Roughly 445 million business trips occur each year. That’s around 1.2m trips a day. A DAY. Yet, in a few short weeks much of business travel has nearly ceased. The pace of this reduction is astonishing in and of itself (thank you Coronavirus) but the financial impact is staggering. Will this crisis be the death of business travel?
According to Investopedia, “Business travelers account for 12% percent of airlines’ passengers, but they are typically twice as profitable. In fact, on some flights, business passengers represent 75% of an airline’s profits.”
The business travel industry is a $250 billion dollar industry each year. My company, and I suspect yours, has completely stopped all business travel. All trips canceled. Everyone’s grounded.
The impact of the near overnight disruption of business travel has clearly had a dramatic impact on travel companies including airlines, hotels, rental car companies and more.
The Global Business Travel Association (GBTA) reported earlier this month (which means it’s probably worse now) that 54% of forecasted business travel spend has been canceled. Ouch.
A GBTA executive further stated:
“Coronavirus is significantly impacting the business travel industry’s bottom line. As the virus continues to spread across the world, business travel is slowing at an alarming rate. The impact to the business travel industry – and to the broader economy – cannot be underestimated,” said Scott Solombrino, COO and Executive Director of the Global Business Travel Association
That’s the obvious impact. What’s even more alarming is the impact this near massive shutdown of business travel is having (and will have) on the secondary companies involved in and dependent on business travelers.
Restaurants, uber drivers, taxi drivers, parking lots, dry cleaners, gas stations and many more organizations rely on business travel as a consistent source of steady income. Many industries are already being crushed with some likely never to return. And don’t forget about airports.
Then, consider local governments who use hotel taxes to help fund local services for transient travelers.
“The Hotel Room Tax (or “transient occupancy tax”) is a 14 percent tax levied on hotel room
charges. The tax is collected by hotel operators from guests and remitted to the Treasurer/Tax
Collector. Many local governments impose this tax to recover some of the costs of governmental
services associated with nonresidents.” – City of San Francisco Controller’s Office [Note: the Tax % varies by city and region]
Undoubtedly, the consequences of this tax gap will hit local towns and cities particularly hard. But, the impact extends even farther than that. Much farther than that. The ripples are rough, wide and possibly long lasting for companies whose staff can’t travel.
How screwed are companies who can’t travel?
Lastly, let’s consider the impact of companies (and their employees) not being able to travel and how that will hit their bottom lines. If we set aside the overall impact of a recession and the ripples that will have across many industries in and of itself and simply focus on the financial disruption that companies not traveling will have, it’s pretty serious.
Why do people travel for work? There’s a variety of reasons but they are almost exclusively in direct or indirect pursuit of revenue. Obviously, traveling sales people are an easy example. Disruption of their travel clearly impacts their ability to retire quota. We’ve already seen sales reps across various industries asking for quota relief as deals they were planning to close are moving or drying up already and companies struggling to adapt their sales plans on the fly in face of the crisis.
But, the impact is even deeper than that. Field deployment teams, support operations, executives, conference attendance, training, and so many other industries also have large swaths of travelers all of which directly, or more likely indirectly affect revenue.
Let’s use a direct example first. For companies that recognize revenue when an installation is complete they are now experiencing delays in that revenue recognition with staff now unable to start or complete installations. Projects move to the right or get cancelled altogether. This directly hits the bottom line.
Indirect examples are easily found too. Take a company who’s employees planned to attend some training or a conference. There was a reason that travel was booked. A reason which likely was based on the premise that their performance would improve as a result of that activity. Their improved performance would translate into a better or more efficient experience for customers or for teams that support teams who support customers (like an internal IT department) and so on. In other words, their productivity improvements have pushed right, and perhaps been permanently eliminated. That performance hit hurts the bottom line, indirectly. Those ripples are felt over time.
I could easily cite many more examples both direct and indirect (Traveling lawyers, religious leaders, bands, entertainment, M&A teams, consultants, photographers, video crews, etc, etc, etc).
You get get the picture. There was a reason companies have business travelers. They help drive business.
Are business travelers themselves affected?
It’s a fair question. The answer is certainly yes, but it’s a little more nuanced. If I consider myself, as an example, the immediate answer is no. Meaning, while I personally am not traveling for work right now, I have not been financially impacted at all by this travel freeze. I am still being paid handsomely for my day job. I will receive my annual bonus in a few weeks and a healthy stash of stock options (which are coming at a great time, I might add). Unlike the millions of workers in less secure jobs who are now faced with crushing uncertainty my job and income are secure (currently).
Sure, I am not traveling and that’s mildly irritating to someone who enjoys traveling, enjoys writing about traveling, and has built my life rhythms around frequent travel. But, that’s really not that big of a deal. In the grand the scheme of things who gives a rats ass?
Moreover, it’s also mildly irritating that I will have no shot at retaining my various airline, hotel and rental car statuses this year, but again, in the grand scheme of things that is so not important (more on this below).
