Written by Rachel Barkan
Since the start of the COVID-19 pandemic, the U.S. travel economy has lost roughly 415 billion dollars and this number is predicted to increase (U.S. Travel Association). Among the biggest contributors to the U.S. travel economy is business travel. As a result of the pandemic, business travel has nearly come to a standstill. This has had massive consequences for the travel industry and the airline industry in particular as business travel tends to make up 60%-70% of industry sales (Crain’s Chicago Business). Delta and other major airlines in the U.S. have had to dramatically cut their schedules, averaging about 23 passengers on each domestic flight and losing $350 to $400 million a day (Chokshi). No one knows for sure when business travel will go back to pre-pandemic levels but most experts predict that it will take one to three years, although one year seems very optimistic (Reed). Most experts agree that a vaccine that is widely distributed is a necessary step before business travel can be anywhere near pre-pandemic levels. Andrew Nocella, United’s chief commercial officer agrees saying, “it will take about six to 12 months to work through the system once a vaccine or treatment becomes widely available” (Crain’s Chicago Business)
Will more work be done remotely even after the pandemic ends?
Even after the pandemic ends, those that work in industries relying on business travel worry that business travel as we knew it will be “a thing of the past.” The pandemic forced businesses to transition to remote work, which they are now discovering has many advantages. Companies are realizing that many of their meetings could have been more easily done through email or zoom. Some studies have shown that work from home can be more productive. According to the Brookings Institution, “An experiment at a large Chinese travel agency found that call center employees who were randomly assigned to work from home for nine months saw a 13% performance improvement, partly because they took more calls per minute, but mostly because they took fewer breaks and days off. The agency also saved on office costs.” Along with increased productivity, other advantages of remote work include increased time with families, a reduction in emission from lack of travel to the office, and monetary benefits for the employer. Companies that were hit hard are going to need to make budget cuts and much of that may come from the internal travel budget (Curley). Furthermore, according to Global Workplace Analytics, “employers can save $11,000 a year for every employee who works remotely half the time.” Aside from the advantages of remote work, companies are afraid of forcing people to go on business trips because of liability risks. If their employee does catch Covid the company could get sued. Thus business travel, until there is a widely distributed vaccine, is just not worth it. Unfortunately, many of the smaller airlines or businesses such as hotels that are focused on conferences, events, and hosting business travelers will not survive long enough for business travel to return. Although the number of business travelers and the money spent on business travel will eventually be greater than it was in 2019 simply because of the population and economic growth, there will be a portion of business travel that will never return. Former Ceo of Sprint Airlines Ben Baldanza concurs predicting that there will be a 5% to 10% permanent loss of business travel (Reed).
Even those there is validity behind the fear that business travel will never be where it was, it will mostly return. Remote work does have its disadvantages. Over the last few months, people working from home have noticed that they are working longer days and have a hard time discerning between work life and home life. An article in the Atlantic noted that “The days of logging off at the end of the workday and focusing on other things until morning, already dwindling, might be gone for good” (Khazan). Zoom meetings also don’t provide the same level of motivation for jobs that require a lot of collaboration. Additionally, managing a fully remote staff can be difficult. The strongest argument for remote work is increased productivity, however, we do not know the effects of remote work on productivity in the long run so it might not be as advantageous as what we are seeing now (Guyot). Most importantly however there is a feeling of “zoom burnout.” People are getting tired of the lack of face-to-face interaction and are “itching to get back to the office and meet face to face again” says Carolyn Van Way, Manager of Business Development and Meetings Expert Team for American Express Meetings and Events. Although remote work is here to stay for long after the pandemic people want and need to conduct business face to face so business travel will return, even if it takes 3+ years to reach pre-pandemic levels.
What will it take for business travel to return?
Travel, especially business travel is going to return in phases. Based on what we saw in the 2008-2009 recession and what we are already seeing, leisure travel will return first. This is mostly because those traveling for leisure are responsible for themselves and the only person liable if they get sick is them. The graphs below compare the trends in business and leisure travel from the early 2000s to the present.
From the graph, we see that during the recession in 2008 leisure travel declined less and came back faster than business travel, which is a similar trend to what we are seeing today.
As it begins its slow return, business travel will return in phases. Regional and domestic travel will return first. As companies begin to return to business travel they are likely going to face a lot of scrutiny regarding what is considered “business-critical” and what can’t be done with technology (Curley). Mckinsey and Company argue that “Within domestic travel, trips that can happen in personal or rental vehicles may replace short regional flights until companies’ comfort with sending employees via airplanes increases.” International travel will take longer because of travel restrictions, mandatory quarantine, and the high risk of policies changing very quickly. Other than travel for supply chain-related industries that have continued through the pandemic travel for in-person sales and client meetings will return first. Once some companies in the sales industry start to return to domestic travel and face-to-face interactions other companies will feel pressure to do the same so that they can stay competitive (Curley). We are also currently seeing some regional drive for market meetings. These meetings involve 25 or so individuals working for a company in Denver for example going to Vail for small regional meetings (Van Way). Business travel for major industry events will take much longer to return. These events will require more confidence in public safety and realistically a vaccine first. Once these events do resume they are going to look very different than before. Many events are going to be offered, virtually, hybrid or multilocal modes with abbreviated in-person schedules (Curley). The hardest-hit sectors, inclusive of retail and energy, will be last to resume corporate travel because of the extensive budget cuts they will need to make.
Hope for the future of business travel
The future of business travel is looking grim at the moment. Almost everyone agrees that there needs to be a vaccine that is readily available for there to be any real chance of business travel rebounding. Despite the widespread uncertainty in the industry, there is however a firm belief that business travel will return. Although remote work may have its advantages there are certain aspects of face-to-face interactions that cannot be emulated remotely and thus business travel and in-person meetings will be necessary.
Bibliography
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