The Future Of Business Travel
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One of the defining features of the coronavirus pandemic for working professionals has been the huge growth in communication via platforms such as Zoom. Where previously workers would meet face-to-face, the shutdown in travel and of workplaces has forced so many of us to converse virtually instead. With conferences also heading online, the business travel market has ground to a halt as people have learned to communicate without jumping on a plane to do so.
This shutdown of business travel has huge commercial implications for airlines, for whom business travelers are believed to make up around 12% of passengers, but an incredible 75% of profits. Understandably, the industry is keen for things to get back to normal as quickly as possible, and in July, a survey of GBTA members found that nearly half expected domestic business travel to resume again in the United States by autumn. Only a third believed it would take six months or more. Of course, international travel is different entirely, with the likes of Qantas suspending all international flights and many borders shutting for prolonged periods.
While there has been a reticence to return to the office after COVID-related shutdowns, there is no such reluctance to hop on a plane for conferences or in-person meetings. This is due in large part to the clear advantage of conducting business interactions face to face. For instance, it’s well known that there are various benefits to communicating in person, with even a simple handshake often crucial in forging a bond with someone that underpins cooperation.
Commercial importance
It’s also hard to under-appreciate the importance of business travel to the economy. A study from Oxford Economics found that $12.50 of additional revenue is generated for every $1 spent on business travel. A second study, from Harvard’s Growth Lab, also underlined the vital role business travel plays in the economy.
The research shows that tacit knowledge is crucial to economic growth, and this is being undermined by virtual communication. The researchers used transaction data from Mastercard to map the flow of business travel around the world, and in the process created a Knowhow Index that they believe maps the incoming and outgoing knowhow in every country.
“We’ve been puzzled by the fact that business travel has been growing faster than world GDP, despite the widespread adoption of alternatives like Skype, FaceTime, email, etc.,” the researchers say. “We posited that maybe there is a difference between moving information and moving brains. We obviously never imagined a complete shutdown of business travel, but the paper allows us to delve into the consequences.”
They concluded that the mobilization of know-how has a huge impact on the economy of nations, with a reduction in business travel contributing to a fall in global GDP of nearly 5%. Despite the evident advantages of a return to normal, the enthusiasm is not felt by all would-be business travelers.
For instance, in Europe, there has already been evidence of people switching from planes to trains for journeys, especially when sleeper cabins offer privacy. In the United States, there has been a similarly lukewarm return to air travel, with the industry now not expecting a return to pre-COVID levels before around 2024.
Bouncing back
The prospects of a bounce-back remain strong, however, not least as the evidence to date suggests that transmission rates from flying are lower than various other forms of normal life, including attending church or eating out. This is due to the medical-grade air filters inside the cabin, which results in very dry air.
Despite the logic of this, however, the prospect of being tightly packed into a cabin alongside 100 or so other passengers is one that will not appeal to everybody. There is also the growing acceptance and familiarity with virtual communication tools, with the vast majority of the workforce given an extensive crash course over the past six months. An almost inevitable global recession is also likely to see discretionary spending fall, which will probably result in travel budgets being squeezed for some time to come. In efforts to cut back on costs, the pandemic has shown that real estate and business travel are among the first areas to explore.
Before the pandemic struck, global business travel was on a seemingly unstoppable upward march and had reached $1.3 trillion per year over the last few years. It’s a level that is unlikely to be reached in the coming years, and possibly for some time to come. When business travel does return, it’s likely that its form will change, with people expected to perhaps combine meetings so that they get more out of each trip. This is especially likely if, as expected, costs rise as the airline industry struggles to regain some semblance of financial stability. Indeed, the airline industry group IATA estimated that fares could go up by 54%.
There is hope across society that what returns after the pandemic is a better version of what came before. Whether it’s cleaner planes, easier transfers, greater connectivity, or environmental friendliness, there is just the same hope for the future of business travel.
