Deloitte issued a report about the current state of corporate travel demonstrating its trajectory to return to 2019 levels, however, there are two points that demonstrate the outlook for corporate travellers may not be as it seems.
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Deloitte’s Corporate Travel Outlook
Management consulting giant, Deloitte, issued a report regarding the state of corporate travel and the segment’s potential for growth in 2022 and beyond. Overall, the pandemic and its lagging effects have cut corporate travel spending significantly from 2019 levels. However, as the world recovers, so too is the return of the business trip.
That said, Deloitte shows just 36% of 2019 spending has returned this year. The study surveyed corporate travel management professionals and matched actual spend with projected spend. Most business travel programs spent far less than anticipated and a cooling of that return is speculated by researchers.
“When Deloitte fielded its first corporate travel survey3 in June 2021, corporate travel spend sat around 10% of prepandemic levels. But a rebound appeared to be just around the corner. Vaccines had been widely available in the United States for a few months and many companies planned to bring employees back to offices by the fall.
A month later, delta was named a variant of concern, and many big companies pushed back their plans. The omicron variant followed delta, bringing further disruption. Corporate travel spend increased throughout the third and fourth quarters of 2021, but not at the rate that travel managers expected. When surveyed in June 2021, 34% of corporate travel managers expected to reach half of 2019 travel spend by the end of 2021. However, only 8% did[.]” – Deloitte
Metrics
The study used the sentiment of corporate travel managers and matched them against receipts for the same period. While many expected travel options to return sooner than they did (the US only cut its COVID-19 negative test requirement today), even following that return there are a few issues with the expectation of the report and its respondents.
First, the measure is based on corporate travel spending but not on net trips booked. Here’s why that matters. In 2019, hotel and airfare rates were far lower than they are now. Some hotel chains are reporting a 25% surge in pricing for room rates, others are still higher. Airfare has been at nosebleed heights for several months and looks to continue at the same elevated level. If the measure is based on how much businesses spent on travel, but all travel costs are higher than 2019 prices, then a return of 36% of 2019 levels doesn’t mean 36% return of corporate travellers, it means that the recovery is closer to 25-27% (assuming a 25-30% premium on rates.)
That matters because the number of travellers is more significant than how much businesses are paying for those trips. Why? Because general inflation means those numbers do not matter as much as they did in relation to pre-inflation numbers. Businesses may be spending 36% of what they did in 2019 on travel, yes, but they are also likely charging more for their products than they were in 2019 as well.
Impending Recession
A topic that has become more and more important in recent months is an impending recession. Projections do not address any potential for an economic downturn that would again suppress the entire travel sector but most substantially businesses that tighten their belts. In an upcoming post, I quote Secretary Yellen who believes the US has a path through the current economic headwinds and does not believe that the US is heading for a recession.
Many other experts disagree. The world’s top banker, Jamie Dimon, CEO of JP Morgan Chase, is one such detractor:
“You’d better brace yourself,” Dimon told the roomful of analysts and investors. “JPMorgan is bracing ourselves and we’re going to be very conservative with our balance sheet.” – CNBC
Dimon is not alone. The Conference Board surveyed CEOs, 68% of whom believe the economy is headed for a recession, 11% of which believe that it will be a hard landing (protracted, deep recession.)
With more than two-thirds of CEOs bracing, preparing, and anticipating a slowdown, non-essential business travel will take a backseat quickly. CEOs that managed to run businesses on just 10% of 2019 travel will return to this especially as costs remain high.
Conclusion
Corporate travel may be returning (without the pre-pandemic level of service) and though the concern is no longer about keeping travelers safe, confidence should be shrinking not increasing. Using 2019 numbers (gas was nearly half of what it is today) is a poor metric to judge a return of corporate travel on any level. Additionally, failing to include recession pressures is a further sign that even these modest increases and comically-high projected growth figures (nearly double current spend in the next 12 months) are unlikely to come to fruition.
