Businesses have had to adjust to working remotely due to COVID-19, but not every deal can be done over Zoom.
In looking at Coupa's Travel Saver price tracking and booking data, we saw an increase in business travel bookings in early May, with departures picking up in September.
While the activity is modest, we believe it shows pent-up demand for face-to-face business meetings. This activity acts as a precursor to broader economic impact, as business travelers are an early indicator of a willingness to return to some form of normalcy.
What did “normal” business travel look like?
In the charts below, you can see how a normal year of business travel plays out, based on our airfare monitoring data and expressed in tickets purchased. Yearly events such as New Year’s and Thanksgiving typically cause dramatic drops in business travel bookings - as shown by the red circles. And one-time events such as Boeing’s grounding of the 737 MAX airliners in March 2019 and the United States government shutdown in 2018 - as shown by the yellow circles - cause minor, but noticeable drops in bookings.
The impact of COVID-19 on business travel shows something else entirely. In late-February, a downward plunge in bookings began - as indicated by the orange line.
Coupa’s Travel Saver tracks future bookings and travel departures, as well as past bookings, so we can project growth in corporate travel up to a year in advance. Our data currently shows some optimism for travel in the fall, but the days to departure has increased, from a historical average of approximately 16 days, to more than 64 days in advance on May 4. This can be interpreted as business travelers expecting restrictions to be lifted and anticipating trips, just further out than normal.
What will “normal” business travel look like?
Getting back to “normal” - that is, the level of travel bookings we saw in early 2020 - may be years away. After 9/11, it took three and a half years for travel volume to return to normal, and another year for pre-9/11 pricing to return. We estimate that in 2021, we’ll see business travel bookings around 2016 levels, or approximately 15% below 2019.
We see domestic corporate travel picking up more quickly than international travel, and we’re already seeing evidence of this in the domestic China market. Making the case for business travel across borders may be tougher, especially since quarantining, social distancing and port-of-entry rules will vary widely by country. Domestic travel, dominated by the major carriers, will also have a more consistent and known experience for travelers, driving greater comfort as to the overall safety of travel.
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But for both business and leisure travelers, airline fares prices are bouncing all over the place. With pre-COVID pricing volatility generally in the range of 11% of the ticket price, our current data reveals pricing volatility for the remainder of the year at bands exceeding 100%.
The airlines have careened between raising fares to recoup lost revenue from the pandemic, to slashing prices to attract the attention of the travelers willing to buy. But it’s likely that lower prices may prevail, as the airlines will be in a battle to bring in travelers going into the normally busy summer period.
While we are seeing exceptionally high volatility right now, we would expect this phenomenon to be a near-term anomaly. As airlines add capacity and passengers return, we expect price elasticity will return to its normal bands of volatility. Just don’t expect this to happen tomorrow.
Will travelers trust airlines?
As business travel picks up, leisure travelers should follow. Travel is a leading economic indicator: If people are willing to travel, spending should improve for hotels, restaurants, car rental companies and other industries adjacent to airline travel.
But the unknown factor here is traveler confidence regarding their safety. While airlines are already increasing cleaning protocols and seating separation measures some companies, including Boeing and Airbus, are taking these precautions a step further and researching how to actually prevent virus spread inside a cabin. On the other hand, doctors tweeting about packed flights could scare off business people who are able to put off travel a while longer.
And then there are security lines, gate boarding procedures and baggage claim areas to consider. Airlines and airports need firm plans for how they’ll ensure physical distancing in these traditional bottlenecks.
While many claim, or perhaps fear, that business travel will never go back to pre-COVID levels and that fully remote work is our new normal forevermore, the reality is that there is still significant value to an in-person meeting that simply can’t be replaced by Zoom.
We may have forgotten about this while a highly infectious virus circulates around the world, but we’ll eventually go back to that in-person connection that we fundamentally crave as human beings. And the good news is, data is already showing early indicators of a recovery that will only increase over time.