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Up in the Air?

The business traveller has had a bit of an existential crisis over the past two years, which had deeper ramifications for the airline and hotel industries. Before the pandemic, business travellers accounted for 30% of revenue for full-service airlines (and according to The Economist, their proportion of profits were even higher). Hotels, moreover, earned two-thirds of their revenue from business guests. While most news articles discussed the effect of a depressed tourism industry, it was really the suspended animation of the business traveller that wreaked havoc. According to the Global Business Travel Association (GBTA), a worldwide spending on flights, hotels, car hire, restaurants and other expensable services fell from 1.4 trillion USD in 2019 to 660 billion in 2020 due to lockdowns and tough limits on cross-border movement. Although expenditures are expected to recover to pre-pandemic levels by 2024, the business of business travel has changed forever. Frequent flyers are not uniformly positive about these changes.

The main change will be at the margins: companies will find it harder to justify travel expenses for trips that would have received quicky approval in 2019. As experts explain, overall travel budgets used to be set annually based on broad commercial objectives. As companies rebuild these objectives and budgets, most companies have begun to consider trips on a more case-by-case basis. Getting a trip approved is, then, getting harder than before. A recent survey of 170 North American corporate-travel managers by Morgan Stanley shows that budgets in 2022 are expected to be 31% below the level of 2019. In the short run approval may get harder still. On March 15th Ed Bastian, chief executive of Delta Air Lines, told the Financial Times that the war-induced spike in the oil price “will no question” raise ticket prices on both domestic and international routes. And even if trips are approved, itineraries have become much more complicated than before. The world’s airlines are running at around two-thirds of their pre-covid capacity. That means less choice on times and fewer direct flights. The problem is not confined to flying; train routes among metropolises in Europe and the US are seeing drastically reduced schedules.

The Essentials

Essential trips, however, will be even more essential than before. There are just some jobs that cannot be performed online. According to the GBTA, the share of travel spending by manufacturing, utilities, and construction firms edged up from 48% in 2019 to 51% in 2020. Because those trips could not easily be cancelled—it is hard to maintain oil platforms or factories over the internet—travellers from those industries constituted a higher percentage of total travellers. Similarly, sectors where in-person meetings are considered essential to sign deals, such as finance and consulting, saw travellers returning to the skies as quickly as possible. Despite getting back on the road, however, most of those roads were shorter than before. The GBTA polled over 450 companies, and found that two in three had restarted domestic trips but fewer than one in three had done so for international trips.

Like in most sectors, things are simply worse than they were before the pandemic. We can try to sugar-coat it, but the fact of the matter is that wearing a mask for hours on end, then receiving inferior services for more money, is not an ideal situation. The future of the business traveller is not in doubt, but that future will be far less comfortable than before.