What do you think? Is corporate travel returning or is it simply suffering higher prices and flawed data metrics?
Are these stats global or just the U.S.? I think that’s pretty important as if just the U.S. that is somewhat shocking. However, if this is global business travel of course we would see those numbers. China and Japan being two examples greatly affecting this. I tend to think that the U.S. and Europe are getting much closer to 2019 levels than what’s being presented in tis study, especially the past 8 weeks from what I am seeing. And with the testing requirement gone today that will only increase.
As to the recession, people keep talking about it, but, oddly, people keep spending. Consumers are driving the economy in ways we have never seen before and it’s hard to see when it will stop. If there is a recession it’s because consumers have nothing left to buy given the supply shortages of so many products. As much as everyone complains about $5 a gallon gas, the highways are full, travel plans are being made, and there is little in the way of a slow down. Maybe this winter, sure, but there is a lot of money being made all the way around right now to throw around…if there are enough things to buy, places to go, and homes to improve.
And let me add, when have we seen a recession with unemployment at these kind of low levels? And companies struggling to fill openings? I don’t know the answer, I’m curious.
I almost think that all these “experts” are screaming “recession” in a hopeful way as they suddenly realize they have to actually pay people living wages to attract workers, essentially cutting into the pockets of their billionaire clients who are none too happy about it. They are all scared because trickle up is proving to be far more resilient than anyone imagined in keeping the entire economy buoyed – not just the stock market and the wealth of billionaires. Their reaction is to scream recession so as to try and stop it all, because, ya know, the madness of having to actually pay people more than $12 an hour.
The recession is real and the problem is that people still didn’t realize for a couple of reasons. One, they are still numb from the pandemic. They didn’t spend money traveling so now they have it to spend. Second, this administration gave them the false impression that they will be taken care off. Free money will continue to flow. Wrong!! That is over and that is what has caused this inflation. People are spending like there is no tomorrow. Flights are full, gas stations are packed, stores are crowded. I feel bad when these people wake up to the reality.
I hardly imagine anyone is living in a fantasy that more free money (that both administrations gave) is coming again. And spending gleefully waiting on a stimulus check that no one has discussed in Washington in almost a year.
So, what if you’re wrong? What if, as actual numbers keep showing, that low unemployment, increased wages, and better job opportunities are building the economy the other way around? Sure, corporate profits may not be as wild, the markets may settle somewhat, and billionaires might have to notch it down to a 110 ft yacht vs 140ft. But in the end prosperity is starting to perhaps flow to everyone in actually being able to make living wages, have choices in where they wish to work, and feel more confident in buying that new washer/dryer or taking their kids on a trip to Disney. Maybe that’s the “wake up” call that’s coming? That we are surprisingly, even in an incredibly high period of inflation (that is partly to blame on Russia and fuel issues) doing pretty darn good and potentially building a better overall society.
Good luck with that. I have friends that work for a corporate travel company. Corporate travel is nowhere near what used to be. Add to that that many companies are telling employees to save money because Brandon’s recession is nothing anyone ever seen.
The problem is that the Deloitte numbers for this year are just wrong
1) Total hotel revenues are already above 2019 levels
2) Weekday revenues (proxy for business travel) are rapidly reaching 2019 levels
There is no way business travel is 64% below 2019 levels right now in 2022.
As far as a recession goes, technically GDP declined in 1Q and barely grew in 2Q; yet in Q2, travel spending surged, breaking the historical correlation. It is entirely possible you get a goods slowdown / recession while travel continues to recover, especially as upper end consumers still have a ton of spending power and as corporations try to catch up on conventions and other meetings forgone the past couple of years.
I just clicked through to the report – Deloitte is saying they expect “corporate travel spend” to be 36%, 45% and 55% of 2019 levels in Q2, Q3 and Q4 of 2022. That is a joke. When we look at actual airline and hotel revenues, they report business travel at close to 90% of 2019 levels now (leisure travel is well over 100%). If business travelers are traveling right now (which os 2Q), who is filling hotels in New York right now at $400 a night?
