Friday, April 12, 2024

Business travel is starting up, but full recovery is expected to delay further


Even though leisure travel has largely recovered from the pandemic’s damage, corporate travel has been slow to return – and now that businesses have explored alternatives, will it ever fully recover? Is there still a need?

New Deloitte Research points to a variety of factors that are contributing to that decline, including increased employee safety concerns, a decline in customer interest in meeting in person, a re-evaluation of the value of attending a conference, the use of virtual conferencing platforms sufficiency, and increased concerns. about stability.

Although pandemic concerns and testing regulations have generally eased in the second half of 2022, financial concerns are now a major uncertainty for the sector. Third Edition of Deloitte’s Corporate Travel Study, navigating a new normalExamines why and when employees are expected to travel for business, as well as the headwinds and opportunities the mobility sector creates.

International travel and events are responsible for the expected growth in 2023

While a full recovery to 2019 levels may be possible by late 2024 or early 2025, accounting for inflation and lost profits will potentially leave the corporate travel market between 10-20 percent smaller than it was before the pandemic . Between higher airfares and room rates, travel numbers are likely to lag even further. However, international tours and live events are set for an expected increase in 2023.

  • Corporate travel spending in the US and Europe is expected to increase to more than half (57 percent) of pre-pandemic levels in the first half of 2023 and to 71 percent by the end of the year.
  • Most companies surveyed (71 percent of US companies and 68 percent in Europe) expect a full recovery in travel spending by the end of 2024.
  • US respondents expect spending on international travel to account for 33 percent in 2023, up from 21 percent in 2022 and similar to 2019 levels.
  • Top reasons reported for international travel include connecting with customers and prospects: in the US, the main drivers are to connect with global industry colleagues at conferences and build customer relationships; In Europe, client project work, followed by sales meetings, are the biggest reasons for trips outside the continent.
  • While high travel prices are the most important factor deterring companies from traveling, live events are set to be a key driver of demand for business travel, leaping from fifth in 2022 to the top reason for US international travel in 2023 Above.
  • With events in mind, companies are adjusting their internal plans: Half report breaking large gatherings into smaller, regional, virtually connected events, and 44 percent have adopted a hybrid approach. In addition, 42 percent of those surveyed in the US and 54 percent in Europe plan to integrate more customers into internal events.
  • Most of the companies surveyed (70 percent) strategically evaluate and weigh the potential consequences of business travel, such as cost, health risks and emissions side effects, as well as revenue generation.

Workplace flexibility and technology continue to change the course of business travel

Although pandemic concerns about travel generally decreased among those surveyed, the ability to leverage technology to exchange trips – which ultimately reduces costs – continues to influence the growth trajectory of business travel. According to the survey, technology can meet almost every business need to some extent. Furthermore, the rate of working from home in the future is expected to be 3.2 times higher than before the pandemic. Together these factors will continue to influence how and when employees travel for work.

  • Business leaders are weighing the benefits of in-person interactions, as internal training and team meetings (44 percent) are rated most replaced by technology compared to client rapport building (11 percent) and client acquisition (7 percent) given.
  • Two-thirds (67 percent) of respondents say their employees travel to cities within driving distance of their location.
  • Visits to company headquarters by relocated employees are also on the rise, most (70 percent) of which are either fully or partially paid for by the company.
  • American companies are increasingly including non-hotel accommodations, including private rentals, in their corporate travel policies. Nearly half (45 percent) of those surveyed have non-hotel accommodation in their corporate booking tool, up from 9 percent last year, and 57 percent have agreements with specific branded apartment or home rental providers , which is more than 23 percent in 2022. Just under 10 percent of U.S. companies surveyed do not reimburse for non-hotel accommodations in 2022, down from half (49 percent).

“As business travel continues to increase, higher airfare and hotel costs are slowing travel growth,” said eileen crawley, Vice Chair, Deloitte & Touche LLP and US Transportation, Hospitality & Services Attested Leader, in a news release. “Business leaders take a strategic view of their travel plans and as the industry embraces a new normal, live conferences and events in particular are proving they can provide effective opportunities to connect in person Remote and hybrid work in particular continue to be fixtures of the corporate. World.”

Contract negotiations aim to right-size travel costs

Companies have the potential for significant cost savings by not having to travel during the pandemic. Now, after three years of low travel, high airfares and inflation-driven room rates, many companies are working to adjust to changing expectations from their employees.

  • Nearly half of respondents (51 percent) reported that costs are rising because of employees’ need for luxury services such as first or business class airfare and expensive hotels, as well as last-minute (45 percent) or flexible booking (52 percent) . High.
  • When negotiating contracts with suppliers, nearly 1 in 5 (19 percent) of companies say hotels are less favorable on rates because they expect lower volumes, and 11 percent report the same for airlines.
  • Regionally, 63 percent of US travel buyers reported favorable airline pricing on positive volume expectations, compared to 54 percent in Europe.
  • Higher rates are having a diminishing effect on the number of trips taken: 45 percent of companies say they limit frequency to control costs, down from 72 percent in 2022. Instead, they focus on reducing cost per trip with affordable accommodation (59 percent). ) and low-cost flights (56 percent).

Sustainability drives some travel decisions

Travel, in general, garners attention as a significant contributor to carbon emissions. However, 49 percent of companies noted that choosing sustainable providers increases costs. As a result, business leaders are forced to weigh the cost and environmental impact of travel.

  • A third (33 percent) of US companies and 40 percent of European companies surveyed say they need to reduce travel per employee by more than 20 percent by 2030 to meet sustainability goals.
  • To meet sustainability goals, 42 percent in the US and 45 percent in Europe say they are in the process of implementing a structure to allocate carbon-emission budgets to teams with financial budgets.
  • Travel suppliers’ sustainability efforts drive varying degrees of engagement with travel buyers. Mandatory use by survey respondents is low, however, with nearly a third citing hotel sustainability certification and ratings (32 percent), airline use of sustainable fuels (31 percent), or car rental fleet availability of electric vehicles (27 percent). ) consider factors such as percentage) to calculate the carbon footprint of the trip.

“The return of corporate travel continues to take a winding road as both business leaders and travel suppliers consider not only rising costs, but the need for few in-person meetings amid increased use of technology to meet financial and environmental goals ,” Said Mike Dehr, Vice Chair, Deloitte LLP and US Transportation, Hospitality and Services Non-Attested Leader, in Release. “Suppliers who take a long-term view of their relationships with travel buyers and communicate with them about their sustainability progress should be better prepared to navigate ongoing changes in travel preferences.”

The study is based on a survey of 334 US-based and European executives, fielded between February 7 and February 23, 2023, with Travel Budget Oversight.