We’ve had four days in the past week where the TSA reports more than half a million people clearing airport security checkpoints. That’s down from 2.3 to 2.7 million a year ago, but way up from 87,000 a day at bottom.
That’s mostly led by domestic leisure travel. Business travel, on the other hand, is a long way off – and likely won’t return to anything near normal this year. Here are 9 reasons why.
- Businesses are conservative. Businesses will hold off sending employees out on trips longer than individuals will hold themselves off from doing so. That’s because individuals can assess their own risk, but it’s tough to impose risk on someone else. That’s true both for ‘duty of care’ reasons and some sprinkle of fear of liability (even though it’s tough to identify where any particular person contracted the virus).
- Offices aren’t fully open. Business travel can’t recover until offices re-open at full capacity. People you need to visit aren’t there, and when they are they aren’t taking visitors.
- Remote workers don’t travel now. When offices aren’t opened back up at full capacity remote workers aren’t traveling to headquarters either. So that’s one segment of business travel that’s completely off the table.
- Conventions are a long way off. Conferences and major events aren’t happening any time soon, 100/1000/50,000 person indoor events will be the last to return. Moreover those get planned years in advance. And it only makes sense to go to one when you know everyone else is going. It’s not the sessions themselves that really provide the most value, it’s the in-person time with high value prospects and other relationships. So we need to wait not just for it to be possible to hold an event. We need to wait for events to be confident everyone will show up, since until most everyone does no one will.
- Some switching to online meetings. There were huge inertia barriers to getting people set up and comfortable with taking meetings online, those have been overcome. So we’ll see some meetings that used to be in person done online, fewer one-and-done meetings people used to fly to. This isn’t a claim that in-person doesn’t matter anymore. Rather there are meetings at the margin that can now be done electronically now that everyone has overcome the transaction costs to make that possible. That means less travel than before not no travel. This effect persists and is largely permanent.
- Businesses can send fewer people. Another effect of zoom et al is businesses no longer feel held hostage to airfares, and won’t pay for as many people to take last minute trips ‘at any price’ since there’s a second-best video option vs no option at all. That may limit travel along some margin, but also limits the ability for airlines to charge higher last-minute prices.
- Most international travel is cumbersome. Borders remain closed, and while leisure travelers may be willing to go through testing and quarantining to some extent businesses aren’t likely to either ask employees to do it or find it as worthwhile – it lengthens trips and adds expense, and businesses have typically been unwilling to make travel all that much onerous. This takes away international premium cabin demand, which in turn limits the international flights airlines are willing to run, which in turn makes flight schedules less convenient and therefore more arduous for business travelers, and limits international business travel even further.
- Recession. On March 6 I said a recession had already started. The National Bureau of Economic Research now says the business cycle peaked in February and then began its recessionary decline. Even if we’re moving up from the bottom we’re well below the economic trajectory we were on at the start of the year. The economic cycle alone suggests less business travel.
- Making up losses and paying down debt come first. Businesses are going to be working to rebuild their balance sheets. You might think it’s important to put people on the road, selling, generating business but travel budgets are an easy place to cut costs.