Deloitte: Business Travel Begins to Take Off, But Full Recovery Experiences Further Delays

Key takeaways

• Corporate travel spend in the U.S. and Europe is projected to surpass half of 2019 levels in the first half of 2023
  and rise to two-thirds by the end of the year. Full recovery following the pandemic appears likely by late 2024 or early 2025.
• Live events are set to comprise a significant share of corporate travel, advancing from the fifth biggest driver of increased spend in 2022 to the top spot in 2023. More than half of travel managers in both the U.S. and Europe expect industry events to spur travel growth this year.
• International trips will account for a larger portion of the recovery this year: The international share of travel costs for U.S. companies is expected to rise from 21% in 2022 to 33% in 2023.
• Amid increased workplace flexibility and use of technology, travel for clients outweighs travel for team building and internal meetings.
• Travel buyers are renegotiating contracts with suppliers and balancing lower expected trip volumes with higher rates for hotel rooms and airfare.
• One-third of U.S. companies and 4 in 10 European companies say they need to reduce travel per employee by more than 20% to meet their 2030 sustainability targets.

Why this matters

Though leisure travel reached pre-pandemic levels, corporate travel has been slower to return. A variety of factors appear to impact the decision to travel for business including employee safety, client interest in meeting in person, the value of attending a conference, and whether virtual conferencing platforms can replace a trip. Although pandemic concerns and testing regulations generally waned in the second half of 2022, financial concerns seem to continue to create uncertainty for the sector. The third edition of Deloitte’s corporate travel study, “Navigating Toward a New Normal,” examines why and when employees are expected to travel for business, as well as the dynamics creating headwinds and opportunity for the sector.

The study is based on a survey of 334 U.S.-based and European executives with travel budget oversight, fielded between Feb. 7 and Feb. 23, 2023.

International travel and events account for much of expected growth in 2023

While full recovery to 2019 levels appears possible by late 2024 or early 2025, accounting for inflation and lost gains would potentially leave the corporate travel market between 10% to 20% smaller than it was prior to the pandemic. Amid higher airfares and room rates, the number of trips is likely to lag even further behind. However, international trips and live events are set to account for much of expected growth in 2023.

• Corporate travel spend across the U.S. and Europe is expected to rise to more than half (57%) of pre-pandemic levels in the first half of 2023 and surge to 71% by the end of the year.
• Most companies surveyed – 71% of U.S. companies and 68% of those in Europe – expect a full recovery in travel spend by the end of 2024.
• U.S. respondents expect international trips to account for 33% of 2023 spend, up from 21% in 2022 and similar to 2019 levels.
• The top reason reported for international trips involves connecting with clients and prospects: in the U.S., the main drivers are to connect with global industry colleagues at conferences and to build client relationships; in Europe, client project work, followed by sales meetings are the biggest reasons for trips beyond the continent.
• While higher travel prices are the most significant factor deterring companies from travel, live events are poised to be the major driver of business travel demand, leapfrogging to the top reason for international travel from the U.S. in 2023, up from fifth in 2022.
• With events top of mind, companies are adjusting their internal plans: Half report splitting larger gatherings into smaller, regional, virtually connected events, and 44% have adopted a hybrid approach. Further, 42% of those surveyed in the U.S. and 54% in Europe plan to integrate more clients into internal events.
• A majority of companies surveyed (70%) strategically evaluate and weigh potential outcomes of business travel, such as revenue generation, alongside the side effects of cost, health risks and emissions.

Workplace flexibility and technology continue to shift the course of business travel

Although pandemic concerns about travel generally declined among those surveyed, the ability to leverage technology in lieu of trips, ultimately reducing costs, continues to impact business travel’s growth trajectory. According to the survey, technology can support nearly every business need travel serves – to some degree. In addition, a future work-from-home rate is expected to be 3.2 times higher than before the pandemic. Together these factors will continue to impact how and when employees travel for work.

• Business leaders are weighing the benefit of in-person interactions, as internal trainings and team meetings (44%) are rated the most replaceable by technology, compared to client rapport building (11%) and client acquisition (7%).
• Two-thirds (67%) of respondents say their employees are traveling more to cities within driving distance of their location.
• Trips to company headquarters by relocated employees are also on the rise, most of which (70%) are either completely or partially paid for by the company.
• U.S. companies are increasingly incorporating non-hotel lodging, including private rentals, into their corporate travel policies. Nearly half (45%) of those surveyed have non-hotel lodging in their corporate booking tools, up from 9% last year, and 57% have agreements with specific branded apartment or home rental providers, up from 23% in 2022. Only 10% of U.S. companies surveyed do not reimburse for non-hotel accommodations, down from half (49%) in 2022.

Key quote

As business travel continues its climb, higher airfare and hotel costs are likely slowing the increase in trips taken. As business leaders take a strategic view of their travel plans and the industry adapts to a new normal, live conferences and events in particular are proving they can offer effective opportunities to connect in person, especially as remote and hybrid work remain fixtures of the corporate world. Eileen Crowley, vice chair, Deloitte & Touche LLP and U.S. transportation, hospitality and services attest leader

Contract negotiations aim to right-size travel costs

Companies likely garnered significant cost savings from not traveling during the pandemic. Now, after three years of reduced travel, higher airfare and room rates driven by inflation have many companies working to accommodate shifting expectations from their employees.

• About half of respondents (51%) report employees’ expectations of luxury services such as first or business class airfares and upscale hotels, as well as the need for last-minute (45%) or flexible bookings (52%), are pushing costs higher.
• When negotiating contracts with suppliers, about 1 in 5 (19%) companies say hotels are less accommodating on rates because they expect lower volume, and 11% report the same for airlines.
• Regionally, 63% of U.S. travel buyers surveyed report favorable airline pricing on positive volume expectations, compared to 54% of those in Europe.
• Higher rates are having less of an impact on the number of trips taken: 45% of companies say they limit frequency to control costs, down from 72% in 2022. Instead, they focus on mitigating the cost per trip with cheaper lodging (59%) and lower-cost flights (56%).

Sustainability drives some travel decisions

Travel, in general, attracts attention as a significant contributor to carbon emissions. However, 49% of companies noted that choosing sustainable providers drives costs up. As a result, business leaders are forced to weigh the expense and environmental impact of trips.

• One-third (33%) of U.S. companies and 40% of European companies surveyed say they need to reduce travel per employee by more than 20% by 2030 to meet sustainability targets.
• To meet sustainability goals, 42% of those in the U.S. and 45% in Europe say they are in the process of implementing a structure to assign carbon-emission budgets to teams alongside financial budgets.
• Travel suppliers’ sustainability efforts lead to engagement with travel buyers to varying degrees. Mandated use by survey respondents is low, however, about one-third consider factors like a hotel’s sustainability certifications and ratings (32%), an airline’s use of sustainable fuel (31%), or a car rental fleet’s availability of electric vehicles (27%) to calculate a trip’s carbon footprint.

Key quote

The return of corporate travel continues to take a winding road as both business leaders and travel suppliers consider not just rising costs, but the necessity of certain in-person meetings amid the increasing use of technology to offset financial and environmental goals. Suppliers who take a long-term view of their relationships with travel buyers and communicate with them about their sustainability progress should be better poised to navigate ongoing shifts in travel priorities. Mike Daher, vice chair, Deloitte LLP and U.S. transportation, hospitality and services non-attest leader

Connect with us on Twitter at @DeloitteCB or on LinkedIn: @EileenCrowley and @MikeDaher.

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