- Business travelers occupy about 12% of seats on major airlines, but generate 45% of revenue.
- While leisure travel is rebounding, experts disagree on how long business class will take to recover.
- Whenever it does rebound, it might look different from how it has in the past.
- See more stories on Insider’s business page.
After 16 months of pandemic-induced lethargy, air travel has roared back to life this summer — but the revival isn’t exactly what the country’s biggest airlines have been hoping to see. Americans seem eager to travel for fun, but not for work: Business travel demand right now is about 40% of what it was in the summer of 2019, United CEO Scott Kirby said in a recent CBS Face The Nation interview.
That’s a problem. In normal times, business travelers occupy about 12% to 15% of the seats on the big, conventional airlines that offer multi-class seating, aim at higher fare-paying business travelers, and have higher operating costs than the budget players. But that same group of travelers generates about 45% of conventional carriers’ revenues.
So airlines — and their travel industry compatriots in the hotel and restaurants segments — remain in a deep financial hole. And nobody’s quite sure when, if ever, business travel will fully rebound.
Kirby said he doesn’t see a full recovery before next summer. In a June interview with Fox Business, Delta CEO Ed Bastian predicted the sector will return to pre-pandemic levels this fall. Hyatt Hotels CEO Mark Hoplamazian, whose business also relies on business travel, proposed a similar timeline. “We are already seeing the signs of people starting to travel for work,” he said at CNBC’s Evolve Global Summit in June. “I think that will really take hold in a more affirmative way in the fall.”
But predictions from the Global Business Travel Association make even Kirby’s outlook seem rosy. In a May poll by the trade group, 92% of companies surveyed said they had paused most or all of their international travel. Two-thirds stopped domestic trips, too. The association said that a recent, modest bump in business travel is a good sign, but that it doesn’t forecast a full return to 2019 levels until 2025.
“The lack of business travel and lingering consumer hesitation are prolonging the road to recovery,” Adobe Analytics, which tracks domestic flight bookings, said in a June report.
But along with how long that recovery will take comes another question: What might it look like?
Bruce Rosenberg, president of travel company HotelPlanner, said it’s likely that business travel demand growth will take off in September. But the reasons motivating that new business travel will be different in some regards.
“People will travel in order to get back to where they think they need to be,” in terms of generating sales, better meeting their clients’ expectations, or overseeing critical aspects of their companies’ far-flung operations, he said. “But the touchy-feely things? No.”
Companies are much less likely to spend money on team building confabs, employee reward events, and other types of “soft” travel that don’t directly generate revenue. Trade shows are likely to start up again this fall, but Rosenberg expects most will be scaled-back affairs, with maybe half as many attendees as in pre-pandemic times, even as such shows’ floor space requirements will double to accommodate social distancing best practices and any local requirements still being enforced.
“I think budgets are an issue. For a big sale or big client meeting, corporations will find the money for that kind of travel, but not the other stuff,” he said. However, over the next couple of years of corporate budgeting, travel for less essential business purposes will gradually make its way back into corporate budgets.
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