Back in April I wrote that there’s a portion of business travel that will never return. And I’ve offered all the reasons why business travel won’t be back soon. With offices bringing back only a portion of employees at a time, there’s no client visits that can happen. And large events won’t return for the foreseeable future, until the virus is no longer a meaningful threat.
However business travel is going to change. Remote work brings its own kind of business travel, with companies bringing employees in – at least in groups – to build and maintain a common culture. And we’re already seeing banks bringing traders and investment bankers back into the office in greater numbers.
I’ve been overall a pessimist about business travel, but Southwest’s CEO takes it too far, arguing that he “wouldn’t be surprised to see business travel languish for a decade before it gets back to 2019 levels.”
Sure, he’s signaling that with their relatively strong balance sheet and largely domestic travel exposure they’re better-positioned than rivals to withstand a long travel recession. But we’re already starting to see cracks in the ‘indefinite work from home’ model.
J.P. Morgan led the way growing their in-office presence from 25% to 50%, with Goldman Sachs quickly moving to match. They want to signal that they’re willing to make sacrifices for their clients and face time now is a way of signaling machismo against the threat of the virus. And this is a competitive position – when one business demonstrates to clients they’ll visibly deliver an in-person service, others have to match or lose business or at least be afraid that they will.
Tech companies may not take that position but for the most part they’re serving large numbers of relatively equal low value customers rather than winning a sweepstakes for high value clients and deals. But once investment banks are back and traveling, who comes next?
Gary, I don’t think anyone has any idea where business travel will be 6/12 months down the road the same goes for leisure travel. With more and more hot spots breaking out and now Israel shutting down for three weeks it’s not helping. One thing about SWA CEO he has been up front and very accurate as he sees things
I don’t think he’s wrong at all. He’s not saying it will be a decade before it returns but that it will be a decade until it return to 2019 levels.
I think as more companies have moved to teleconferencing and other modalities, they are seeing ways to cut business travel.
Will there be business travelers? Absolutely and it might not take a decade as you suggest but even if a company cuts discretionary travel by 10% I don’t see that changing any time soon.
I would argue business necessity travel with continue and some corporations might expand out their definition as the pandemic improves, but I also foresee it being years before it’s back to where it was in 2019.
As with everything, we all have opinions. MY OPINION is that the CEI of Southwest is calling it very conservative and obviously welcome being off on his call. As a strictly leisure traveler, 8-10 roundtrips per year always on Southwest, most of the places I go to are surging in cases if Covid-19 so I’m not going. Hotels that are open are also charging as if nothing is going on, seemingly in an attempt to recoup what they’ve lost in the past.
It will come back but it will never be the same volume again and there will be a lot of differences we can’t foresee.
The closest analogue to this would the the 2008 crash. Before that crash I flew 200k mile a year and all my international travel was in business class. In 2008 I think I might have done 25k. Most of the volume was back by 2010 but the company i worked for kicked everyone not in the c-suite down to economy.
We’ll see some travel come back but it will be probably exec level travel and critical customer calls. All the “let’s meet in NY to sort this out” meetings and random conference boondoggles are going away for a while. Problem is that’s where all the volume is.
They’re rattling the sabers trying to get more govt support
I agree with your view of biz travel trajectory Gary
As for tech companies – more than you think rely on big enterprise sales, which is old school relationships – biz dev at tech is the new pharma rep of the 90s / 2000s
@Shawn – as someone who is recently retired after almost 40 years in IT and a heavy traveler since the mid 80s I agree with you completely. I’ve worked for software companies, Big 6 (at the time) consultancies, national companies (CTO of 1 and CIO of 2) and as a director leading an integrators national practice. In other words I’ve been on practically every side of business travel and worked across the industry spectrum.
While necessary travel will return, and there is no substitute for face time, the definition of “necessary” will change. IMHO, you will still see sales people traveling with necessary support but more people will call in or use Teams/Zoom/Webex/etc to participate versus travel. Also, once large conferences are back (and they will be) I would expect companies to limit participation far more than they did in the past (maybe 15 people instead of 40). Travel cost is a huge expense area for many companies and has always been under review (to some extent). The fact that videoconferencing has been used a lot more and companies can see how it impacts sales/revenue will change their thoughts on travel. Even extremely profitable companies are always competing for the available funds and if travel can be cut that means money for new facilities/acquisitions/product development etc which will be much more beneficial long term.
Overall business travel volume MAY get back to 2019 levels but it will be a different mix of travelers and will take a long time to get there. Leisure travel, on the other hand, could be pretty much back to normal by end of 2021 (assume vaccine in place in 2021) with the major drawback people just not having the money to travel as much due to job loss/reduction.
Air travel pre-pandemic had become increasingly unpleasant. Although it is harder to build relationships remotely, a lot of pre-pandemic business travel involved meetings that could be done just as productively remotely. Lots of people, like myself, traveled because we thought we had to, not because we really wanted to, especially because flying had become more and more uncomfortable and unpleasant. I anticipate traveling again as the threat of Covid-19 recedes, but I will never again travel as much as I used to, in part because sitting in an airplane for any amount of time is generally one of my least favorite things to do.
I saw the same predictions in 2008-2009 that travel and the economy will take a decade to come back. Obviously not correct in heinsight.
People are itching to go places. See family, etc. This virus threat is normalizing to a degree that seeing the numbers starting to show it isn’t as big of a threat as it once was sold (the data collection and assumptions that it only spread in March was not correct). Travel will come back pretty quickly. I see this fall being relatively stable and as such I see thanksgiving and Christmas travel will be robust.