Corporate travel, often called business travel, can impact a business’s bottom line in many ways. The connections made through corporate travel help businesses make sales, scale operations, break into new markets, develop partnerships, service customers and much more. Businesses invest heavily in travel, driving sector revenue and economic growth worldwide.
Thus, the drastic reduction in corporate travel during the COVID-19 pandemic has affected businesses, industries, communities and global economies. With such wide-ranging ramifications, the future of corporate travel is top of mind for business management professionals.
As future business leaders, business administration students must examine the challenging effects of the decline of corporate travel. The University of Louisiana at Lafayette’s online Master of Business Administration (MBA) degree programs are designed to prepare students for such challenges. With the advanced skills and knowledge students gain, they can help their businesses adapt with the agility needed to thrive in a post-pandemic world.
What Effects Has the Pandemic Had on Business Travel, Present and Future?
The Global Business Travel Association (GBTA) estimates business spending on global corporate travel dropped $694 billion in 2020 — a 52% decrease for that year — and $1.4 trillion (USD) since 2019.
As for the future, GBTA estimates business travel spending will not rebound to pre-pandemic levels until 2025. Yet, many experts believe corporate travel will see a permanent decline. A Wall Street Journal assessment of data and industry expert opinion estimates the pandemic could result in a permanent reduction in business travel of up to 36%.
What Is the Impact of this Decline on Businesses, Economies and People?
The impacts of this decline in business travel are complex. In terms of numbers, the World Travel and Tourism Council (WTTC) reports that in 2019 the travel and tourism sector drove the global economy to the tune of $9.2 trillion (10.4% of global GDP) in revenue and the creation of 10.6% of jobs worldwide, or one in four jobs.
In 2020, the travel and tourism sector saw a $4.5 trillion loss in revenue and 62 million lost jobs, plus drastic reductions in hours and income for many who kept their employment. Business travel plays an outsized role in these figures, accounting for over 20% of travel and tourism sector revenue.
While airfare, car rentals and accommodations account for a good portion of business travel expenses, most are spent on meals, entertainment, gas and other miscellaneous expenses. Business travel losses negatively impacted many industries, businesses, economies and people beyond those directly involved in travel and tourism.
Business travel also impacts the global, in-person transfer of knowledge, ideas, innovations and technology. Research has shown that this aspect of business travel substantially impacts economic growth and business diversification in travel destinations. This effect is quantifiable in terms of GDP growth for countries in various stages of development as well as global GDP growth as a whole.
Leisure travelers will also feel this shift in revenue, even as travel restrictions lessen. For instance, business travel only makes up 10 to 15% of airline passengers. But, due to the high cost of business class fares and last-minute tickets, business travel accounts for 50 to 75% of major airline revenue.
This revenue effectively subsidizes lower fares for everyday travelers, meaning airlines may have to raise base fares to accommodate the steep decline in business travel revenue. Airlines have also had to reduce flights to common business destinations, meaning fewer options for leisure passengers.
How Are Businesses Adapting?
While important factors like sales, market expansion and networking opportunities have suffered, businesses have found ways to adapt, sometimes beneficially for the long term.
The shift to remote work, virtual employee training and online meetings can lower business costs in travel expenses, overhead for office space and professional development expenses. Seeing cost reductions and, in some cases, improvements in employee productivity and job satisfaction, many business leaders will likely make some of these changes permanent.
Travel and tourism sector businesses that depend on corporate travel must adapt creatively to rebound and create more resilient business models. Many are pivoting services and marketing efforts to cater to high-end leisure travelers. Others are designing safe, quarantine-free destination bubbles, where corporate travelers can arrive and conduct all their business or attend conferences without leaving designated facilities.
Clearly, the pandemic-induced decline in corporate travel has wide-ranging effects on businesses, economies and people worldwide. Corporate travel may not ever look quite the same. But innovations spurred by the decline may well have a positive, long-lasting impact on businesses’ agility and continuity in the face of future disruptions.
Learn more about the University of Louisiana at Lafayette’s online MBA programs.