Business travel is back, but corporate customers are more demanding than ever

It’s been a long time coming, but business travel has just about reached its pre-pandemic revenue levels. This is great news for the industry and the economy. However, the face of business travel is totally transformed. There are rapidly changing company policies on business travel, scrutiny on sustainability and employee wellbeing, and a constantly moving supply chain. Delivering business travel that ticks all the right boxes presents the biggest challenge yet.

Business is finally booming again for those in the business travel supply chain. According to the GBTA’s Business Travel Index Outlook report, business travel spend is set to reach $1.4 trillion this year, climbing to $1.8 trillion by 2027. Having fallen to $661 billion due to the pandemic, this is welcome news.

Some said business travel would never recover, since we all discovered the power of video conferencing and virtual catch ups. But it’s worth remembering that business travel is about much more than this. “Travelling for work is not just people travelling for meetings,” said Clive Wratten, Chief Executive of the British Travel Association (BTA) [LISTEN TO PODCAST]. “It’s going to fix things, it’s going to play sports. Some things physically have to happen.” Business travel also involves events, conferences and going on longer stays at other offices. Even commuting for work falls under the business travel umbrella. And with more remote workers since the pandemic, business travel is also about getting colleagues together from time to time.

RBH Management has witnessed significant change in the makeup of its corporate business. “The corporate transient market has changed considerably, with full-year volumes at around 70% of pre-COVID levels. However, the volume recovery isn’t necessarily even and tends to be determined by client industry type, feeder market, and hotel location. Transient Corporate shortfalls are however being more than mitigated by project and group business, where increased demand for team meetings and incentives tends to be growing as a result of sustained remote working policies,” comments Andrew Secker, Group Director of Sales at RBH Hospitality Management.

The evolving face of business travel is fascinating. But the rising demand for business travel is not necessarily easy for the industry to handle. Here are just some of the issues travel and hospitality providers are grappling with at the moment.

Employee wellness and sustainability shape business trips

“What we’ve learned from Covid is that corporates are thinking about the duty of care and the wellbeing of their employees,” Wratten said. “There’s a trend towards premium travel, such as premium economy on planes, that links directly to wellness.”

In fact, many businesses are redefining their business travel policies, with sustainability and employee wellness a key focus. “Duty of care is everywhere now,” said Claire Steiner, the UK Director of the Global Travel and Tourism Partnership (GTTP) - and a panellist on Travel Market Life podcast. “That’s a good thing, but you need to have rules in place.” For example, a company’s business travel policy might say that if an employee is travelling for more than four hours, they can book premium economy or business class on a plane. Rules like this recognise the impact of travel on wellbeing, and also on how productive and motivated employees can be when they are tired from travelling.

RBH Hospitality Management has been investing in sustainability credentials, “Priorities are already changing and will need to evolve further and faster to meet corporate ESG goals. Our properties at RBH are all targeted against Green Tourism’s third party criteria and the ability to evidence hotel practices to reduce carbon emissions, which will rightly only increase. Outside of ESG, corporate guests tend to be seeking broader experiences during their stay, engaging with the local culture,” said Andrew Secker, Group Director of Sales.

Prioritising employee wellbeing and sustainability is also seeing people take longer business trips. This is so staff can be more productive and incorporate more into their business trips, plus add on some leisure time too. Travelzoo is one company that is rethinking the way staff travel for business. “Our policy has changed – we’re travelling less for business and we’re being a lot more economical about how we travel,” said James Clarke, General Manager at Travelzoo - he explains on the Travel Monthly Review Show. “But instead of visiting our other offices more regularly, we’re staying for longer when we do go, getting more out of each visit and making it more productive.” Travelzoo is also hosting two global events a year in a bid to be more effective. Instead of ad hoc meetings happening across the world throughout the year, all employees will get together for a week a couple of times a year. With a pop-up office plus time for leisure and socialising, this reduces the cost, environmental impact and wellbeing impact of multiple trips.

Bleisure – where business travellers add on some leisure time to their trips – is an ongoing trend too. According to National Car Rental, 81% of travellers engage in some form of bleisure travel. Around 41% extend business travel into leisure trips, and 33% book a holiday around a business trip.

Getting more out of fewer but longer trips is as much about sustainability as it is about wellness, and it’s a topic businesses are becoming acutely aware of. According to Trainline Partner Solutions, 52% of businesses have already set targets for reducing their emissions from business travel, and 82% intend to improve support for employees to choose low carbon business travel options.

