Just over two years ago, Romano Nickerson was traveling three days or more per week for client meetings and attending four conferences a year. But his road-warrior lifestyle came to a screeching halt in the early days of the Covid-19 pandemic. Nickerson, a 48-year-old principal in the Colorado-based architectural consulting firm Boulder Associates, soon discovered that nearly all of his in-person meetings could be handled virtually.
Today Nickerson says he is “treating an in-person meeting as being much more precious than it was in the past, when it was sort of just this default.” Just back from his first business trip since March 2020, he does not expect to go back to living out of a suitcase. Nor does he believe that his 150-employee firm will revert to pre-pandemic business-travel habits anytime soon. “We still have a policy that allows folks to follow their own comfort level,” Nickerson says. “Right now, there is still very, very little business travel going on. I would estimate maybe a dozen trips per month when it was probably four or five times that at its peak.”
The challenge for the business-travel sector, of course, is that even if Covid eventually goes away, Zoom will still be here. Nickerson is but a single drop in a sea of executives reassessing the value of work trips in a new normal where web conferencing is not only essential but, for many in the workforce, preferred. That trend is not going away, and it’s spawning new catchphrases like “bleisure” and “return to base.” According to Morning Consult data, the percentage of frequent business travellers who say they’ll never return to the road has ticked up from 39% in October 2021 to 42% in February 2022.
At a New York Times event back in November 2020, Bill Gates sent a chill through the travel industry when he predicted that more than 50% of business travel and more than 30% of days worked in offices would go away permanently. “Now that it’s not the gold standard to say, ‘Yes, you flew all the way over to sit in front of me,’ and that you can do the virtual connection, it will be a very high threshold for actually doing that business trip,” the Microsoft co-founder said.
In 2019, business travel had injected $334 billion dollars in spending into the U.S. economy and supported 2.5 million jobs, according to the U.S. Travel Association. If Gates were right, the American economy would stand to lose at least $167 billion dollars per year post-pandemic.
Flash forward 16 months and Gates’ assessment is now accepted, more or less, both inside and outside the travel industry. “The pandemic has led to extensive use of videoconferencing and virtual meetings, and many companies expect virtual work to persist over the long term,” concluded the U.S. Bureau of Labor Statistics in a February 2022 report forecasting employment demand in various industries. The labour bureau predicted that many types of business trips would be replaced by virtual meetings, though some in-person trips – for instance, sales pitches and trade conferences – would return to pre-pandemic normal.
While few people expect business travel to disappear completely, the sector is going to look very different on the other side of the pandemic. For starters, those boomerang trips that waste a day travelling for a one-hour meeting? “Definitely gone, and they’ve probably gone for good,” says Matthew Parsons, who covers business travel and writes a weekly Future of Work Briefing for Skift, the travel intelligence company.
“The bigger the company, the harder they are going to be on those one-day trips,” says Parsons, noting that corporations are scrutinizing travel expenses more closely now. “The travel management side of things is moving more toward the CFO than anyone else. The last two years, people have shown that they can work pretty well without travelling a lot,” he says. “So the finance department's going to be really watching company time on travel in the future.”
Opportunities in the New Normal
Few travel companies have navigated the pandemic as nimbly as Airbnb. By May 2021, the company’s CEO was already sounding a lot like Bill Gates. “I think that traditional business travel is never going to return the way it was,” Brian Chesky told CNN’s Poppy Harlow at the time. “The bar is higher to get on a plane to do a meeting. We’re realizing how many things can finally be done remotely.”
Chesky and his team noticed that the average Airbnb rental period had lengthened dramatically during the pandemic. That trend, they concluded, was part of a bigger picture: for many customers, the lines between living, working and travelling were blurring. “We started seeing these shifting trends in Summer 2020,” says Catherine Powell, Airbnb’s global head of hosting.
“As lockdowns lifted, many people found themselves still able to work from home but not tethered to an office or even a specific location. So they searched for different homes, ones where they could take their families, their pets, and where they could continue working remotely. And they stayed for weeks at a time. We believe these longer stays and flexible living are here to stay.” In other words, Airbnb saw early on that remote and work-from-anywhere was not a temporary blip but a fundamental shift in how people would travel from now on.
Six months after Chesky’s CNN interview, Airbnb had fully embraced a strategy focusing on delivering guests more flexibility. “We made over 150 upgrades in 2021, rolling out features like flexible searching and a tool to test the WiFi speed called Verified WiFi, and other tools for our hosts to update their spaces to meet the new demands of today’s travellers,” says Powell.