Will I be affected in the long term? No doubt. Will my company achieve the same level of performance we did last year and will my bonus be dramatically reduced? Hard to know, but I’d bet it’s lower that’s for sure. Will I have to cut staff or perhaps even be cut myself? Perhaps. Will the travel slowdown delay the transformation efforts I have underway among my various organization thus slowing my personal career trajectory (and earning potential)? Maybe. Will my current pile of company stock take FOREVER to recover? Who knows, but I ain’t cashing it in tomorrow, that’s for sure.
So yes, I am personally affected, but let’s be honest, it’s NOWHERE near the pain that many less fortunate workers are facing and I am fully aware of that.
While I am not immediately impacted (in a severe manner) and possibly won’t be affected as severely as others (although time will tell), that is certainly not the case for other business travelers. Many business travelers are now out of job. That’s a fact. Moreover, many others are feeling an immediate pinch (or giant bite). Salespeople, for example (of which I am not presently, but have been in the past) are likely not going to retire as much quota this year. That means less compensation. And that hurts. It hurts right now. And for the whole year.
This story is being played out with various degrees of severity in many business travelers lives. I know. I’ve talked to them. Suddenly, that hourly field engineer who traveled 48 weeks a year has nothing to install and is furloughed for 6 weeks. Ouch.
Or the traveling non profit leader who roams the country drumming up donations.
Or the consultant who’s bonus is based on billable hours for onsite ERP implementations.
Etc. Etc. Etc.
So, yes, business travelers, in varying degrees, ARE affected by this crisis.
What doesn’t matter right now
I am going to digress a bit if you’ll excuse the rant. This crisis has certainly brought out the best and worst of us. In the domain of business travel I’ve noticed a few things that I’ve found particularly disconcerting:
- Many elite travelers (often business traveler) are hyper worried about their “status”
- There are still some travelers still traveling…wtf over!?!
- The amount of straight up angst and hatred directed towards the worker bees in the travel industry has been shocking.
I’ve been flabbergasted by some of the behavior of elite travelers (many who are also business travelers) who have been so focused on their elite status with airlines. This literally seems like a pointless thing to care about right (as someone who has more elite status all over the place, I can appreciate not having it…yes it’s mildly irritating). But, now? This is the time to worry about that? I think not.
Despite the massive business travel slowdown there are still many people still traveling for work. If we set aside those who are doing so for critical functions and just talk about others, it’s seems completely asinine that companies would allow people to do this. I’ve seen boasts from business travelers who are dismissive of the crisis and continue their travels full bore. You are no bigger than those jackasses in Florida. Sorry not sorry.
Lastly, travel providers have had various responses to the crisis. Some companies are totally nailing it. Others not so much. I think it’s completely fair to bitch and moan at the companies themselves and their leadership, but I am seeing a fair amount of angst directed at the staff. The person they are on the phone with (who is probably going to lose their job anyway). Not. Cool. At. All. Stop it…
Again, apologies for the digression, but it needed to be said. I know I feel better now. 🙂
If you need a little more rant to fill up your rant reserves here’s a longer rant on these topics: how not to be a total douchebag elite traveler right now.
Is there some good that’s come of this?
It’s hard to find a silver lining in all of this, but I think there are a few and I’ve highlighted a semi-random collection of potentially positive outcomes below – some of which apply to domain of business travel (including for the company, the marketplace and the business traveler) and some that are just interesting in general.
- It turns out you CAN actually do a lot of this remotely. Zoom. Hangouts. Webex. Wow. It turns out a LOT of this work can be done remotely.
- Even conferences! Yes, even them too. My company just ran a virtual conference and it went pretty good.
- Investments in remote worker tools are paying dividends in keeping many companies operational. I can personally attest that the investments we made in cloud, remote technologies, VPN, etc have PAID dividends for us.
For the Business Traveler
- Some extra time at home is a great thing. Turns out I like my home. It’s pretty nice…
- Hey, I have a family…it has been nice to spend some more quality time with the family. Something business travelers usually have in short supply.
- I can finally do those expense reports I’ve been avoiding. You know who you are…
- It’s a great time to buy stocks! I missed the last run after the great recession. Not missing this one.
- The environment is certainly appreciating the travel pause. The earth is breathing a sigh of relief.
- As a travel blogger (by night) my traffic has been CRUSHED like many others. But, I have used this time to position my blog for the future by going deep and hard on SEO, new content scheduled for later, etc. Very productive!
Is Business Travel Dead?
Let’s circle back to the fundamental question we asked at the beginning: Is business travel dead?
Not a frickin’ chance.
