Scott Gillespie, founder of tClara, is an industry-leading expert on travel management, procurement, analytics and traveller friction
There is no joy in recognising that business travel has peaked and that our industry will never return to its pre-Covid level. Like it or not, there are significant implications for our industry's future.
Yes, the Covid-19 pandemic will recede and business travellers will feel safe about traveling, as will their hosts. Getting a global green light on the health and safety front will unleash demand for business travel. Unfortunately, that demand will be sharply and permanently diminished for four reasons.
Firstly, the pandemic has forced most employees to work from home. While not everybody's cup of tea, working from home will remain a popular choice for many workers and their companies in the post-Covid world. If you don't need to go to the office to work, why do you need to travel?
Secondly, the massive shift to working from home has forced the widespread adoption of virtual meetings. These have proven to be mostly adequate (but not great!) substitutes for meeting in person. If you can meet virtually, why do you need to travel?
Thirdly, the sustainability issue is rising on executive and government agendas. Business travellers and their employers will increasingly factor a trip's impact on our climate into their travel decisions. No small number of trips will be eliminated for this reason alone.
Note the synergy of these three forces. They reinforce each other and will endure for a long time. There is no magic wand that will make any of these constraints on business travel disappear. Business travel will clearly shrink.
And lastly, the biggest force that will sharply reduce demand for business travel is the CFO's logic. Imagine every pre-trip approval request being met with the CFO's default response of "Why can't you do these meetings virtually? There's no travel cost, no travel time lost and no carbon emissions, right?"
Many (some may fear most) business trips will not clear this final hurdle. Not after we've had a year or two of doing business extensively via Teams and Zoom and seeing that this mode works well enough for many types of meetings.
The inevitable conclusion is that most corporate travel budgets will be permanently smaller. Business travel peaked in 2019. What lies ahead?
The future of managed travel
Managed travel's future will be built on much smaller corporate travel budgets, so we must expect:
• Fewer travel suppliers and fewer travel managers. An unavoidable consequence of a shrinking industry.
• The travel category loses importance. Duty of care remains a high priority, but the category's smaller spend means less management attention. Procurement execs combine travel with other indirect spend categories and accept the shallower T&E expertise.
• Fewer but more important trips and travellers. Low-value trips are denied and far fewer infrequent travellers have the need to travel. Those who do travel are deemed "important," just like their trips. Expect more prima donna travellers and more pushback on cost-focused travel policies. Suppliers intensify their battles for the remaining frequent travellers.
• Less focus on travel prices and cost savings. The more important the trip, the less worry about the price. Airlines recognise price inelasticity of remaining trips and raise prices for business travellers. Negotiated savings are seen as inconsequential in the face of "huge savings" delivered by not taking as many trips. Buyers shift their focus from price to evaluating supplier's product, service and relationship qualities.
• More outsourcing to travel management companies and more direct bookings. Smaller travel budgets make the outsourcing value proposition more attractive to management. TMCs up their technology game to reduce their labour costs and improve their service. Direct bookings grow as suppliers beef up this omnichannel option with strong traveller recognition, duty of care and data-reporting features.
• New efforts to stimulate demand. Network airlines see a dire need to stimulate demand for business trips. Marketing campaigns showcase the benefits of meeting in person for small meetings and MICE events. New studies and tools emerge to show the advantages of in-person meetings.
• More scrutiny on the merits of meeting in person. Trip approvers require better justification. More trip requests are framed with a risk-versus-reward, in-person-versus-virtual lens. Pre-trip ROI is tried and abandoned as not credible. Trip approvals are driven by the meeting's importance and potential for interpersonal dynamics.
• More focus on meeting and traveller outcomes. Fewer and more important trips and travellers begs the analysis of what these meetings achieve and how travellers are affected. Significant innovation emerges to make meetings more effective; travel logistics become secondary. Post-trip surveys about meeting outcomes become crucial. Metrics on traveller health, safety, productivity and attrition gain traction with senior management. Efforts are made to predict a meeting's success – and the need for travel.
• New need for optimising travel and meetings. Senior management asks: "How do we know if we are travelling too much or too little?" and "How can we get more out of our meetings?" New career paths open for those who relish finding answers to these daunting questions.
• Unmanaged travel is the key to growth for some. Though the business travel industry shrinks, the unmanaged segment provides growth opportunities for TMCs and providers of data reporting, payment, expense and duty-of-care solutions. Go-to-market efforts are consolidated across these providers, resulting in cost-effective inroads to this untapped market.
We are entering a new paradigm, one grounded by questioning the need for travel. It's now much less about getting people to meetings and much more about the value of the meeting itself. Our industry needs to embrace this pivot.