The Covid crisis will change the business travel market forever. Business travel will become increasingly rare despite the limits of remote working and the return to face-to-face work. Current statistics show a decline of unprecedented magnitude, which questions the very existence of specific economic sectors.
Business travel: post-Covid statistics
- 50%: the structural decline in business travel according to Bill Gates
- 63%: the decline in weekly ticket sales to U.S. companies compared to 2019 (figures as of 01/23/22)
- 75%: decline in the number of passengers on TGV (high-speed trains) in France
- 25% to 33%: the average occupancy rate of hotels in urban areas in 2021
- 55% to 75%: the share of profits represented by business travel for traditional airlines
- 80%: the drop in foreign visitors to major European trade shows
Evolution of the business travel market
The market research we have realized with B2B decision-makers shows that companies will halve their business travel. Their volume will not return to its pre-Covid level.
3 factors can explain this structural decrease:
Digital habits
The forced transition to digital has made videoconferencing a part of everyday life. The practices of companies are permanently modified. Internal meetings, as well as meetings with customers, are now held via videoconference.
Eco-responsible image
In the age of global warming, companies want to be perceived as eco-responsible. Reducing business travel helps to achieve this marketing objective. However, let’s not forget that digital technology is also a source of pollution.
Inflation and travel prices
It will have escaped no one’s notice that inflation is here to stay. This inflation is due mainly to an energy component (gas and electricity prices). With the price of oil reaching record highs, the cost of airline tickets will have to be revised upwards. Therefore, the budget for business trips will increase significantly, which will be an additional argument for companies to limit them to a strict minimum.
Eventually, post-Covid business travel volume will be cut by 50% compared to 2019.
Consequences of the decline in business travel
The structural decline in travel will affect several sectors.
Airline sector
Following our analysis of the impact of Covid on airlines, we can expect a complete reshaping of the business model of traditional airlines. Business travel represents between 55% and 75% of their profits. This should give even more room for maneuver to low-cost airlines whose revenues are independent of business travelers. In the long run, one may even wonder if low-cost airlines will not become the standard for air travel.
For traditional airlines, the desertion of the business class could, beyond the drop in revenues, also initiate a reflection on cabin design. In the same way that first class has become increasingly rare, is there not a risk that economy seats will swallow up business class space?
Trade shows
Despite a better epidemic situation in 2022, the major European trade fairs are experiencing a drop in attendance of around 80% of foreign visitors.
Some trade fairs should suffer less than others. The luxury sector, for example, has been relatively spared. We hope some other sectors (notably food with the SIAL in October 2022) will not suffer too much.
Hospitality sector
The hospitality sector will continue to suffer from the consequences of Covid for a long time to come. While luxury hotels seem to be spared the effects of the decline in business travel, other hotels are seeing their occupancy rates remain low. In the week of January 3 to 9, 2022, the occupancy rate was 37.4%, compared with 52.8% before the crisis.
Conclusion
The decline in business travel is structural. Post-Covid business travel volume will be cut in half compared to 2019.
Traditional airlines will probably have to reinvent their business model. Low-cost airlines could eventually capture an even larger share of the market.
As for trade shows and the hotel industry, it is reasonable to assume that consolidation will occur. Some B2B trade shows, with insufficient reach, could disappear. In terms of size, we believe that regional and global trade shows (CES, etc.) are best placed to resist. Some sectors, less quick to digitalize, should also resist well.
Posted in Strategy.