But that isn’t stopping people from ringing the bells for death for them. Take these posts on social media:
surprised. don’t you think a subset the 10s of millions of ppl working from home right now will opt for Zoom vs business travel? in my circle im hearing ceos looking at going remote permanently.— Justin (@moconinja) March 27, 2020
Business travel is gonna be cooked obviously, the Zoom era is upon us, same goes for conferences etc.— Leigh Drogen (@LDrogen) March 27, 2020
Industry source tells me he reckons business travel will be destroyed (after CV) as Video Conf becomes more accepted. 40% of inefficient planes like 777s/A330/A380 will be repurposed.— Alan (@AlanOakIE) March 27, 2020
My feeling is that sectors about to be affected are so integral to the overall economy that everything is gonna tank. International travel is already dead, high dollar business travel basically dead, the convention center economy is about to die, then hospitality after that…— Peter Pandemic (@BostonJerry) March 5, 2020
I could post 500 of these tweets where folks are claiming business travel is dead. They might be right, but I highly doubt it.
Will it change? Maybe
Business travel will never die. There are always reasons why employees need to travel somewhere. Here’s a few things worth noting:
- Things don’t install themselves. Wires need to ran. Monitors unboxed. Equipment staged.
- Nothing is more effective than meeting with a customer or client in person. Hasn’t changed for a hundred years. Won’t change. Trust is best built this way.
- People still want to see the boss – in person. Be it customers or employees, leadership still has to get around. People want and expect to see leadership.
- Conferences are still better in person. Virtual conferences are pretty cool, but they still don’t compare to a physical conference.
- Some training can only be done in person. Online learning can only go so far. Physical tasks are best performed in person (like installing a card in a computer).
- People like to travel and that includes business travelers. Don’t underestimate the fact that despite all of our bitching and whining many business travelers view traveling for work as a perk of the job. In fact, Millennials are leading the charge in the combination of business and leisure travel…aka Bleisure.
What will change?
I am not big in the prognostication game, but indulge me. Here’s a few (safe-ish…haha) predictions I am willing to make about business travel and related ideas.
- I predict companies are going to scrutinize business travel more than ever – for a while anyway. This is especially true in the short term as companies look to control the impact of this crisis and cutting travel is often a way companies try to do that. I expect it to ramp up hard in the back half of 2020 and to bleed into 2021 for sure.
- I predict an gradual increase in business travel over the balance of 2020 with it picking up a lot more steam in 2021. Will it return to pre-pandemic levels? Not at first. Maybe not even for at least a year.
- Counterpoint: Fellow travel blogger God Save the Points predicts a “cabin fever” travel bump this summer. He might be right. Will the same hold true for business travel? I’d say it’s possible – especially for sales teams scrambling to save their sales year.
- I predict a boom in working from home flexibility that has nothing to with travel. Companies have been whipsawing about with this for the last few years. Some companies like Aha are 100% virtual (worth noting they still do business travel). Other companies tried to force employees back into the office (Marissa Meyer and Yahoo anyone?). Many companies prefer to hire staff located near an office, although that’s changing. This crisis is definitely showing that certain industries can function just fine completely remote. This opens up a huge door to different talent pools. I believe employees will now DEMAND this as a significant perk more than ever and companies will likely not be willing to fight it, but also encourage it.
Will the travel industry recover?
Yes. The travel industry WILL recover but I suspect it will be leisure travelers that lead the way as companies (at least early on) are a bit slow to jump back into full fledged business travel especially after seeing the successes they did have with no travel.
As noted above, fellow blogger GodSavethePoints predicts a “cabin fever” bump in travel THIS YEAR. That certainly wouldn’t hurt.
Plus the airlines are getting huge bailouts.
Planes will still fly. Hotels will still exist. People will stay in them. Food will be eaten. Uber’s taken. Paris is still a great city to visit. And so is Salem Oregon. And NYC.
There will be causalities, no doubt. But the bigger question that looms large over this question is will the overall economy recover? If the economy sinks into a recession travel will continue to bear the brunt of cost savings measures.
The wild card here is how long the ripples take to settle down. All those small businesses that are shuttered or teetering. The drain of local tax revenues, etc.
So, yes, business travel is dead…right now. But long live business travel!
What say you? How have you been affected? What are your thoughts on the future of travel? Do I have it wrong? Drop us a comment below!
Not traveling and need something to do?
If you are like me and suddenly stuck at home when you are used to rolling your bag through the airport every week you might be looking for something to do or read. Here’s a few ideas:
- Mileage Runs
- Global Entry for Military?
- IRS Mileage Rate?
- United Airlines Baggage Fees for 2020
- REAL ID for Flying
- What are the TSA rules on Food?
- Cyber Security Travel Tips
- Can I travel with tweezers?
- Under 25 Car Rental Tips
- Useful Travel Gadgets
- Can I travel with vitamins?
- Can I travel with a razor?
- Can I travel with deodorant?
- Where can I buy a hotel mattress?
- Can I purchase a hotel pillow?
- What are the best travel pillows?
- How to use a status match
- What should I bring on my business trip?
- Checked bags vs carry on bags?