COVID-impaired business travel, is now trying to recover with new adaptations and innovations
Due to COVID restrictions, business travel or corporate travel had to be put on hold all across the world. The stakeholders in this segment have incurred huge losses but the experts opine that the sector is in the midst of a transformation for the better and will make a gradual comeback.
Anushruti Singh July 16, 2021
MORE IN Focus
Nobody needs to be reminded that the global pandemic has decimated business travel.
S.K Awasthi, a senior sales executive in a private trading company, used to undertake frequent intercity travel for his company. However, one year into the pandemic, he and thousands of others are now working from home and holding video meetings rather than travelling for work.
Face-to-face client discussions have been converted to virtual calls for most working professionals like him. As it is, many of them do not expect to travel for work anytime soon, and even if they do, they are unsure about how much they will travel.
Due to the restrictions imposed because of the pandemic, the business travel segment which combines corporate and SMEs travel has been hit the hardest, with corporate travel bearing the brunt of the damage.
Even if people are confident about travelling, business travel, as opposed to leisure travel, is low in these uncertain times. In addition to that, the advent of the second wave has once again pushed the travel industry into troubled waters. Given this scenario, the experts are predicting a slow pace of growth for the business travel segment, at least for the time being. At the same time, various new trends are now cropping up in the travel industry, influencing the diaspora of business travel and the manner in which it is conducted.
Pause on travel & tourism
The last decade has been marked by a sustained and significant growth in certain industries such as travel and tourism, hospitality, the aviation sector, and the other sectors associated with them. For instance, between 2009 and 2019, the number of passengers increased at an annual rate of 11.4 per cent on average. While domestic aviation being the real growth engine, grew with a CAGR of 12.6 per cent.
Passengers, businesses, and local economies have reaped enormous benefits as a result of this. However, as the world came to a halt due to the outbreak of the pandemic, so did travel, and it took everything down with it, including the travel and tourism industry and the aviation sector, severely impacting the growth of both.
According to the World Travel and Tourism Council, work travel accounted for 21 per cent of the $8.9 trillion spent on global travel and tourism in 2019. Business travel generates a lot of money in India as well, particularly for the aviation industry.
To put it in numbers, a CII and Hotelivate report estimated that the entire value chain associated with travel and tourism is likely to lose around Rs 5 lakh crore or $65.57 billion, with the organised sector alone likely to lose $25 billion.
Similarly, Indian airlines, which rely heavily on business travel for a large portion of their revenue, lost Rs 16,000 crore between April and December 2020, while airports lost Rs 3,000 crore.
At the same time, aviation consultancy firm CAPA predicts that Indian airlines will continue to lose money, with a consolidated loss of $4.1 billion or approximately Rs 3,553 crore in FY2022.
While tour operators and travel agents have lost approximately Rs 35,070 crore in revenue since 2020.
Almost all the travel and hospitality service providers, including the giants of this sector took the heat, experiencing an almost total wipe out of their revenues. For instance, travel packages provider Thomas Cook India’s (TCIL) consolidated loss stood at Rs 416 crore in FY21, while it was Rs 69 crore in FY20. Home sharing platform, Airbnb reported that its first quarter loss more than tripled to $1.7 billion. Similarly, MakeMyTrip, an online ticketing platform reported a revenue of $163 million, which is a decrease of 68 per cent in FY 2021 as compared to the previous financial year. The company earned $511 million in revenues in FY 2020.
Speaking to us, Chhavi Chadha, founder of luxury travel experience provider Bespoke, which also caters to the business travel segment, says that while they were still getting business from leisure travellers, the demand went down to almost zero in the business travel section, “Business travel has taken an impact and it shows in our revenue collection. Though we mainly have expertise in leisure travel, we also handle business travel activities such as outside corporate events or conferences. In figures, our pre-pandemic revenue share was 80 per cent from leisure and 20 per cent from business travel. But, since the outbreak of COVID, that 20 per cent has gone to almost zero,” she says.
