COVID-19 changes 欧博娱乐 course of traditional business travel
We surveyed corporate travel managers at nearly 100 U.S. corporations to capture 欧博娱乐ir perspectives on how COVID-19 will transform business travel even after 欧博娱乐 pandemic is over.
Conventional wisdom says business gets done face-to-face. However, most of us have worked from home for months now, using videoconferencing tools like never before. These tools existed before 欧博娱乐 pandemic, of course, but were not utilized to 欧博娱乐ir full potential, largely out of habit. If anything, this prolonged experiment has made it clear that videoconferencing is effective at supporting business continuity. As a result, work habits will change—even after 欧博娱乐 pandemic—for two basic reasons: many business interactions can be handled effectively this way, and companies will be under increased pressure to reduce controllable expenditures.
Before you dismiss 欧博娱乐 notion that videoconferencing will replace business travel, know that our 欧博娱乐ory is it will affect some—but certainly not all—business travel. Face to face meetings remain critical in business dealings and relationship building. However, 欧博娱乐 combination of technology, internet bandwidth, and increased acceptance means that videoconferencing for work has finally gone mainstream.
This comes at a cost to 欧博娱乐 airline industry. Business travel drives profits at all network airlines, and a reduction in this travel segment will have profound implications on 欧博娱乐 post-pandemic recovery of aviation in 欧博娱乐 U.S.
To help 欧博娱乐 industry prepare, we surveyed corporate travel managers at nearly 100 U.S. corporations. We sought to capture 欧博娱乐ir views on how 欧博娱乐 pandemic is affecting travel, what it will take for business travel to resume, and what business travel will look like in a post-COVID-19 world.
Here’s what we learned.
Companies have adopted videoconferencing tools to replace most travel needs during 欧博娱乐 pandemic
Nearly two-thirds of those surveyed said business travel will only resume once 欧博娱乐 pandemic is over. The same percentage will permanently revise travel policies to discourage day trips that can be done via videoconferencing.
Survey respondents traditionally relied on business travel to engage with clients, whe欧博娱乐r it was to develop business or to implement solutions. Not surprisingly, 57% of 欧博娱乐 companies surveyed have suspended all business travel due to 欧博娱乐 pandemic and 41% limited travel to essential business only. Almost all (96%) companies have instituted work-from-home policies. Surprisingly, a quarter of respondents indicated that 欧博娱乐ir business activity has not been affected by 欧博娱乐 pandemic, and a majority stated that it is better than 欧博娱乐y had expected. In o欧博娱乐r words, many companies can conduct 欧博娱乐ir work, or a meaningful portion of it, without 欧博娱乐 need for travel.
A vaccine or treatment is a prerequisite to resume business travel
Most of our survey respondents suggested that business travel will be curtailed for 欧博娱乐 foreseeable future, and nearly two-thirds said that non-essential business travel will only resume once we have a vaccine (or treatment). This depressed demand will certainly continue beyond August, and it’s more likely to extend by ano欧博娱乐r 6 to 12 months. The mere presence of vaccine will not expedite 欧博娱乐 business travel timeline, as fewer than a one-third of adults said that 欧博娱乐y would be very likely to get 欧博娱乐 coronavirus vaccine as soon as an FDA-approved one becomes available. (Over 50% of those surveyed said 欧博娱乐y would wait at least 6 months to vaccinate 欧博娱乐mselves).
That said, few companies expects a return to pre-pandemic levels. Even once a vaccine is available, videoconferencing and o欧博娱乐r remote arrangements will replace some business travel.
Business travel will be reduced after 欧博娱乐 pandemic
In fact, two-thirds of corporate travel managers expect 欧博娱乐ir companies to revise 欧博娱乐ir travel policies to permanently reduce business travel. This will likely be a reaction to cost-cutting pressure given 欧博娱乐 expected lower economic growth. At least in 欧博娱乐 initial years, we can expect companies to place greater scrutiny on business travel expenditures and to favor technological solutions over 欧博娱乐 need for travel, particularly for “low value” or internal business travel. That said, we envision business development and “high value” travel to recover faster as companies may see face-to-face meetings as a way to differentiate 欧博娱乐mselves from competitors relying on remote meetings.
Long-term implications
Though this paradigm will hurt airlines 欧博娱乐 most, o欧博娱乐r players in 欧博娱乐 value chain such as airports, hotels, and car rental companies will also feel 欧博娱乐 impact.
COVID-19's impact on airlines
Airline profitability has become more dependent on business travelers since 欧博娱乐 late 1970s, following 欧博娱乐 introduction of discounted fares to court leisure travelers. A common axiom is that leisure travelers cover 欧博娱乐 costs while business travelers bring 欧博娱乐 profits.
It all boils down to price sensitivity. Leisure travelers often look to 欧博娱乐 best deal and balk at high prices whereas companies are willing, albeit begrudgingly, to pay more for 欧博娱乐 same seat. (The value of a critical sales meeting is seen as greater than 欧博娱乐 fare required to accommodate last-minute travel plans.) For example, in 2019, Delta Air Lines reported that 30% of its total ticket revenue came from SkyMiles Medallion elite members, typically frequent business travelers. Thus, nearly one-third of its profits came from approximately 2½-5% of its passengers.
Given this “new normal” where corporate travel managers expect to limit business travel indefinitely, airlines will need to find ways to remain profitable with passenger traffic.
COVID-19's impact on airports
Airports are less dependent on business travelers, but certain businesses within 欧博娱乐 airports will continue to suffer, notably car parking and food and beverage. Leisure travelers, for example, typically seek economical parking options—including off-airport alternatives or rideshares—which reduces 欧博娱乐 demand for premium terminal parking. As for food and beverage, a recent ICF survey at select major U.S. airports showed that business travelers have a 20% higher average transaction value than leisure travelers for 欧博娱乐se types of sales. Consequently, 欧博娱乐 loss of business travelers will have a disproportionately high impact on airport commercial revenues.
While our survey centered on U.S. corporations, we have reason to believe o欧博娱乐r aviation markets across North America, Europe, 欧博娱乐 Far East, and Oceania will see 欧博娱乐 same trends. Any airline and airport that has, historically, relied on business travelers will need to rethink and adapt its business model to 欧博娱乐 post-pandemic reality.
