Signs of the times
Business travel volumes are the surest sign of the industry’s current state but there are other metrics that add an alternative dimension to the recovery story
As travel restrictions in many parts of the world are removed, business activity is picking up pace and the widely held belief that ‘pent-up demand’ is waiting to be unleashed could yet prove true. Read on to discover six signs of business travel's current performance.
It’s the obvious one, but these numbers don’t lie. Business travel bookings almost universally dropped off a cliff when the pandemic broke out and only a handful of industries – energy, marine and construction among them – continued travelling throughout. Now, however, we’re seeing TMCs, suppliers and corporates issuing a wide range of numbers about current travel activity that all point in the ‘right’ direction.
The world’s largest travel management company, American Express Global Business Travel, reported that transaction volumes at the beginning of April had recovered to 61 per cent of pre-pandemic levels and total transaction value was at 59 per cent of 2019 levels.
Transactions had recovered to 45 per cent of pre-Covid volumes last November but sunk to 30 per cent in January when the rise of the Omicron variant of Covid-19 coincided with the festive season to stall travel activity.
“Travel recovery is building strong momentum,” said Paul Abbott, Amex GBT CEO. “Transactions have increased by 200 per cent since mid-January.” Abbott said the current “consensus” view of the sector’s recovery was for a return to 90 to 100 per cent of 2019 sales by the end of 2023.
Clive Wratten, CEO of the Business Travel Association, observed similar recovery levels to those of Amex GBT among its members. “Our TMCs were trading on average at 55 per cent of pre-pandemic levels for February-March 2022. Therefore, we are forecasting that it will take until late 2023 before business travel returns at a consistent 2019 level.”
Sean Menke, CEO of Sabre, said in February that corporate bookings were back to 50 per cent of pre-Covid volumes having slumped in the face of Omicron. By the end of this year it anticipates up to 70 per cent overall recovery – across leisure and corporate bookings – and, further ahead, expects corporate travel to be back to 90 per cent by 2025.
TripActions, meanwhile, reported ‘hyper-growth’ in the first quarter of 2022, with all business travel categories ‘surging’ in March, although it was unclear how much of that could be attributed to new customer acquisition. Global bookings increased 125 per cent from January to March, with total volumes in Q1 more than half (54 per cent) of those seen in the whole of 2021.
“The strength of pent-up demand for business travel is clear,” said Michelle McKinney Frymire, CEO of CWT, which reported 133 per cent growth in bookings in the first quarter of the year compared with the same period in 2021.
“We are seeing the highest levels of business travel since the pandemic began and, while traveller health and safety must always remain the number one priority, removing hurdles and uncertainty will be key in achieving a full recovery. This, in turn, will help stimulate economic growth, and it is encouraging to see the potential benefits arising from some countries relaxing these restrictions.”
Airlines' seat capacity and air passenger traffic, for obvious reasons, track each other’s paths closely and both are showing strong recovery in spite of rising fuel costs, the conflict in Ukraine and well-documented staff shortages as travel ramps up. While the upward trajectory is clear, several commentators note that business travel recovery remains well behind leisure travel growth.
IATA’s latest figures, for February 2022, showed a “strong rebound” following a dip in passenger numbers caused by the spread of the Omicron variant of Covid-19. Global passenger traffic was down 45 per cent compared to the same month in 2019 but Europe was the best-performing region in terms of month-on-month growth.
“The recovery in air travel is gathering steam as governments in many parts of the world lift travel restrictions,” said Willie Walsh, IATA’s director general.
By April, airline capacity in Western Europe hit 88 per cent of 2019 levels, with capacity up more than 30 per cent over the first three months of the year in a host of countries including the UK (up 41 per cent), Greece (36 per cent), Portugal (34 per cent), Denmark (34 per cent), Germany (34 per cent), France (32 per cent) and Norway (31 per cent).
OAG senior analyst John Grant said the recovery in Europe was down to a “combination of nearly all lockdown restrictions being removed and the change to summer programmes”. EasyJet, British Airways and Vueling have added the most seats since January.
“EasyJet is the standout winner in terms of capacity recovery, although some of their low-cost competitors would argue that they were slow off the mark at the beginning of the year,” said Grant. “Nevertheless, almost doubling capacity in twelve weeks is no mean feat, especially when going from one million to nearly two million seats a week.”
Ryanair, Iberia and Turkish Airlines are the only major European airlines to now offer more seats than they did in April 2019.
Increased capacity is the result of both more flights and also the use of larger aircraft, with the likes of British Airways reintroducing A380 aircraft on services across the Atlantic last winter and Singapore Airlines, Emirates and Qantas deploying the superjumbos on more services.
“We’re supplementing our flight schedules with increased frequencies to meet pent-up demand and deploying the high-capacity double-decker A380 aircraft on popular routes around our network,” an Emirates spokesperson told BTN Europe. “We have been prudently restoring our operations in line with the borders re-opening and ease of travel protocols, and with the positive signs in the economic recovery and continuous growth of demand, we are hopeful to be back to where we were pre-pandemic, from mid-2022."
While growing capacity means increased frequencies on key business routes, Heathrow Airport noted that leisure travel was driving overall recovery. Upon reporting its highest monthly passenger numbers (for March) since the pandemic began, it said: “Inbound leisure and business travel remains weak due to high Covid levels in the UK and the requirement to test before returning home [to passengers' destination of origin].”
The airport was not alone in noting business travel is lagging well behind leisure. Etihad Airways CEO Tony Douglas speaking in April said corporate travel remains "hugely suppressed," but added that some corporations were starting to "come back in and operate in a way in which we are familiar with pre-pandemic, [although] many still from a policy point [of view] are avoiding it."