Anthony, you’re the joke here. How about some citations for your spurious anecdotal claims. Sorry, I trust Deloitte more than you
Sounds about right to me. I work for a large accounting and consulting firm (not Deloitte). Billable travel is nowhere near where it once was – our clients don’t want to pay for us to travel when they know we can get work done without being on site. Even more so for non-billable (admin) travel. We used to have lavish in-person conferences, trainings, etc. There are zero plans to bring those back. Sad but true.
Andy – just because you aren’t traveling, doesn’t mean others are not traveling. Hotel revenues have been above 2019 levels for a while, which weekday travel picking up in May and June.
https://www.cnbc.com/2021/06/01/travel-bookings-are-rebounding-as-hilton-has-best-night-since-the-beginning-of-the-pandemic.html
https://str.com/press-release/str-us-hotel-results-week-ending-21-may
https://str.com/press-release/str-te-upgrade-forecast-full-us-revpar-recovery-2022
Well, if we are going on personal experiences as data, I am traveling more than I ever have in my career. Demand is through the roof and I can barely keep up moving around the world. Flights are full, and it’s not just leisure travelers anymore (though still the dominant) as hotels are not at all like last year in being nothing but families…it’s more evenly split now with obvious business travelers. I also book functions and hotel banquet room demand for conferences are making meeting space very hard to find. I am in OZ now and the only way out I could find back to the U.S. on an award ticket is via BKK/Muscat/LHR….forget any other routing on an award with even paid tickets topping 7K on the Pacific routing. I had to buy an SQ ticket to BKK and, as my meetings here keep expanding, have had to change it twice.Flights from BNE in the premium cabins are so full I had to settle on a not ideal day as every other day all the flights were completely sold out, including via SYD.
So, yes, maybe you and your company have scaled back. But it appears to me that a significant portion of the world is starting to move again and doing so with gusto. And it’s not just Bob, Marge, and the kids like last summer. Sure, it’s not 2019, but as capacity increases and airline meltdowns calm, we could very easily see this fall getting pretty darn close to it.
Here is the latest data from ARC – Airlines Reporting Corp. IATA may have the same air data –
https://www2.arccorp.com/articles-trends/the-latest/coronavirus?utm_source=homepage-card
@Lisa – Great link! Every commenter on here should take a look. The one caveat that remains is that when it comes to sales, it’s showing the sales variance for ALL tickets, but a far greater share than normal is leisure (as also shown.) The stat that we don’t have is that relative to 2019, because ticket prices across the board are so high, achieving 36% of travel budget compared with the base year would not represent a return of 36% of corporate travel. I speculated that costs were up 25-30% in another post on the same day and CNBC confirmed that on June 2nd, 2022: https://www.cnbc.com/select/airline-ticket-prices-are-up-25-percent-why-and-how-to-save/
So corporate travel with respect to the number of corporate trips, or the number of corporate travelers is really closer to 27% of 2019 levels. And further, it could be lower than that based on the fact that a 25% elevation of all trips will still price leisure routes cheaper than business routes. What we really need to know is how many fewer net corporate travelers are moving right now, simply because when prices change and leisure demand drops we will have a better idea of where corporate travel truly stands in its recovery and whether a 30% increase in a year is possible.
Kyle – again, you are badly misreading Lisa’s data, which is itself an incomplete picture of business travel.
_ The data says as of the most recent weeks, *tickets sold* were *down* about 30% relative to 2019 in the corporate sector – meaning they represent 70% of the volumes of *tickets sold* in 2019, 30% range.
– This is travel agent data – this often misses business travel booked direct, which makes up a growing share of independent business travel
According to Hilton, in *March*, business travel volumes were down about 9% from 2019 levels. It is certainly improved in April, May and June.