Are business trips a thing of the past?
The coronavirus pandemic forced many companies to halt business travel almost overnight. The economic consequences for airlines and hotels have been dramatic, leaving many wondering if corporate travel can bounce back.
In 2019, scores of domestic and foreign guests travelled to Berlin to attend conferences and conventions, like the annual international tourism trade fair, ITB. Their visits translated into considerable revenue for the transportation and hospitality sector. Estimates by Germany's business travel association (VDR) show that in 2019, German companies spent a record €55 billion ($61 billion) on business trips, sending 13 million employees on work-related trips.
The following year, business travel all but ceased. In a bid to contain the coronavirus, countries around the globe shut their borders. Countless conferences and trade fairs were cancelled or replaced by virtual events. According to VDR estimates, in 2020, German companies reduced business trips by a staggering 80% compared to 2019. Last year was similarly grim. Germany's transport and hotel sector have taken a beating.
Airlines adapt to drop in corporate travel
Prior to the pandemic, Lufthansa, Germany's biggest carrier, earned half all revenue from business trips. Selling business class tickets has been highly lucrative for carriers, says professor Yvonne Ziegler, an aviation expert at Frankfurt's University of Applied Sciences. So lucrative, in fact, that some airlines, including Lufthansa, have relied heavily on corporate travellers and afforded less attention to holidaymakers.
Now, major airlines like American, Delta, Emirates and Finnair have reacted to the sudden drop in work-related travel by removing business class berths from aircrafts and replacing them with premium economy class seats. These boast additional leg room and better service, albeit at a higher ticket cost. Airlines, in short, are looking to woo leisure travellers willing to spend extra cash for extra comfort. It's a move born out of economic necessity. "Very few conventions and conferences are being held at the moment, so few business travellers are flying, which means reserving excess space aboard aircrafts makes no sense," explains Ziegler.
While she expects business travel to make a comeback, Ziegler thinks recovery will be slow. Still, she is cautiously optimistic as ever more countries are lifting restrictions for business travellers.
Hotels take a hit
Tobias Warnecke of Hotelverband Deutschland, an association representing most of Germany's large hotels, says his industry does not track whether hotel guests are traveling for work or pleasure. Even so, he estimates that business travellers typically account for 20 to 25% of stays at German hotels. That makes it difficult to calculate exactly how hard the drop in work-related travel has hit the sector. What Warnecke can say with certainty, however, is that the past two years have been "catastrophic " in financial terms. Indeed, figures by the German Hotel and Restaurant Association (DEHOGA) show that revenue in the hotel sector in 2020 and 2021 was almost half of what it was in 2019.
ACCOR, a major hospitality chain operating some 350 hotels in Germany, has had a tough time these past two years, confirms Ben Brahim, who runs its German operations. Many ACCOR establishments, he says, are geared towards conference guests and business travellers. One strategy to cope with the shortfall in corporate clients has been to target local companies and office workers by renting out hotel rooms as temporary workspaces. Remote working, Brahim says, has driven up demand for such service. Besides, he expects corporate travel to pick up this year. The need for interpersonal business meetings remains, he says.
Building relationships and trust
Claas, a German manufacturer of agricultural machinery that maintains production sites around the globe, says most of its clients are abroad. That means traveling for work will remain essential for the company, spokesman Wolfram Eberhardt told DW. "Digital meetings can't replace everything," he says. Face-to-face meetings remain crucial for building momentum and launching new business projects, he says. The same holds true when it comes to meeting potential clients at fairs to showcase products. Customers want to know who they are dealing with and buying from, Eberhardt says.
VDR Vice President Inge Pirner concurs. She is confident work-related travel won't disappear in the long-term. She says interpersonal meetings are crucial for companies eager to win over customers and build mutual trust.
What will the future bring?
Back in 2020, Microsoft founder and philanthropist Bill Gates predicted that corporate travel would not return to pre-pandemic levels. He projected that 50% of business trips would disappear long-term as enterprises now have a "very high threshold " for sending staff packing.
This view is echoed by the VDR, which expects the overall volume of business trips to significantly decline in Germany. A reduction in work-related travel, after all, saves money, time and helps reduce a company's carbon footprint.
That said, corporate travel won't be phased out entirely, as it remains key to building trust, fostering relationships, and promoting products. Moreover, new hybrid formats combining business and pleasure — so-called "bleasure" travel — are expected to grow in popularity. Similarly, there will likely be more people choosing work remotely and become so-called digital nomads.