Expense claims and spend
Another tell-tale sign of business travel recovery – and of business activity in general – is rising spend on corporate cards and increasing expense claims.
American Express’ total revenue grew 30 per cent in the last quarter of 2021 and 17 per cent for the year but the real story lies in the details of its latest earnings report. Across all its customers – consumer and commercial – spend on travel and entertainment was up 132 per cent in Q4 of 2022 compared to Q4 of 2020 but was still 18 per cent down on Q4 2019.
Drill down further to commercial customers only, and travel and expense spending recovered steadily quarter-by-quarter in 2021. In Q1 it was 72 per cent down compared to 2019, in Q2 it was 61 per cent down, in Q3 it was 50 per cent down, and by Q4 it was 39 per cent down on 2019 T&E card spend – still a long way off 2019 levels of T&E spend but showing steady recovery nonetheless.
Most notable, perhaps, was the rate of recovery by customer type: T&E spend among SMEs returned to 83 per cent of pre-pandemic levels but the same figure for large and global corporate customers was a distinctly different 36 per cent. Those numbers support a trend widely reported by travel agencies and suppliers that it’s smaller businesses – often less hindered by protocols and procedures – that are spearheading business travel’s recovery. "We've said all along that we expect this [large and global corporate customers] will be the last customer type to see travel recover," said vice chairman and CFO Jeffrey Campbell.
Elsewhere, TripActions Liquid saw business travel spend increase 220 per cent between January and March this year, with airline spend rising 240 per cent and accommodation 138 per cent.
Advance booking period
There has been clear movement in advance booking behaviour over the last two years, with several factors at play.
“Pre-Covid, travel was being booked on average 19 days in advance,” says Shelley Mathews, general manager sales and partnerships Europe, CTM. “During 2020, the chart goes up and down like a rollercoaster, dropping to a 13-day average at its lowest point. From September 2021, however, it started to increase steadily and is back to an average of 18 days, which is testament to the renewed confidence we are all seeing in travel.”
CTM is among a host of companies whose data shows that average advance booking times are stretching out once again and thus is seen as an indicator of growing confidence.
“We’ve seen a significant shift in the amount of time prior to travel that trips are booked, and we consider this a strong benchmark for determining traveller confidence,” says Chris Lewis of data specialist Travelogix. “Travellers booking multiple trips is also a very good indicator of confidence.”
In 2019, the average booking horizon was 23.3 days – this dropped to less than 10 days in 2021, according to Travelogix, whose data is based on bookings handled by 70 UK-based TMCs.
In Q1 of 2021, the figure stood at 9.18 days, before increasing marginally to 10.22 in Q2 and stretching out to 20.28 in Q3. In Q1 of this year, the advance booking period had fallen back to 15.96 days. “We expect to see a return to 20+ days toward the middle or back end of Q2,” says Lewis.
TripActions, meanwhile, says average lead times for bookings are now back to February 2020 levels at 12 days. The lead time for flights, which collapsed to 2.7 days during the initial travel shutdown, now stands at 15.8 days, exceeding the pre-pandemic booking window.
CWT’s senior director global customer management Rob Coomer notes that very short lead times can still occur following significant changes to travel protocols. “When restrictions are relaxed or completely removed, travellers want to get on the road as quickly as possible,” he says.
Domestic vs international trips
Some domestic and international travel continued during the pandemic but it was clear the latter would suffer to a greater extent. Indeed, for some countries with large domestic markets – the US a prime example – the gap between domestic and international trips has been sizeable. But as the world reopens, are international bookings catching up with domestic trips?
Data from HotelHub would suggest so. In Europe, the proportion of domestic hotel bookings processed by its TMC customers ranged between 50 and 60 per cent in 2019. By June 2020, after the pandemic spread across the world and international trips declined, the share of domestic hotel bookings climbed to 80 per cent and ranged from 75 to 84 per cent over the remainder of the year.
In 2021, the proportion of domestic bookings peaked at 85 per cent in March and steadily dropped to 69 per cent by November. HotelHub’s data for 2022 shows the gap once again closing, with its share of domestic bookings at 75 per cent in January, 70 per cent in February and 66 per cent in March as international trips pick up again.
Meanwhile, American Express Global Business Travel says international air bookings have consistently lagged around ten per cent behind the recovery of domestic business trips. At the end of March, it reported domestic trips have returned to more than 60 per cent of pre-pandemic levels and international bookings had surpassed 50 per cent.
Meetings and events recovery
While domestic and international business trips slowly find their new, post-pandemic ‘normal’, the meetings and events sector – which generates significant travel volumes – is going through its own transformation as agencies and venue providers closely watch how live, virtual and hybrid events all fare.
In a 2022 Q1 Planner Sourcing report, meetings technology specialist Cvent found more than 70 per cent of organisers believe most of their events will have an in-person component this year, with only 25 per cent expecting the majority of events to be virtual. In addition, most organisers (68 per cent) said they had more budget for in-person and hybrid events than they did in 2019.
Meanwhile, event planners are returning to live-only events more quickly than expected, according to etc.venues. Its twice-yearly survey found that 97 per cent of planners were “increasingly inclined” to meet in person in 2022, with 82 per cent saying they valued face-to-face meetings more now than they did before the Covid crisis started two years ago.
There also seems to be some softening in the desire to offer ‘hybrid’ events, with only 49 per cent of planners expecting to run this type of event in 2022, down from 57 per cent of respondents last summer.
The majority of planners (54 per cent) still think virtual and hybrid meetings are valuable and expect to run them in the future, with another 13 per cent believing they would be the future of meetings. However, 24 per cent said they were only valuable as a back-up contingency for live events.