Business travel may be a long time coming back to pre-pandemic levels. That will hurt many bottom lines, particularly for airlines where business trips make up a significant part of industry profit.
A recent study from the consulting firm McKinsey & Company predicts that business travel won’t return to pre-pandemic levels for years. Many companies and business travellers are finding that they can cut costs by switching to virtual events and meetings, which could hurt businesses which rely on corporate travel. 1:59
Kacey Siskind recently took her first business trip to the U.S. since the pandemic began.
The vice-president of business development at Honk Mobile, a parking app, attended an industry conference in Texas.
“Our team was fully vaccinated and we felt that we could probably make our way and see how it went… we just wanted to take a chance and really be back out in the world,” said Siskind.
But in Dallas, you’d barely know there had ever been a global pandemic. Panel discussions and networking sessions at the conference happened indoors with no masks in sight — just lots of people eager to re-connect.
Siskind said she found the environment unnerving at first, but soon began to appreciate the experience.
“There is really nothing like being in person with somebody,” Siskind said. “There’s nothing like physically seeing them and talking to them.”
Only essential business travel has continued throughout the pandemic; for example, trips related to healthcare issues or critical infrastructure. Work trips related to maintaining or building relationships, making sales or attending conferences had been shut down.
In an online survey of 640 industry professionals, a June poll from the Global Business Travel Association, a U.S.-based industry group, found 91 per cent of companies say they’ve cancelled or suspended most or all international business travel — a huge hit for the industry.
Slow return for business travel in Canada
In Canada, virtual, online gatherings are expected to be the norm at least until the end of the year, event planners said.
“Our friends down in the states are moving a little bit quicker than us,” said Anh Nguyen, an event planner in Calgary. “In Canada, we’re seeing a little bit of a more conservative approach.”
Nguyen’s company, Spark Event Management, organized a number of virtual events over the past year. She believes many organizations — here and in the U.S. — won’t be willing to give up all the benefits that come with going online.
“There’s no such thing as sold out, right? So if you’re a 300-person event you can now reach 5,000-6,000 people if you wanted it to.”
Nguyen adds that with avatars, networking and breakout room software, industry is getting close to being able to replicate much of a real-life event experience online — though it’ll never be quite the same.
“The technology has grown and there’s a lot of money and investments being put into event technology right now,” Nguyen said.
Virtual gatherings may be great in some ways, but industry insiders note that they do next-to-nothing for local economies. Business travellers are often big spenders. They’re often on expense accounts, which benefit hotels, restaurants, taxis, airlines and more.
“Business travel contributes over $40 billion towards our Canadian economy in pre-pandemic numbers,” said Nancy Tudorach, who works with the Global Business Travel Association. “It’s about 2.5 to 3 per cent of our typical pre-pandemic GDP.”
Airlines are hurting
Vik Krishnan, a consultant with McKinsey & Company, said airlines in particular depend on expensive business class tickets.
“The business traveler tends to book late, they tend to travel with higher frequency, and they tend to also buy some of the more expensive fares,” he said. “Business travel for some airlines comprises 50 to 75 per cent of profits.”
A recent report from McKinsey noted that it took six years for airlines to recover from the impact of the Sept. 11 attacks, and that the industry still hadn’t fully recovered from the 2008 global financial crisis when the pandemic hit.
The COVID-19 pandemic has been larger in scale and deeper than any of those prior crises, Krisnan said. But if corporate travel remains curtailed, he said airlines probably won’t make up the difference by charging regular consumers more.
“This is an industry that has faced a lot of competition, has faced fairly relentless pricing pressure and cost pressure, and therefore, it’s no stranger to having to deal with an environment where you don’t have a lot of leeway and flexibility to raise prices.”
The recent emergence of new discount airlines in Canada, such as Flair and Canada Jetlines, could make it difficult for WestJet or Air Canada to charge more.
Business travel may stay depressed
Many of the companies that depend heavily on business travellers are expected to continue to struggle. McKinsey’s report on the airline industry forecasts pre-pandemic travel levels won’t be reached until 2024, and even then will only be at 80 per cent.
Others say the pandemic may have changed the approach to corporate travel forever.
Kacey Siskind suspects all business trips will now be evaluated differently.
“Is it efficient for us to go to a conference? Yes, if we’re going to see hundreds of people, it’s going to make sense for us to be there,” she said. “Is it smart for me to go off to New York for a night to have one meeting? Maybe not so much.”