Steve Allen is a director with the Firebird Partnership, set up in summer 2020 to support travel companies as they plan for the future. He returned to the UK in August following a three-year spell in Dubai running the corporate travel arm of dnata across the ME&I region. Prior to this, Steve was CEO at Portman Travel and a board member of Radius Travel.
Twelve months ago the outlook for the new decade and for 2020 held so much promise. Now, after a year that seems to have lasted forever, how optimistic dare we be for 2021?
When gazing into the future we usually consider macro-economic factors, geopolitical issues and current trends, be they tech-driven or otherwise. But looking to 2021 requires us to really focus on the customer. How will companies and organisations change their behaviour as a result of Covid, and how will their staff feel about travelling on business? We are all in a very different place.
Economically, 2021 will be challenging in the UK with post-Brexit changes to work through and a rise in unemployment to a forecast 7.5 per cent by the end of Q2, meaning some 2.6 million could be out of work, almost double that recorded in June 2020.
How then will companies and organisations behave?
There will be much greater scrutiny of spending on travel based on the economic value to be gained. Travel will also be assessed against alternative means of digitally enabled communication. And it will increasingly be viewed through the lens of sustainability, as companies collectively take greater responsibility for our environment.
The way many used to work has changed and changed forever. For those who can, time will be split between the work-office and the home-office. Office footprints will shrink along with their costs of operation. New digitally enabled behaviours are here to stay. Finance directors will be pleased.
Employees are concerned about safe travel and the risk of being stranded in the wrong country at the wrong time. They do not want to have to quarantine. They do not want to put their families at risk. Some will have enjoyed their new work-life balance. Personal wellbeing is now top of the agenda.
Companies appreciate this. Directors have a legal duty of care to their employees. They also know the value of doing business in person, whether to win new prospects, retain their customers, negotiate new supplier deals and partnerships, and a host of other activities. Business travel is positively correlated with economic growth, and so is vital to the UK’s wellbeing too.
Will vaccines be the universal panacea? The probable answer is that they are all we’ve got and so will have to be. However, it will take time for their roll-out, with the vulnerable and front-line staff first in line in the coming months.
An estimated 70 per cent of the population needs to be vaccinated in order to effectively manage the virus. This is a huge logistical ask that will take time. We do not know yet when follow-up jabs will be needed, and what the bumps in the road will look like. There will be international variations and issues to contend with too.
Therefore, the numbers likely to travel on business internationally in H1 2021 will remain low. There may also be a further surge in cases through January, after the Christmas and New Year period, leading to restrictions on movement in the UK and elsewhere.
There will be continuing reluctance to risk more cases with travel to/from places with relatively high rates of infection. The option for a series of tests pre- and post-travel allied to stringent safety measures taken by airlines, hotels and others, may yet enable some business flying, which would suggest a slow increase through Q2 to around 20 per cent of where the industry was in 2019.
Whilst there is an expectation that we might be able to travel abroad for a summer holiday, the volume of summertime business travel is likely to be similar to end of Q2 levels until we reach September, based on seasonality. It may be possible that we see an increase to 50 per cent of Q4 2019 international travel in the final quarter of 2021, although this feels optimistic if we are only at around 20 per cent in August.
Overall, my current view is that we should expect domestic business demand to be running up to 50 per cent of 2019 levels on average in 2021, with international business travel closer to 25 per cent on average, with Q1 remaining below 10 per cent and Q4 rising to around 40 per cent.
2022 will then be brighter, with levels around 75 per cent or more for domestic travel and meetings, and 60 per cent and above for international travel, compared to 2019.
IATA’s latest forecast expects air travel to not equal 2019 volumes until 2024, with leisure doing better than business travel in terms of the recovery.
Whilst this is arguably a pessimistic scenario, it is surely better to plan for the worst and hope for the best. It is easier to add back cost as activity levels rise – it is so much tougher to manage a business with too much cost.
Cash and access to funding has already been a huge challenge, eased by the furlough and Coronavirus Business Interruption Loan schemes. Of course, the former ceases at the end of Q1.
TMCs are under enormous pressure to rapidly change, embracing technology to deliver efficient and safe services. Understanding what their customers now think and want is key.
Some will adapt and thrive. Some will not. Decisions have to be made quickly. We will see more M&A activity to achieve economies of scale, and the scale required to access travel content that underpins their customer value proposition.
Companies must grasp the nettle now. TMCs that smartly reset and closely collaborate with their customers will cope with a weak 2021 and benefit from the momentum as business travel slowly recovers.