According to the latest research by the World Travel & Tourism Council (WTTC), in 2021, global business travel spending is expected to increase by 26% and increase by 34% in 2022, reaching a recovery of about 66% compared to 2019. These are good signs, but the road to recovery of official tourism is still difficult.
Analyzing the trends that business travel has experienced over the past 18 months, the report “Adapting to endemic Covid-19: The outlook for business travel” jointly conducted by WTTC and McKinsey & Company reveals the big changes in business travel in the recent period and points out four realities that business travel will have to deal with in the medium term:
Changes in demand: Coporate policies play an important role in shaping the demand for business travel as well as how business travel adapts to the borders regulations of countries, thereby forming an internal business travel policy. As explained by Zubin Karkaria, CEO of VFS Global Group, the perception of health and safety risks by large companies and their priorities for cost-effectiveness is one of the threats to the recovery of business travel. Some companies may be able to temporarily cut back on business trips that do not have a negative impact on their business.
It can be seen that the demand for business trips has decreased. In the future, online meetings, virtual meetings or hybrid models will drastically change the way businesses work. However, there are still many activities that cannot be done virtually. Some businesses, such as manufacturing, require in-person presence. Or confidential meetings, business trips to evaluate hotel standards, … these can help open up business tourism activities.
Changes in supply: The accelerated application of technology during the pandemic has created many changes for the tourism sector. To adapt to the new context, companies have to change their business models, develop new products, embrace omnichannel trends to increase connectivity and enhance customer experience.
One technological innovation that has emerged during the pandemic is the hybrid event model, which has become an interesting model for business travel providers. Hybrid events emerged and replaced in-person events as destinations were in lockdown. WTTC believes that this model can provide future opportunities and can be a great advantage to complement core business travel, even if business travel gradually recovers as before. For example, hybrid event models that are not yet at full capacity can open up for subscription and allow activation year-round or regionally.
Another drastic change in supply is the risk of a shortage of talent. Businesses in the industry, especially hotels, have had to cut a large amount of staff in the past time. Border restrictions also affect this issue, especially in countries dependent on foreign workers.
Changes in operation environment: The change of travel restrictions is a barrier that causes concern when travelers plan their trips. According to the WTTC, when considering a trip, travelers care more about consistency and standardization around rules and procedures than about the stringency of the regulations. Therefore, clarity in regulations will help business travelers make decisions about where and when to travel.
Paul Griffiths, CEO of Dubai Airports said: “Governments need to come up with policies that are sustainable in the long term so we don’t have a problem where people commence a journey and then get stuck.”
Besides, WTTC also argues that the tourism sector is still very fragmented with a high proportion of small and medium enterprises (accounting for about 80%). As a result, if travel restrictions continue, the risk of permanent business closure will remain.
In addition, the report also shows four new realities that the tourism industry in general and business travel, in particular, must face:
- Business travel will recover slowly and unevenly, so planning around domestic or industry-driven segmentation will better support the recovery.
- The recovery of business travel is driven by the business-sector composition, thus, it will be impacted by border restrictions and health regulations.
- Consumer preferences and the needs of business travelers are changing. Therefore, the tourism sector needs to adapt to these changes.
- The imposition of border restrictions on outbound travel will affect certain countries and require a long-term strategy and sector support.
Change creates opportunities for diversification
The changes in the above context have caused business travel providers to look for a resilient source of growth. WTTC believes that the growth potential for business travel providers lies in smaller corporate clients and mainly in the domestic market.
The WTTC proposes 3 aspects that can provide opportunities for providers and stakeholders in the Tourism & Travel sector, including:
- Revenue model: Consider adjusting the revenue model, such as providing additional accommodation or transportation services, or expanding into B2C or B2B2C services.
- Changing market focus by geographic region: Current border restrictions may make the domestic market more attractive, especially in Asia-Pacific when analyzing tourism spending patterns shows that this market is forecasted to recover faster than Europe and America. As a result, business travel providers may consider changing their focus markets to find new customers.
- Digital services: Digitally applied remote self-service services are what the industry is all about. Therefore, when providers make decisions about revenue models or changing focus markets, digital service models need to be considered, such as investing in B2B2C CRM, or appropriate communication platforms.