The Long Road to Recovery in Business Travel Sector Shortens
Encouraging Signs of Business Travel Rebounding
The global business travel sector is showing promising signs of recovery, with spending levels rebounding to pre-Covid levels sooner than expected, according to the Global Business Travel Association (GBTA). Business travel came to a halt during the Covid-19 pandemic, leading to predictions of a slow recovery and permanent changes in the industry. However, the GBTA now predicts that global business travel spending will surpass its 2019 level of $1.4 trillion by 2024, two years earlier than previously forecasted. By 2027, spending is expected to reach $1.8 trillion. This rebound is attributed to the resilience of the global economy and the optimism of corporate decision-makers.
Optimism among Corporate Decision-Makers
A recent survey by Morning Consult revealed that corporate decision-makers are more optimistic about business travel compared to workers. The survey found that 28% of those responsible for making business travel decisions and 32% of those in charge of travel budgets expect their workplace to increase business travel in the coming year. This is in contrast to only 15% of all employed adults who expressed the same optimism. These findings indicate a positive outlook for the recovery of business travel.
Beneficiaries of Business Travel Recovery
The recovery in business travel has significant implications for the travel industry as a whole. Business travelers tend to spend more per person compared to leisure travelers, benefiting airlines and other sectors. The return of corporate travel demand is expected to stimulate revenue gains for airlines, with Deutsche Bank analyst Michael Linenberg stating that revenue gains of 5% from September 2019 are highly achievable. Furthermore, the blending of business and leisure travel, as well as the ability to work remotely while traveling, are new segments that offer additional opportunities.
Positive Outlook for Airlines and Hotels
While business travel traditionally accounts for a significant portion of airline volume, there has been a shift in focus due to the emergence of new segments such as remote work travel and blended travel. Despite this shift, airlines like American Airlines, Delta Air Lines, and United Airlines are expected to benefit from healthy cash-flow generation, strong margins, earnings growth, and diversified revenue streams. Similarly, the hotel industry has experienced a decline in business travel due to online meetings and layoffs at tech and financial firms. However, corporate group bookings and small to midsize business travel growth show positive signs for the hotel industry’s recovery.
Economic Factors and Future Outlook
The recovery of business travel is contingent on the continued performance of the global economy. Changes in the economic environment can impact the progress made thus far. However, industry experts remain optimistic about the future of business travel and its role in driving economic growth.
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