Business
travel’s not what it used to be. Literally. The data seen by corporate payment companies
about how clients are paying for travel reveals much about the state of companies’
managed travel programmes – and it’s clear what the story for 2020 will be.
“Volumes are
going to be catastrophically down,” says Steve Robson, head of commercial cards
EMEA for Citi. “There have been huge drops in travel because of coronavirus.
[Even before countries started to shut their borders], client reductions ranged
from business-essential only to a complete ban, where travellers had to go to
senior management to ask for an exception.” According to Simon Barker, CEO of
the virtual card technology provider Conferma Pay, volumes were down by more
than 90 per cent in some cases before the border closures.
Nor is it
only the number of trips that will end 2020 lower than for 2019. So too will be
what business travellers pay for them. “One would expect air average transaction
value to fall as airlines look to fi ll the aircraft that are still flying,”
Robson says.
So far so bad, certainly for travel suppliers, but Robson thinks
business travel may never be the same again. “The story is what happens next?
People are being asked to work from home and do video-conferencing. But once we
recover will there prove to be more fundamental changes? Will business people
say they got what they needed by using virtual conferencing, or will they say it
has made them value face-to-face relationships even more and want to continue
travelling?”
Maria Parpou, chief product & commercial officer for
commercial payments at Barclaycard, suspects some travel volume declines will
be permanent. “Conferences and overseas trips have been cancelled and businesses
are seeing that doing it with WebEx instead is doable and you can survive in a
nonface- to-face environment,” she says. “I think business travel will be
dampened down and there will be a pattern shift, especially if coronavirus
continues next winter.”
2019 travel spend tightened in the Eurozone
In the pre-coronavirus world, average spend per transaction by
Barclaycard customers on corporate cards fell 3 per cent between 2017 and 2019.
Parpou attributes these figures to “better management of expenses, with better
control on where you are spending.”
According to Parpou, travel managers are making smarter use of
technology, such as tools that rebook hotel reservations if a lower rate
becomes available. “Companies have put their arms around travel spend and now
with coronavirus I think that will go further,” she says.
Wellbeing red alert:
what day do your people travel?
Business travel can seriously impinge on employees’ personal time. Figures from
AirPlus show Sunday is the busiest day of the week for outbound intercontinental
travel, and Saturday the third busiest. After Covid-19, will companies target travel
more carefully and switch more flights to within the working week to avoid
mixing with leisure travellers?
Monday - 25.1%
Tuesday - 11.1%
Wednesday - 7.5%
Thursday - 5.2%
Friday - 7.9%
Saturday - 18.0%
Sunday - 25.2%
Citi likewise saw what Robson characterises as “muted” travel
spend across the Europe, Middle East and Africa region in 2019. “It was pretty
fl at, but it wasn’t down,” he says. However, Robson thinks macro trends beyond
business travel were the main reason: economic downturn in the eurozone and
Brexit-related uncertainty. Beyond Europe, client spend in sub- Saharan Africa
was up modestly, and surged by double figures in the Middle East.
Figures from AirPlus International, meanwhile, shed light on
shifting costs for business air travel. The average ticket price paid by
AirPlus customers in the UK in 2019 rose 2.8 per cent. “In most countries, ATP
was on the decline, reflecting the UK outperforming the eurozone,” says AirPlus
UK managing director Paul Spelman.
ATP growth in the UK was entirely attributable to higher domestic
fares. Short-haul fares to the rest of Europe were flat, while long-haul fares
were down. There were also variations by cabin class. Economy fares shot up 4.8
per cent and business class fares 3.1 per cent, but premium economy was flat and
first class was down.
As a result, the diff erence in price between a business class and
first class tickets is now pretty small: £3,479 versus £3,899, suggesting that
flying first class may occasionally make sense, although Spelman points out
that few corporate policies permit it.
One of the reasons first class has become relatively affordable is
that it is booked farther in advance: 58 days on average in 2019, compared with
35.1 days for business class. However, first class remains a tiny proportion of
all bookings by AirPlus customers – just one ticket in a thousand.
Overall, business travellers continued to book further ahead than
ever in 2019, with the average number of days ahead of departure lengthening to
22.4 days from 21.7 days in 2017 and 21.9 in 2018. Strikingly, 24 per cent of
tickets booked by AirPlus’s largest clients were two days or fewer before
departure, whereas for its smallest clients the figure was only 8 per cent.
Presumably, larger clients negotiate better deals for more expensive fare classes
that are available at short notice.
For several years there was also a lengthening in the number of
days between when travellers booked hotels and when payment was taken on a Conferma
Pay virtual card on arrival or departure. However, this figure stuck at around 18
days in 2019. “There is a balance to be struck between booking far enough in
advance to get lower rates and too far in advance that travellers might have to
cancel,” says Conferma Pay’s Barker. “It may be the wisdom of crowds has
decided 17 to 18 days is optimal.”
Another trend Barker has noticed is that use of prepaid rates grew
to 15 per cent of all bookings in 2019. Pre-paid rates are generally lower but
the problem is what to do about extras run up by the guest at the hotel. The solution
has been to cover those extras on the same virtual card payment. Historically,
an average of 1.1 charges have been made to each Conferma virtual card used for
hotel payments. That rose in 2019 to 1.3 charges – yet another example of how
payment strategies for corporate travel continue to evolve.
Revolution in 2020?
Evolution, however, may not be the pace at which spend patterns change
for 2020; at present revolution seems more likely. Should border restrictions
remain in force and visa requirements tighten due to an ongoing health threat, advance
planning for business trips may be required by governments, not simply
requested by corporations. On the other hand, the potential for infection waves
may drive businesses to book closer to the travel date to reduce cancellation
risk. Or, with both issues in play, companies may have to spring for fully
refundable airline tickets and eschew those cheap prepaid hotel rates.
One thing is certain: payment data will tell the story of business
travel in 2020 as it starts to reemerge. Companies should look to that data
over time to understand the reality on the ground for their travellers and use
it to reshape their programmes.