g., a ban on flying on from Paris to Marseille in favour of trains)
- Monitoring carbon emissions linked to employee travel
We anticipate that the importance of these environmental considerations will increase in the long-term
Historic players will have to accelerate their transformation
The logical result is that there is an opportunity to question ageing delivery models that are poorly suited to current business travel consumption. Business travel is a dated market, ripe with frustration, and sorely lacking in innovation — a fact known by business travellers and recognised by market players. Those who rebuilt the world of leisure travel (e.g., Expedia, Booking.com, Kayak) had an exclusively B2C approach, creating a two-speed market with B2B lagging significantly. COVID-19 could very well be the opportunity the industry needs to finally reinvent itself.
Increasing penetration of TMCs (Travel Management Companies)
In a world that seems more uncertain than before, it has become necessary to have increased control over the movements of employees. Before the crisis, almost 2/3 of SMEs did not use a travel management tool, forcing their teams to book on public platforms. There is little doubt that a significant number of these companies are moving towards “managed-travel” in order to control their travel budgets and ensure the safety of their travelling employees.
The boom of Do-it-Yourself and self-booking
Forcing people to stay at home has been a great way to accelerate the widespread adoption of digital tools across various applications (e.g., productivity, telemedicine). Containment has widely popularised Do-It-Yourself and this will most certainly have a lasting impact. Even though self-service was already favoured by younger generations, accustomed to consumer platforms which replaced their telephone support with chats/FAQs, telephone contact was still the preferred channel for most business travellers. As travel management interactions become less frequent and more asynchronous, we expect to see an evolution towards more empowerment of the autonomous business traveller. This will result in better adoption of SBTs (self-booking tools), a reduction in costs, and above all, the gradual disappearance of traditional travel agencies.
From data to the rise of tech-managed travel
The unprecedented complexity and constant change to travel parameters (e.g., territorial restrictions, new airline health & safety rules, sustainability constraints) mean that it will be critical to master information and data at each stage of the journey: both upstream (to guide the traveller) and downstream (to monitor her activity) to the reservation. For example, the ability to instantaneously restrict travel to certain destinations (e.g., following an earthquake) could become an essential Duty of Care process for companies. What will be the consequences of these new demands? There will be a transfer of market share from non-reactive, primarily manual traditional players to technology players who use real-time data to help companies manage their trips in this more uncertain environment.
“The moments that matter might mean more digital than ever and in new places within the customer journey. Solutions and policies that provide choice and control will help to build the trust and confidence necessary to get travellers back on the road and in the air.”
— Make it better, not just safer: the opportunity to reinvent travel; McKinsey & Company, June 2020
Increased sensitivity to price and carbon footprint
As mentioned above, the crisis has and will continue to put significant pressure on companies’ cost and carbon budgets. Data mastery will become key to ensure the best control/Duty of Care, enabling real-time monitoring of traveller activity, agile tools to adapt movement rules to a fluid and changing context, and automated workflows to support these control processes. Companies will tend to prioritise price competitiveness, real-time monitoring of budget or carbon footprints, and innovative players vs. the ad hoc, manual, and often costly operations of traditional agencies.
In summary, the business travel market should gradually move towards a new equilibrium whose total volume has no fundamental reason to be permanently negatively affected in the long run. The real transformation will be more in its nature: more controlled, eco-responsible and regional.
When demand returns to its pre-crisis level, supply will have to adapt to the new rules of the game. To deal with recovering economies and potential regulatory and health uncertainties, but also to accelerate the transition to greener travel, the business travel management of tomorrow will be more automated and reliant on data flows.
The crisis is the catalyst this sector needed to transform and free itself from its historic inertia and its obsolescence. Traditional TMCs will have to adapt quickly to accelerate their digital transformation, while new, more-agile online agencies will certainly take advantage of this momentum to grow.