On January 28th, 2021, we had the pleasure of hosting a webinar, during which our in-house expert in analytics and data Fred Gatali discussed the new reality of business travel. Here’s a summary of the presentation. You can also click here to watch the recording of the entire event.
Travel Industry Scope
The travel industry right now comprises of approximately 330 million workers that account for about a tenth of the global workforce. On a global basis, this accounts for 10.3% of the GDP in 2019. Looking further, corporate travel makes up 12% of passengers but 75% of profits for airlines.
Travel Patterns Linked to Regional COVID-19 Cases
Source: Skift Research
It is important to not discount the willingness of persons to travel. 2020 data can align the points in which cases slightly subsided and the impact on the overall increase in persons travelling. Travel patterns in the chart above shows the percentage of the US population that had travelled throughout the year. This includes travel via long-distance car, rail, and plane. The chart shows a negative correlation between the COVID-19 cases and travel. Throughout the summer as cases lowered, we saw a high increase of travellers within the months of June July and August.
Impact of Different COVID-19 Responses on Travel Bookings
Source: IATA
In analyzing data from Latin American countries, and the nations’ differing approaches to COVID-19, we draw conclusions on which methods best promote travel. We see that the highest negative percentage change year-over-year in net bookings between the first 2 weeks of October of 2020 versus those in 2019, are for those nations which have been completely closed off to foreigners. The closed-off nations are followed by those that require entry with quarantine, those that allow full entry with a negative COVID-19 test, and then, last, followed by those that have no COVID-19-related restrictions or requirements to enter. What this tells us is that testing pre-arrival or on arrival offers a promising way forward to restart air travel in the absence of a vaccine if governments should opt to use these methods in replacement of full border closures.
Bookings Increase with Shorter Quarantines
Source: IATA
Towards the end of November, the UK announced a test-to-release policy. Under this new policy, passengers could halt or stop any self-isolation given that they tested negative five (5) days after entry into the UK. The point of the test release policy was to allow the incubation period for COVID-19 to show up in tests to surpass. What was not expected is that such a framework would result in a massive increase in the bookings that would be placed in the week following the announcement. Bookings from countries that were previously mandated a 14-day quarantine period, increased by 101% in the first week. The largest number of these bookings came from countries such as the US, Spain, India, and France as the top origin countries.
Most Valued for the Business Traveler
While there has been a reluctance to return to the office after COVID-19 related shutdowns, there is no such reluctance to hop on a plane for conferences or in-person meetings. This is due in large part to the clear advantage of conducting business interactions face to face. Business travellers will want travel changes in the form of (1) security fast lanes, (2) spaced seating, (3) pre-arranged seat selection, and (4) fast track immigration. The best adaptation will be to get the traveller through transit quick, and reduce time spent in long lines or crowded areas.
Important Factors When Choosing an Airline
Source: IATA, August 2020
A poll by IATA in August 2020 looked at the most important factors when choosing an airline, in the chart above. Airlines have come out with other ingenious ways to go beyond these efforts and find ways to continue operating, such as through travel corridors that specifically connect two international destinations in a unique agreement.
How Encore Currently Sees 2021
The above figures represent Encore Travel’s forecast made in January 2021. It is subject to possible drastic changes, given the uncertain travel landscape.
New Expected Adjustments
There is an expectation that travel may initially boom as companies use travel to re-establish connections lost in the past year or visit all partners in the supply chain.
We expect to see an uptick in the mix of business and leisure in company policies. These “bleisure” travellers will want questions to be addressed surrounding where their company insurance comes into play if they choose to extend their trips, and if there is an internal accommodation surrounding the extension of their trips.
As travel restarts, there will be more emphasis on face-to-face interactions. Regardless of the use of the virtual meeting, we do not see any way that it would replace the experience of an in-person chat.
Outlook for Hotels
Source: CBRE
We expect to see the occupancy rates rise faster than the change in daily rates. This will mean that hotels will have low prices in the short term, but more volatile (most likely higher) prices in the long term. As hotels adjust their new operation models, the prices are expected to adjust to the demand environment.
A Lighter Tone
To summarize, Encore remains optimistic that business travel will return faster than currently viewed in the market. COVID-19 will bring definite change in how companies plan and view corporate travel. And, additionally, airlines will be quick to adjust to the needs of their customers.
Changes for Companies
The biggest changes for companies will be around defining essential travel, adjusting to the new traveller that mixes business and leisure trips, creating better clarification surrounding assistance travel, and being more wary of changing regulations and restrictions.