And as remote work became more permanent at many companies, Airbnb started collaborating for solutions. “For example, during the pandemic, Salesforce introduced Success from Anywhere, which gives employees flexibility where, when and how they work,” says Powell.
“Salesforce employees enjoy the new flexibility they have, but also still want opportunities to come together and reconnect safely with their teams. With Airbnb, Salesforce employees can travel to an offsite or another office location and stay at an Airbnb of their choosing.”
Last month, Airbnb posted a record $1.5 billion in Q4 2021 earnings and announced that 2021 was the best year in the company’s history.
“Nearly two years into the pandemic, it's clear that we are undergoing the biggest change to travel since the advent of commercial flying,” Chesky said on the earnings call. “Remote work has untethered many people from the need to be in an office. And as a result, people are spreading out to thousands of towns and cities, staying for weeks, months, or even entire seasons at a time.”
The Pivot to Leisure
Hotels have also taken notice of a significant shift, but it’s different from the one Airbnb is capitalizing on. The American Hotel and Lodging Association (AHLA) has seen business travel’s share of room revenue drop during the pandemic, from 53% in 2019 to a projected 44% this year. “Leisure demand has led the recovery, and we are well‐positioned to continue growing our lead in resort destinations, including in the high growth all‐inclusive space,” Marriott CEO Tony Capuano said on his company’s fourth-quarter 2021 earnings call. “We have also been seeing strong preference for our luxury properties.”
This makes perfect sense. Historically, business travel has rebounded slower than leisure travel following catastrophic events like the September 11 terrorist attacks in 2001 and the 2008 financial recession, which also explains why so many professional prognosticators have predicted a slow and tepid recovery for corporate travel.
The AHLA’s annual “State of the Hotel Industry” report, published in January, predicts that “while leisure travel will likely return fully in 2022, business travel is projected to remain significantly below pre-pandemic levels.”
With such a big question mark looming over business travel’s recovery, some major hotel groups have spent significantly to pivot hard toward vacationers. “We’re very bullish on leisure travel. It's proven its resiliency and durability,” Hyatt CEO Mark Hoplamazian told investors last August when announcing the acquisition of luxury resorts operator Apple Leisure Group. The $2.7 billion cash deal made Hyatt the world’s largest operator of luxury all-inclusive resorts based on room count and the largest operator of luxury hotels in Mexico and the Caribbean.
Though airlines have always relied on business travellers for their bread and butter, there are opportunities in the new normal for them, too. “The airlines are probably very worried by the fact that the business travel accounts are going to slowly fade away,” says Parsons, noting that the larger airlines are hedging their bets, pivoting to “more premium economy seats, with business class being taken out.”
Airlines also need to be more nimble in identifying opportunities and shifting to other routes, he says. “As you start seeing more leisure routes on the big city pairs, there will be regional airlines picking up a lot of that commuter traffic. So as people move outside of these big cities to smaller towns, then airlines are going to start putting more routes in to serve people coming into the office two days a week.”
Two Trends to Watch
Business travel’s big buzzword now is “bleisure.” It’s exactly what it sounds like—a blend of business and leisure. A typical bleisure trip might be a three-day work trip with a few days of play tacked on to the front or back end. Or a one-week vacation might be extended to two weeks, with the traveller bringing along the technology needed to work from the road on the second week. Morning Consult’s February 2022 report found that the share of former frequent travellers who expect to take a bleisure trip in the coming year is nearly equal to the share who will travel solely for business. The AHLA’s 2022 report also noted that bleisure has “exploded during the pandemic.”
But it’s hardly a new phenomenon. “I've actually been doing that for 15 years,” says Nickerson, adding that during the summer of 2019, he turned a three-day business trip in Hawaii into a 10-day family vacation. “You know, that is perfectly normal for me.”
A fresher trend is being dubbed “return to base” travel. Think of it as the old business-travel model but in reverse. In the conventional paradigm, employees based at company headquarters flew off to do business in other cities. With “return to base” travel, remote workers will be called into the mothership from time to time, much like George Clooney’s character in Up in the Air.
One company already embracing “return to base” in a big way is Salesforce, whose new 75-acre, 140-room Trailblazer Ranch is nestled among the redwoods in Scotts Valley, California. The campus was conceived as an in-person gathering place for its 70,000-strong workforce, the vast majority of which has opted to work remotely or on a hybrid model. “Salesforce wants to create a network of ranches around the world in nature,” explains Parsons.
“These bigger companies are looking to buy hotels and own them and have their own corporate retreats,” Parsons says. “That's definitely happening, and I think when people can travel freely again, especially internationally, these retreats will be quite a big aspect of business travel in the future.”SOURCE: ForbesIMAGE SOURCE: Pixabay