It is no joy to realize that business travel has peaked and that our industry will never return to pre-Covid levels. Like it or not, there is a significant impact on the future of our industry.
Why business travel has peaked
Yes, the Covid-19 pandemic will recede and business travelers will feel safe traveling, as will their hosts. When you give the green light to health and safety around the world, the demand for business travel will increase. Unfortunately, this demand is greatly and permanently reduced for these four reasons:
First, the pandemic has forced most employees to work from home. While not for everyone, working from home will remain a popular choice for many workers and their companies in the post-Covid world. If you don’t have to go to the office for work, why travel?
Second, the massive home relocation has forced the widespread adoption of virtual meetings. For the most part, these have proven to be an appropriate (not great!) Substitute for a face-to-face meeting. If you can meet virtually, why do you have to travel?
Third, sustainability is on the agenda of the executive and government. Business travelers and their employers will increasingly consider the impact of travel on our climate in their travel decisions. For this reason alone, not a small number of trips are eliminated.
Notice the synergy of these three forces. They are mutually reinforcing and will last for a long time. There is no magic wand that can make these business travel restrictions go away. Business travel will shrink significantly. However, the biggest force that will greatly reduce the demand for business travel is the logic of the CFO.
Imagine every pre-trip approval request being answered with the standard CFO response: “Why can’t you have these meetings virtually? There’s no travel expense, no lost travel time, and no carbon emissions, right?”
Many (some fear most) business trips will fail to overcome this final hurdle. Not after a year or two of doing extensive business through Teams and Zoom and finding that this mode works well enough for many types of meetings.
The inevitable conclusion is that most business travel budgets will permanently decrease. Business travel peaked in 2019. What is ahead of us
We are entering a new paradigm based on questioning the need to travel. It’s now much less about getting people to meet and more about the value of the meeting itself. “
The future of managed travel
The future of managed travel is based on much smaller business travel budgets. So we have to expect the following:
Fewer travel providers and fewer travel managers. An inevitable consequence of a shrinking industry.
The travel category is becoming less important. Due diligence remains a high priority, but the category’s lower spending means less management attention. Procurement execs combine travel with other indirect spending categories and accept the lesser T&D expertise.
Less but more important trips and travelers. Low value trips are rejected and far fewer infrequent travelers have to travel. Those who travel are considered “important” as is their travels. Expect more prima donna travelers and more setbacks in cost-conscious travel policies. Suppliers are intensifying their struggles for the remaining frequent travelers.
Less focus on travel prices and cost savings. The more important the trip, the less to worry about the price. The airlines recognize the price inelasticity of the remaining trips and increase the prices for business travelers. The negotiated savings are considered inconsequential given the “huge savings” made by less travel. Buyers are shifting their focus from price to evaluating the supplier’s product, service and relationship qualities.
More outsourcing to travel management companies and more direct bookings. Smaller travel budgets make the outsourcing value proposition more attractive to management. TMCs are upgrading their tech game to lower their labor costs and improve their service. Direct bookings are on the rise as providers expand this omnichannel option with heavy traveler recognition, due diligence, and data reporting capabilities. ARC leads a breakthrough to enable TMC maintenance of direct bookings.
New efforts to stimulate demand. Network airlines see an urgent need to stimulate demand for business travel. Marketing campaigns show the benefits of a face-to-face meeting for small meetings and MICE events. New studies and tools are emerging to demonstrate the benefits of face-to-face meetings.
More control over the merits of a face-to-face meeting. Travel approvers need better justification. Further travel inquiries are framed with a lens between risk and reward, personally and virtually. The ROI before the trip is tried and abandoned as not believable. Approval of travel depends on the importance and potential of the meeting for interpersonal dynamics.
More focus on meeting and traveler results. Less and more important trips and travelers need to analyze what these meetings do and how travelers are affected. Significant innovations are emerging to make meetings more effective. Travel logistics becomes secondary. Post-trip surveys on the results of the meeting will be vital. Key figures on health, safety, productivity and wear and tear of travelers are gaining in importance for management. Efforts are made to predict the success of a meeting and the need for travel.
New need to optimize travel and meetings. The management asks: “How do we know if we are traveling too much or too little?” and “How can we get more out of all of our meetings?” New career paths are opening up for those who like to find answers to these daunting questions.
Unmanaged travel is the key to growth for some. Although the business travel industry is shrinking, the unmanaged segment offers growth opportunities for TMCs and providers of data reporting, payment, effort and due diligence solutions. Go-to-market efforts are consolidated with these vendors, resulting in low-cost entry into this untapped market.
We are entering a new paradigm based on questioning the need to travel. It’s now much less about getting people to a meeting than about the value of the meeting itself. Our industry needs to embrace this linchpin.