She adds, “Despite the reopening of hotels and people resuming travel, we are having trouble in organising bookings for corporate meetings, as the government till now has not eased the restrictions on gatherings.”
Another player in the industry, Zingbus, also saw a temporary downfall in the number of its passengers.
“The overall demand in the segment has dwindled to around 40-50 per cent of the pre pandemic numbers.”says, Prashant Kumar, Co-founder & CEO of Zingbus, which is an intercity bus travel start-up
But on the flip side, Kumar tells us that after the travel restrictions were lifted, the company has managed to gain more market share. “We have seen our revenues getting tripled during the last one year,” he said. “Travelers are looking for safer means to travel and thus we are gaining market share from the incumbents,” he reasons.
Considering the fact that business owners and employees of businesses other than corporates, while travelling intercity, prefer buses or trains rather than catching flights, it has had a positive impact after the reopening.
Business travel is still in limbo
According to Investopedia, business travellers make up 12 per cent of airline passengers but are typically twice as profitable. In fact, they can account for up to 75 per cent of the profits.
However, the pandemic has dried up these profits.
Even though the government has relaxed restrictions and announced free visas, and there has been a slight increase in passenger traffic due to vaccinations as well, business travel has still not picked up since travel was resumed following the second wave of the mayhem.
For instance, even though the number of domestic passengers at Delhi airport has more than tripled, business travellers remained shy. The airport passenger traffic grew from around 18,000 per day in mid-May 2021 to over 62,000 per day at the end of June 2021. The numbers reveal that 48 per cent of passengers were in the ‘visiting family and relatives’ (VFR) category, followed by vacationing passengers. Only 19 per cent of the passengers were business travellers.
Which suggests that corporates will continue to stick to their WFH or bare minimum travel policies which will hurt the business travel segment further.
According to a survey by JLL, over two-thirds of global firms in Asia Pacific intend to limit business travel permanently. In another survey, Fortune 500 CEOs feel that business travel in their companies will never go back to pre-pandemic levels.
Harmeet Singh Bedi, Senior Director—Hotels & Hospitality Group at JLL India says that business travel, which has always constituted the lion’s share of the market, will continue to see a rather muted recovery.
“Business travel has definitely slowed down,” he comments.
He then tells us the reasons briefly, “However this is also owing to the lockdowns within India, the closed borders and a general hesitancy to travel as corporates and business houses are cautious and concerned about the well-being and safety of their employees amidst the rising COVID cases,” he avers.
As COVID-19 has put the health and safety of employees centre stage, it is impacting business travel as well, says Dr. Ruchita Verma, Dean, School of Hospitality Management at Narsee Monjee Institute of Management Studies (NMIMS) deemed-to-be-university. “Definitely, the current sentiment in terms of business travel is to wait and watch, due to the fact that international travel is yet to open up,” she explains.
She further adds, “Pre-COVID, there were no health restrictions for travel, but today, we have to be mindful of the COVID restrictions or requirements of the various states and even countries. Also, vaccination has emerged as a key requirement for international travel, especially with the European Union allowing member countries to decide on Covishield.” This has compelled Indian businesses to reassess their approach to business travel.
One of the biggest changes is—WFH mode and tech adoption
As technology has enabled employees to meet their work-related obligations remotely, it has caused a dramatic shift in corporate life. A survey by Booking.com found that 59 per cent of over 20,000 respondents agree that due to the increase in working from home and reliance on technology, business travel will be considered less essential than before.
“Technology adoption was fast tracked and advanced due to the pandemic. It has to a large extent eliminated the need to travel during the pandemic,” asserts Bedi.
With the dramatic resurgence of COVID cases, travellers are still concerned about the possibility of future outbreaks, which is the primary reason for avoiding corporate travel. Firms are also avoiding trips and using virtual meetups for their operations, keeping the well-being of their employees in mind. According to JLL India, this trend will continue for a longer period of time as more stringent due diligence is performed to assess the need and purpose of the travel.
