After more than a year of canceled meetings, conferences, and tradeshows—as well as closed workspaces—business travel will accelerate in the second half of 2021 but will remain well below pre-pandemic levels. The reopening and return to office-based work will be a primary trigger to reinitiate corporate travel, though executives are cautious of the impact that continued uncertainty around the pandemic will have on both returns. Just a third of companies expect to reach or surpass 50 percent of 2019 travel spend levels by the end of 2021. Although business leaders expect steady increases, corporate travel is unlikely to make a full recovery within the next year. Just over half (54 percent) of survey respondents expect their companies to reach 2019 levels by Q4 2022.
Until immigration policies of major U.S. trading partners allow for border crossing without the need for quarantine, U.S. corporate travel will remain primarily domestic. And, even when policies enable better ease of movement, the unpredictable and uneven nature of the pandemic across countries and regions will depress international corporate travel demand. As business travel will accelerate, both cost containment and a corporate commitment to reduce carbon emissions will impact the volume of travel, as many companies see limiting trip frequency as a means to address both. Travel use cases that support client relationships have been identified as the most crucial to business success, and the most dependent on in-person interaction. Visits to prospects and clients will lead the business travel comeback.
While domestic leisure travel has taken off in recent months, corporate travel faces a slower return due to a more complex set of considerations. Companies find it difficult to ask employees to travel, and many of their clients, vendors, and partners have yet to open their doors to employees, let alone visitors. According to Deloitte’s new report, “Return to a World Transformed: How the Pandemic is Reshaping Corporate Travel,” these conditions are temporary as competition and growth imperatives provide an impetus for business leaders to slowly increase their spend to maximize the value of face-to-face interaction. While the eventual scale and shape of the pre-pandemic staples of corporate life are unclear, they are returning. Many companies plan to significantly accelerate their return to offices following Labor Day, and an uptick in corporate travel is expected to follow.
The study is based on a survey of 150 U.S. travel managers and executives with travel budget oversight fielded between May 28 and June 20, 2021, in addition to interviews with executives at U.S. companies whose 2019 air spend averaged $123 million.
Employee and Client Reticence Impacting Travel Growth
The reopening of offices, set to accelerate in the fall, will provide a boost to domestic business travel in Q4 2021, especially if it is accompanied by sustained improvement in vaccination and infection rates within the United States. However, travel managers expect employee and client resistance to travel and in-person meetings to slow the return of corporate travel. Furthermore, the report notes that international travel cannot return at scale until health realities and border policies allow better ease of movement.
Taking into account these triggers and other potential drag factors for travel’s return, as well as companies’ travel spend estimates through the end of 2022, Deloitte has developed quarter-by-quarter projections of corporate travel’s return.
Two scenarios account for the range of likely outcomes through the end of 2022. A strong recovery of business travel assumes continuous easing of border restrictions in much of the world. It also assumes continued COVID-19 vaccination progress and no prolonged or large-scale outbreaks in the United States. A weaker scenario accounts for a slower improvement in public health and border openings and more reticence among travelers.
- Deloitte’s projections, based on the survey and executive interviews, show U.S. business travel will accelerate throughout the remainder of this year, from 10 to 15 percent of 2019 spend in Q2 2021, to 25 to 35 percent of 2019 spend by Q4 2021. While many conferences will return to live or hybrid formats by end of this year, about one-third of companies (36 percent) say Q4 2021 travel spend will remain below 25 percent of 2019, and two-thirds (66 percent) say it will be below 50 percent.
- By Q2 2022, U.S. business travel spend is expected to increase to 40 to 60 percent of 2019 spend as workers get through the end of cold and flu season and a more consistent schedule of live and hybrid industry events emerges. By the end of 2022, U.S. business travel will accelerate and reach 65 to 80 percent of 2019 levels, spurred by more clarity about the health situation, ongoing state of offices versus remote work, and support for both pre-planned and last-minute trips. This would represent more than four times the travel spend from the summer of 2021.
Sustainability and Cost Imperatives
When the pandemic brought corporate travel to a standstill, it resulted in hundreds of millions of dollars in cost savings for many companies. Now, as business travel will accelerate, they are rethinking their budgets and travel spend by leveraging new business practices and prioritizing sustainability goals.
- Overall, 7 in 10 companies plan to reduce travel frequency in an effort to bolster the bottom line. Nearly half (45 percent) of companies will take more control of the reservation process by requiring stricter compliance with their prescribed travel policies. Thirty-seven percent of companies expect their share of air bookings via company-approved booking platforms to increase in 2022 compared to 2019, and 45 percent expect the same for lodging. Many plan to reduce costs by choosing more economical travel suppliers (37 percent) and negotiating better-preferred rates (35 percent).
- Additionally, 79 percent of surveyed companies have a stated commitment to reduce carbon emissions or are working toward a pledge to do so. About half of survey respondents (48 percent) plan to optimize their business travel policy to reduce their environmental impact within the next year. To curb travel-related emissions, companies will draw on lessons learned during the pandemic to limit trip frequency. The top ways companies plan to improve their sustainable travel profiles are by holding internal meetings online (76 percent) and arranging meeting agendas to reduce the need to fly (67 percent).
- Moreover, tech platforms for meetings and collaboration will continue to evolve the needs of businesses while mitigating the need for certain trips. Close to 60 percent of respondents expect their companies to spend less on attending trade shows and conferences in 2022 compared to 2019.
“While many road warriors are ready to return to a consistent travel schedule, ongoing health concerns and shifting workplace priorities will influence the future of corporate travel. The changes adopted and lessons learned during the pandemic, combined with progress toward sustainability commitments, are creating a new normal for corporate travel. However, the importance of in-person interaction for business success is clear, creating opportunities for the airline industry to continue to attract and serve business travelers,” says Anthony Jackson, principal, Deloitte transactions and business analytics LLP, and U.S. airlines leader.
Technology and Business
Although most business success is contingent on face-to-face interaction, the pause in travel caused by COVID-19 has helped companies better understand which travel motivations are most crucial compared with those situations that can indeed be replaced by technology. Deloitte’s Why We Fly Matrix outlines 10 business travel use cases across four quadrants.
- Thrive: Use cases focused on external relationship building are both essential to business and dependent on in-person interaction. They will come back first, albeit not to 2019 levels instantly, and include sales or client acquisition, client relationship building, project work, and conferences for networking.
- Battleground: Use cases such as small-group internal meetings are crucial to business success, yet are also served well by virtual platforms. Following an initial surge resulting from pent-up demand, these trips will likely decline.
- Struggle: Travel use cases such as internal training, learning and development, and industry conferences offer a relatively low contribution to business success and are prime for tech replaceability. These activities are most likely to see a long-term pullback in corporate spend.
- Niche: A few use cases like exhibitions, trade shows, and onsite monitoring and visits are difficult to replace with technology, but are viewed as lower in importance to the success of many companies. There is limited upside here for both tech and travel providers, and these forms of travel are highly unlikely to lead the corporate travel comeback.
“While companies recognize that travel is crucial to their success, they will continue to hold onto some of the cost savings brought by the pandemic pause. The adoption of tech platforms for meeting and collaboration will mitigate the need for certain trips, and we expect that these services will continue to evolve to better meet some of the needs that travel used to fill. Having said that, external relationship building can clearly not be replaced by technology, and lodging suppliers that meet the shifting demands of companies that seek to interact with clients and partners will be well-positioned to attract business travelers long term,” says Peter Caputo, principal, Deloitte transactions and business analytics LLP, and U.S. hospitality sector leader.