Rising costs and tough payment terms are crippling

The travel industry can help to deliver on business travellers’ evolving priorities, which ranges from integrating leisure offers into a hotel stay, to offering eco-friendly hotel amenities and helping them understand the carbon impact of their trips. But the rising costs of everything is causing some difficulty in the sector too.

“Cost increases are a concern for business travel,” Wratten said. “That will have an impact at some point, particularly on hotels. We looked up the cost of a budget chain hotel in London recently and there was nothing for under £300 per night. A situation like this will cause either a crash in pricing, or the market will slow down for people staying in hotels.” [LISTEN TO PODCAST]

Despite the unpredictable economic climate – or perhaps because of it – many corporate clients are becoming more demanding in their business travel contracts. “This is the first year ever where I’ve seen some large corporate accounts asking for requests for proposals (RFP) not for one year, but for six years,” said Thibault Catala, Founder and Managing Director of Catala Consulting and panellist on Travel Market Life Hospitality Monthly Review podcast. “We have no clue what’s going to happen in six months, even less in six years! Companies are pushing for last room availability (LRA) and longer contracts at a fixed rate. We try to negotiate, but if they don’t like what we say, they say they will go elsewhere.”

The demand for long payment terms from corporate clients is another area the travel industry is struggling. “Over 60% of payments in the travel management world are on credit,” said Wratten. “You have to invoice and wait for payment. If you extend the payment terms from 30 days up to 120 days, that is crippling for our industry.” Wratten and the BTA have been working with the organisation, Good Business Pays, to challenge the demands for long payment terms.

Tech and supply chains are a help and a hindrance

Technology has been transformational for the travel industry, but the vast diversity of travel tech is also tricky for travel companies to navigate. “Digitalisation is good, and everyone sees that,” Wratten said. “The issue is the real end-to-end solution. It’s rare. Each [solution] has to be fed into a central API or booking tool, and the sheer spread of the tech is difficult. We now need more tech to pull all the tech together!”

Technology is also enabling business travellers to use self booking tools instead of going through agencies. Although this is liberating, it is also causing difficulties for hotels. “Self booking tools are so important now, but properties need to know how they work, said Daniel Simmons, Chief Commercial Officer at HotelREZ [LISTEN TO PODCAST]. “There is still bias on what the actual person booking sees. If a property or group has preferred partnerships, kickbacks and high commissions on the TMCs, they will be at the top of the list, even on the self booking tools. They also link to online travel agents (OTAs). You have to be really careful with the cost of sale, it’s hard to know what’s coming from where.”

Jon Siberry, the Group Revenue Manager from Sarova Hotels concurs. “We’ve seen a very sudden and very obvious increase in corporate travel through the OTAs. It makes it a bit of a challenge because the whole dynamic of the booking and payment process is completely different. Now we’re having to get involved in virtual credit cards, corporate payments and submitting invoices. This is extra work hotels are not geared up for.” [LISTEN TO PODCAST]

While RBH Management has been adapting to changes as the market develops, Group Director of Sales, Andrew Secker explains, “The evolution of technology is being implemented at all stages of the guest journey. Commercially, with the tools now available, we’re better able to evaluate client contribution to profitability. Our systems can yield the business more effectively and, with dynamic discount pricing, we can ensure our corporate clients always get the best rate. Our ability to recognise our customer's unique preferences is already well-advanced but the opportunity to further enhance this is an exciting one.”

Despite challenges, the fact business travel is returning is a huge boost for everyone involved in this vast industry. Occupancy in hotels is now so good in many city hotels that companies such as Travelzoo are helping their clients on campaigns to drive occupancy at the weekend instead. Clarke said: “If you can stay in a London hotel at half the cost at the weekend compared to a weekday, that indicates the return of business travel.”

Needs and priorities might be shifting, but if hotels and other hospitality providers can meet them, there are also plenty of opportunities. A survey by Uber for Business found that 51% of respondents said that meeting their organisations’ Environmental, Social and Governance (ESG) requirements for more sustainable business travel would also push up spending. Adding in bleisure deals, and enabling blended itineraries and objective stacking, also helps business travellers strike a balance while being more productive for their companies.

“Increased expectations are coming from higher up, such as travel managers and booking managers,” Jeremy Dowdin, the Head of Sales and Marketing at Zetter Hotels said. But we know with some certainty what business travellers are ultimately looking for. “Corporate guests need a good bed, water pressure, Wi-Fi and breakfast.” Whatever the future holds for business travel, remembering the basics is just as important. [LISTEN TO PODCAST]

Ryan Haynes
Director | Lead Consultant
Haynes MarComs Ltd