Less travel leads to more savings
Until now, most firms are finding it difficult to relax their rules on coming back to work and travelling. But it’s not just health that’s at stake.
Due to remote working, the workforce has now become accustomed to meet virtually and crack deals online. Then why should there be a need for in-person meetings? According to experts this has also led to fewer travel incentives for employees and a reduction in travel expenses, ultimately leading to cost savings for companies, which is quite appealing to them.
A JLL India official says, “Businesses are still in a prolonged recovery period that is affecting growth and continuity. Cutting business travel is an easy way to minimise cost during this period. It won’t be surprising to see some business travel reducing permanently in post-COVID times.”
Meanwhile, the switch to online operations and remote sales pitching has led to heavy savings on travel expenses for the top five IT services companies-TCS, Infosys, HCL, Wipro and Tech Mahindra.
An analysis by UnearthInsight, a cognitive intelligence platform substantiates this trend.
Its research stated that the travel expenses of these companies reduced by around 75 per cent to $370 million in the financial year 2021 compared to $1.4 billion in the financial year 2020.
The report further estimates that the Indian IT outsourcing sector spent only about $750 million on travel costs in FY 2020-21 as compared to $2.9 billion in FY 2019-20.
Also, experts are of the opinion that firms, whether enterprises or MSMEs, are employing various strategies to ramp-up or transform business travel. This includes curtailing any extra costs, spending on travel only when necessary, reducing the number of people going on trips or combining several trips into one. Chadha, while agreeing about this trend, says, “I strongly feel that the volume of passengers travelling will be drastically altered in the business travel arena. For instance, instead of four people, it might come down to just two employees travelling. Also, I feel that the number of trips would also go down accordingly due to the bunching together of two or more meetings at a time.”
Confidence in digital travelling
If digital is a disrupting force, it’s a boon as well.
This is evidenced by the fact that technological solutions are useful and indispensable for business travellers during official visits. A SAP Concur survey discovered that business executives who travel, needed technology that could keep up with their needs.
For Indian business travellers, the most important mobile app features are traveller safety information (46 per cent) and the ability to view and manage their trip itinerary (31 per cent). Almost a quarter (24 per cent) want automatic notifications for out-of-policy bookings or expenses, and 18 per cent want to track and offset their carbon footprint.
Most of the respondents opine that when business travel resumes, Indian business travellers are most likely to use their company’s online booking tools. 25 per cent said they would use it to look for hotels or flights. The order of preference after that is as follows-their company’s travel agency (20 per cent), online travel agencies (20 per cent), and direct booking with an airline or hotel (19 per cent).
Besides aiding travellers, technology adoption is providing an edge to travel service providers and the start-ups in this sector as well. In fact, last year proved to be the peak year for the heavy digitisation of purchases in the service industries, excitingly from tier 2 and 3 cities.
Technology led, branded players like Zingbus have a strong online presence and are able to reach their customers digitally. Further, they can focus on customer communication around their pressing need for safety, contactless services, digital solutions, etc.
Talking about it, Kumar of Zingbus says that the current industry dynamics are such that start-ups like them are in a unique position to take advantage of the opportunities and build something very valuable, very quickly!
“The pandemic has led to higher expectations of hygiene and safety from customers. A contactless, hassle-free boarding process, amongst other technology tools have helped us to fulfil this post-COVID need beautifully. Once a traveller associates a brand with safety, they prefer it over others,” he says.
According to him, by simultaneously building tools for audits, boarding and demand management technology, players have been able to help the struggling traditional fleet owners to cope with their operational challenges with minimum manpower investment from their side in a post lockdown world.
Businesses are preferring local travel
In the future, people might only want to travel local keeping in mind the shorter distance, hence making it a safer choice for them.
That is why car rentals are generating more interest whilst travelling local according to Verma. “Since it saves travellers from the crowds and risks of airports and plane rides. Knowing that the car is clean and sanitised puts business travellers at ease,” she asserts.
