Global business travel is expected to reach two-thirds of pre-pandemic levels by the end of next year, with the revival led by Asia and the Middle East, after the sector was disproportionately hit by the Covid-19 crisis, according to the World Travel & Tourism Council.
While the segment will bounce back, the recovery will be uneven, making public-private partnerships even more important in the months and years ahead, the WTTC said in a report in collaboration with McKinsey.
"Business travel is starting to pick up. We expect to see two thirds back by the end of 2022," Julia Simpson, chief executive and president of the WTTC, said. "Business travel has been seriously hit but our research shows room for optimism with Asia Pacific and Middle East first off the starting blocks."
Business travel was particularly hard hit by the Covid-19 pandemic as companies slashed their budgets and turned to online meetings via video-conferencing technologies such as Zoom and Microsoft Teams. Demand for business travel has been slower to recover than leisure trips and corporate policies continue to influence business travel demand according to national travel restrictions imposed by governments.
Spending on business travel worldwide is forecast to rise 26 per cent this year and an additional 34 per cent in 2022, following a 61 per cent decline in 2020, according to the report.
The Middle East is leading this revival, with the region's business spending forecast to rise 49 per cent this year, stronger than leisure spending at 36 per cent, followed by a 32 per cent rise in 2022, the data showed.
Business travel is an important segment that generates global economic growth. Corporate trips are also particularly important for airlines and high-end hotels, generating a major chunk of their revenues.
Before the pandemic, business travel accounted for around 70 per cent of all global revenue for high-end hotel chains, while between 55 and 75 per cent of airline profits came from business travellers who made up around 12 per cent of passengers, the report said. The decline in business travel over the past 18 months has been a hit for airlines that depend on corporate travellers to fill their first and business class seats.
Business travel's recovery will be "heavily influenced" by Covid-19 vaccine rollouts and virus management strategies.
"There remains a highly uneven rollout of vaccines, and this large variation will influence how quickly travel rebounds," the WTTC said in its 27-page report.
Moreover, government decisions on travel restrictions will continue to have a "significant and immediate effect" on the industry, the organisation said. Policy shifts may also disproportionately affect certain markets that depend on international travel.
Looking ahead, business travel recovery will probably vary by region, country and industry.
Business travel may return faster in Asia than in many European and American markets, with recovery possibly taking place in phases depending on dominant industry sectors, the WTTC said.
Given spending patterns over the past year, industries such as manufacturing, pharmaceuticals and construction are early adopters of a return to business travel, the report showed.
"Given the significant disruption to the business travel segment, and its uneven recovery to date, business travel recovery will likely be bumpy," the WTTC said.
However, there are opportunities for travel and tourism industry players to look to domestic and leisure markets to stimulate growth and aid the recovery. For example, business travel providers looking for resilient growth, largely in domestic markets in the short-term, could consider ways to find new clients and diversify their geographic markets, according to WTTC recommendations. They could also adjust their revenue model by providing additional services and improve the digital services on offer.
Governments could also play a role in offering support to travel companies and business travel providers, for example by finding ways to help small businesses digitise operations or reskill staff.
Organisations involved in the MICE segment could play a role in providing new business models, ensuring the safety of existing models and developing hybrid strategies to host events, thereby increasing demand for business travel, the WTTC suggested.
Companies could offer virtual and hybrid alternatives to in-person events and diversify the use of venues beyond corporate events. They could also increase leisure offerings to take advantage of this growing trend, it said.