A year ago I flew home from the Business Travel Show in London after just taking off BTN Europe as the newest brand in the portfolio of the BTN Group. Unfortunately, the person sitting next to me on the flight had a pretty nasty cough. I was upset that someone would get on a plane in this condition, but even then the idea that I might become infected with a life-threatening disease didn’t seriously cross my mind. Covid-19 still felt aloof despite traveling Asia in January and documenting the crater formation of the Chinese travel industry in early February.
It was rumored at BTS that certain large companies were restricting international business travel. Then suddenly big trade fairs and big business events began to be canceled; Governments restricted indoor gatherings and wiped out the gathering and events industry almost entirely. Eleven days after I landed in New York from London, the World Health Organization declared Covid-19 a pandemic.
We all know what happened next, and data from BTN’s Corporate Travel Index has documented the contours of that mayhem for the business travel industry in 2020. The data in this edition reflects the rolled up averages for 2020. Our online resource, Corporate Travel Index Calculator, provides quarterly updated hotel and rental car data and can prove to be an essential resource for buyers finding their way into a turbulent travel recovery in 2021.
The slimmed-down data set for 2020
The Corporate Travel Index is unique in that it does not take into account the overall market, but only bookings through corporate channels. A few years ago, BTN revised its method of collecting this data, significantly expanding the sources from a single large agency to multiple partners. This new method has proven useful in a year when transaction levels in some regions and in some quarters dropped to less than 30 percent of a “normal” year. If we couldn’t get data for a particular city from one source, it was likely that another source contained information. On some rare occasions, data was not available, and you will see it in a few places on this year’s charts. These loopholes will be obvious. There are other effects of the stripped-down dataset in 2020 that are less severe.
Increased volatility
One of these effects is more dramatic fluctuations in interest rates – especially in hotels – from quarter to quarter. The online calculator for the Corporate Travel Index from BTN shows this volatility more clearly than the pages of our annual special edition, as it breaks down the data by quarter, with these pages serving as a reference for the annual average. However, when the dates are tighter, some very expensive or incredibly cheap bookings can have an oversized effect on the final price set for the market. In an in-depth study of the raw data, BTN removed obvious outliers in order to minimize fluctuations in certain markets. However, we have taken care not to dampen the volatility that is clearly occurring locally in 2020.
A new calculation
A shift in decision-making during the pandemic was also shown in the leaner dataset. In the first quarter of 2020, when most markets were still experiencing strong business travel volumes at least until February, the CTI data showed bookings across all hotel levels for which we are collecting data. For example, in an average year and this first quarter, it’s not uncommon for economy hotel prices to be higher than the mid-range. This is a sign that hotels are using a compressed market for last minute bookings and businesses are trading down even at the higher rate. During the pandemic, the CTI data showed a different shift. Economy hotel bookings have become scarce, indicating less compression in the markets we are tracking, but also possibly the unwillingness of the traveler or his company to take advantage of the lowest prices – even in times of financial stress.
We also saw the data at the higher end of the hotel spectrum have been thinned out. For several quarters and in several cities around the world, bookings for luxury hotels have also been a hit. Companies seem to move into the middle in times of uncertainty. However, as business travel begins to recover, many buyers have told BTN that price will not be the deciding factor. In fact, travel managers from companies like Discovery and Microsoft have publicly stated that business travel can get more expensive as companies protect the health of travelers and support strong results for necessary travel. I suspect, and some of this initial data suggests that luxury hotels may not necessarily be the choice, but upscale and upscale hotels could gain momentum in a pandemic environment, especially if they master elements like contactless room service and remote check-in and keyless entry.
As companies incorporate these new factors into their decision-making process, new procurement strategies are emerging that are designed to enable companies to take advantage of low price levels during the pandemic, even if they give travelers the freedom to book higher categories of hotel service. American Express Global Business Travel and GM’s global EVP customer David Reimer told BTN that dual-rate load models with both a fixed corporate rate and a dynamic discount on the market price for each property are on the list of customers Have penetrated GBT. The model will last through at least 2022 as hotels try to regain a foothold and buyers unwilling to commit to corporate rates that market conditions could undercut.
Overall, according to Reimer, this could lead to significant price reductions for hotels booked by companies. It also brings an interesting new crease in what BTN’s Corporate Travel Index actually tracks. What is a booked company price these days? It’s an interesting question that the industry is clearly working to answer.
Car rental consistency in a sea of change
Car rental transaction data was down significantly in 2020, but it didn’t fall as low as hotel data. Still, there were loopholes. Prices for rental car bookings in 2020 didn’t fluctuate as dramatically from quarter to quarter as they did for hotels. As a result, we also see significantly lower interest rate volatility year-on-year. That’s not to say that car rental companies have had an easy time last year. You didn’t do it. One only has to listen to their earnings reports briefly to understand how deep the pandemic is in this sector. Corporate contracts that already include low interest rates may have dampened additional discounts, and we know that a large proportion of business travel in 2020 was by car, resulting in significantly longer rental periods. The Corporate Travel Index scope doesn’t cover the latter, but travel managers should consider more demand for rental cars when planning travel budgets.
Vaccine Driven Recovery Scenario
The Global Business Travel Association expects it will be 2025 before total business travel volume returns to pre-Covid levels. January 2021 was worse than December 2020 for air travel, according to the International Air Transport Association. However, when travel returns, the industry will change in terms of volume share per market. Part of this dynamic may be driven by current health protocols and vaccine distribution.
The first vaccines available require special treatment that many countries and local communities cannot logistically support. Pfizer and Moderna vaccines, which were first introduced in the US and Europe, are difficult to market worldwide. The UK has received praise for its quick and effective introduction and has included the AstraZeneca vaccine in its emergency approved batches. AZ has also been approved for the European Union, however there have been messaging issues related to this option which has resulted in poor adoption. Johnson & Johnson, with a more traditional vaccine that requires a single dose and has a longer shelf life, has just been approved in the US. The EU has also started reviewing the Russian Sputnik vaccine.
Immunity successes in one or two regions cannot be sustained without reaching the immunity thresholds everywhere. Newer, more contagious varieties in the UK, South Africa and the US have shown us this. We are literally all together to end this health crisis, but there may be geopolitical and economic rewards for those who can get us there faster.
China’s robust response to the Covid-19 virus and the recovery in domestic travel levels in this market are positioning the region to return to business, and therefore business, travel faster than other regions. The country has also prioritized an international vaccine diplomacy strategy that could strengthen China’s influence on international business and geopolitical alignments, according to the South China Post. The Associated Press reports that China has promised vaccines to 45 countries, 25 of which have started vaccination and 11 more have received delivery. There are questions about both the effectiveness of the Chinese vaccine and what China wants in return for the doses, but the health crisis seems to allay those concerns among recipient countries – they are receiving between 50,000 and 600,000 shocks to be distributed locally. A spokesman for the Chinese People’s Political Consultative Conference has described suspicions about China’s vaccine distribution as “extremely narrow-minded.”
Regardless of power motives, it makes sense to predict at least one outcome for travel industry recovery and personal business exchanges: travel corridors are likely to develop between countries and regions that share vaccine standards, immunization thresholds, and basic Covid-19 infection rates.
Recent reports suggest that Europe and the US may have enough Pfizer, Moderna, J&J, and AZ vaccines to share with low- and middle-income countries. But deliveries can lag far behind their Chinese competitors. On the other hand, there is pressure on the Chinese government to slow its exports as it has billions of guns to stab at home. And anyone can tell you that outbound Chinese travelers are central to a global business travel recovery – and any travel recovery.
