Spending on corporate travel is likely to be lower than before the pandemic as US and European companies weigh return on investment and sustainability goals amid continued flexible working arrangements and increased use of technology.
New YorkAnd April 11, 2023 /PRNewswire/ —
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- Corporate travel spending in the United States and Europe it is expected that Exceeded half of 2019 levels in the first half of 2023 It will rise to two-thirds by the end of the year. A full recovery after the pandemic is likely by late 2024 or early 2025.
- Live events are set to make up a significant share of corporate travel, advancing from the fifth largest driver of increased spending in 2022 to the number one spot in 2023. More than half of the travel managers in both the united states and Europe We expect industry events to spur travel growth this year.
- International flights will make up a larger part of the recovery this year: The international share of travel costs for US companies is expected to rise From 21% in 2022 to 33% in 2023.
- Amid increased workplace flexibility and use of technology, Travel for clients outweighs travel for team building and internal meetings.
- Travel buyers are Renegotiate contracts with suppliers and balancing projected lower flight volumes with higher rates for hotel rooms and airfares.
- A third of US companies and 4 in 10 European companies say they need to Reducing travel per employee by more than 20% to achieve the 2030 sustainability goals.
Why is this important
Although leisure travel has reached pre-pandemic levels, the return of corporate travel has been slower. A variety of factors appear to influence the decision to travel for business including employee safety, the client’s interest in meeting in person, the value of attending a conference, and whether virtual conference platforms can replace travel. Although concerns about the pandemic and testing regulations generally waned in the second half of 2022, financial concerns appear to continue to create uncertainty for the sector. The third edition of Deloitte’s travel study, Navigating Towards a New Normal, examines why and when employees can be expected to travel for work, as well as the dynamics that create adverse opportunities for the sector.
The study is based on a survey of 334 executives in the United States and Europe with oversight of the travel budget. Between February 7 and February 23, 2023.
International travel and events account for a significant amount of the expected growth in 2023
While a full recovery to 2019 levels appears possible by late 2024 or early 2025, accounting for inflation and the lost gains will likely leave the corporate travel market 10% to 20% smaller than it was before the pandemic. Amid rising airfares and room rates, the number of flights is likely to be delayed even further. However, international travel and live events are set to account for a large portion of the expected growth in 2023.
- Corporate travel spending across the us and Europe It is expected to rise to more than half (57%) of pre-pandemic levels in the first half of 2023 and rise to 71% by the end of the year.
- Most of the companies surveyed – 71% of US companies and 68% of companies located in Europe A full recovery in travel spending is expected by the end of 2024.
- US respondents expect international flights to account for 33% of 2023 spending, up from 21% in 2022 and similar to 2019 levels.
- The main reason reported for international trips involves networking with clients and prospects: in the US, key drivers are networking with global industry colleagues at conferences and building client relationships; in EuropeCustomer project work, followed by sales meetings are the biggest reasons for trips outside the continent.
- While high travel prices are the most important factor holding companies back from travel, live events are poised to be the main driver of demand for business travel, jumping to the leading cause of international travel from the United States in 2023, up from fifth in 2022.
- With events in mind, companies are adjusting their internal plans: half a report breaks down large gatherings into smaller, regional, and physically connected events, and 44% adopt a blended approach. Moreover, 42% of those surveyed in the United States and 54% in Europe Plans to incorporate more clients into internal events.
- The majority of companies surveyed (70%) strategically assess and evaluate the potential outcomes of business travel, such as revenue generation, along with side effects of cost, health risks, and emissions.
Workplace flexibility and technology continue to transform the trajectory of business travel
Although pandemic concerns about travel have decreased overall among those surveyed, the ability to take advantage of technology in place of trips, ultimately reducing costs, still influences the growth trajectory of business travel. According to the survey, technology can underpin almost every business a travel service needs — to some extent. In addition, the rate of working from home in the future is expected to be 3.2 times higher than before the pandemic. Together, these factors will continue to influence how and when employees travel for work.
- Business leaders weigh the benefit of personal interactions, with internal trainings and team meetings (44%) rated the most fungible through technology, compared to building customer relationships (11%) and customer acquisition (7%).
- Two-thirds (67%) of respondents said that their employees travel more to cities that are within driving distance of their location.
- Trips to company headquarters by transferred employees are also on the rise, most (70%) paid for in whole or in part by the company.
- American companies are increasingly incorporating non-hotel accommodations, including private rentals, into their travel policies. Nearly half (45%) of those surveyed have non-hotel accommodations in their corporate booking tools, up from 9% last year, and 57% have agreements with certain branded apartment or home rental companies, up from 23% in 2022. Only 10% of US businesses surveyed do not pay for non-hotel accommodations, down from half (49%) in 2022.
quote key
“With business travel still on the rise, rising costs of air travel and hotels will likely slow the increase in trips made. As business leaders take a strategic view of their travel plans and the industry adapts to the new normal, conferences and live events in particular prove they can Providing effective opportunities to connect in person, especially as remote and hybrid work remains a staple in the corporate world.”
– Eileen CrowleyVice President of Deloitte & Touche LLP and the leading transportation, hospitality and service company in the United States
Contract negotiations aim for travel costs of the right size
It is likely that companies have made significant cost savings from not traveling during the pandemic. Now, after three years of declining travel, high room and room rates driven by inflation, many companies are working to accommodate the changing expectations of their employees.
- About half of respondents (51%) report that employee expectations for luxury services such as first or business class airfare and luxury hotels, as well as the need for last-minute (45%) or flexible bookings (52%), drive costs. higher.
- When negotiating contracts with suppliers, about 1 in 5 (19%) companies say hotels are less accommodating on prices because they expect less volume, and 11% report the same for airlines.
- Regionally, 63% of US travel buyers surveyed reported favorable airline pricing based on positive volume expectations, compared to 54% of those in Europe.
- Higher rates less affect the number of trips taken: 45% of companies say they reduce frequency to control costs, down from 72% in 2022. Instead, they focus on mitigating the cost of a trip with cheaper accommodation (59%) and low-cost flights (56%).
Sustainability drives some travel decisions
Travel in general is attracting attention as a significant contributor to carbon emissions. However, 49% of businesses indicated that choosing sustainable service providers raises costs. As a result, business leaders are forced to weigh the cost and environmental impact of trips.
- A third (33%) of US companies and 40% of European companies surveyed said they need to reduce travel per employee by more than 20% by 2030 to meet sustainability goals.
- To achieve sustainability goals, 42% in the United States and 45% in the United States Europe They say they are implementing a structure for allocating carbon emissions budgets to teams along with financial budgets.
- The sustainability efforts of travel suppliers are reaching out to travel buyers to varying degrees. Mandatory use by respondents to the survey is low, however, about a third take into account factors such as sustainability certifications and hotels (32%), airline use of sustainable fuels (31%), or the availability of a car rental fleet for electric vehicles (27%) To calculate the carbon footprint of the trip.
quote key
“The resurgence of corporate travel continues to take a tortuous path as both business leaders and travel suppliers look not only at rising costs but at the necessity of certain in-person meetings amid the increasing use of technology to balance financial and environmental goals. The long-term view of their relationships with travel buyers and networking needs to be With them on the progress of sustainability, they are better positioned to deal with the ongoing shifts in travel priorities.”
– Mike DaherVice President of Deloitte LLP and an uncertified leader in the transportation, hospitality and service industries in the United States
Connect with us on Twitter at @employee Or on LinkedIn: Eileen Crowley and MikeDaher.
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Source Deloitte