At the same time, she feels that more than business travel, people are keener on leisure travel. “Domestic travel is waiting to explode, and already grass shoots are visible in the domestic market- from airlines increasing the number of their flights, to the occupancy of hotels improving,” she asserts.
That is why, according to her, the travel industry will first see a resurgence in domestic business trips, while international travel, on the other hand, will see slower growth due to travel restrictions.
New trends in business travel
There are several new trends that have surfaced in the business travel sector.
Bedi sums it up, “The new trends are staycations and business trips accompanied with a spouse or even children. Contactless payments and check-ins, doing away with buffet breakfasts and meals inclusive plans are a few of the trends being witnessed in corporate travel.”Harmeet Singh Bedi, Senior Director—Hotels & Hospitality Group at JLL
One of the many tactics that travel service providers are employing to woo customers is to give them flexibility in their services. “Flexibility is going to be the real gamechanger,” says Chadha of Bespoke.
“The travel service providers understand this, and they are applying that to the various services that they provide, such as the flexibility to cancel travel reservations at the last minute with a full repayment. That way, the consumers wouldn’t mind paying a higher cost for the ticket as they are getting that peace of mind…” she tells us.
Also, COVID insurance is another trend that has been introduced to India by the west. Considering the current scenario of the pandemic, anything can go wrong while travelling, especially if there is a medical emergency. Hence, various companies are now providing COVID insurance. “Consumers will choose to have COVID insurance because travelling during a pandemic entails the following —delaying or cancelling travel, hospitalization if they get COVID during the trip, quarantine and the covering of medical expenses. So, these are the trends which I feel are growing, especially in the business travel arena,” says Chadha.
Also, those travelling for business might want to extend their business trips. Booking.com in its survey states that almost two-thirds (63 per cent) of Indian travellers say that they would take the opportunity to extend any business trip to also enjoy leisure time at the destination.
On the other hand, the travel segment is transforming with the inception of online services.
Interestingly, the travel agent community has been transformed by this disruption too. Verma of NMIMS, while commenting on these changes, says, “Online travel agents are picking up the businesses of the offline ones. Also, direct booking with airlines and travel service provides has increased due to heavy promotions. This has cut down on the commissions provided to the online travel agents; similarly, many five-star hotels have transformed themselves as co-working spaces.”
Business travel will be back
“Business travel will bounce back,” says Bedi.
Other experts also concur with him but are unsure about when it will reach the pre-pandemic levels.
Bedi says that airlines have been the most impacted in the business travel segment. “Yes, they have been impacted but have still managed to get their share of business from leisure and other reasons for travel. But as the country opens up after the lockdowns imposed due to the second wave of COVID-19, the flights to key metro segments are at peak capacity (on reduced flight schedules) owing to the gradual uptick in business travel. This bodes well and hopefully will lead to increasing connectivity,” he asserts.
Chadha feels that business travel will pick up gradually. Meanwhile, her company is focusing on the leisure side of the business, from which their maximum revenue is currently being generated.
While Verma of NMIMS says that she is not sure about the timeline. “An exact timeline cannot be given as it is based on multiple factors, but with the speed of vaccinations in India and after overtaking the USA on the number of vaccinations, the nation would be ready to travel from the end of 2021,” she avers.
Weighing in with his concluding remarks, Bedi of JLL India says, “We foresee that the adoption of technology may reduce short business travel to an extent, but it will also increase the average length of stay during the travel. If we were to hazard a guess, we should be back to pre-COVID levels of demand by Q4 2023.”
Considering all these facts, the travel industry is still suffering on the back of the COVID induced financial slump. To mitigate their challenges, corporates should start encouraging vaccinated employees to travel. Increasing vaccine production and accelerating vaccination drives along with creating awareness among the general population about the benefits of vaccination, will also help.
Some of the other options for remedying the current situation are-the opening up of international air travel with the required restrictions, SOPs for the travel industry to revive their businesses, increasing liquidity in the market for economic revival, attracting more FDI to India and keeping a watchful eye on the pricing policies of the travel industry.