The resurgence of business travel is evident as the Global Business Travel Association (GBTA) forecasts a substantial rebound. Projections indicate that international business travel spending will hit $1.5 trillion in 2024, surpassing the 2019 peak of $1.4 trillion. Looking ahead to 2027, GBTA anticipates a remarkable 25% increase, with spending reaching almost $1.8 trillion.
Following a significant 53.8% decline in business travel spending in 2020, companies are now eager to make up for lost ground. However, despite the heightened demand, there are challenges to navigate. Airfare and hotel prices are soaring, driven by inflation, prompting businesses to exercise caution in their travel expenditures. Many are strategically allocating resources to revenue-generating travel while carefully managing the number of trips.
After enduring years of disruption, the landscape of business travel has undergone profound transformations, and its recovery will mirror these changes. From dynamic growth in specific regions to emerging trends, the next six quarters hold various considerations for hotels.
One notable aspect of the corporate travel resurgence is the revival of conferences and exhibitions, particularly within the Meetings, Incentives, Conferences, and Exhibitions (MICE) sector. Among these, conferences and exhibitions are leading the way, spelling positive news for hotels poised to reap the benefits from these segments.
In the dynamic landscape of corporate interactions, the resurgence of in-person experiences, including product launches and live demonstrations, is instigating heightened demand for such events. These formats, reliant on substantial face-to-face engagement, not only foster networking opportunities but also serve as lucrative revenue-generating channels, thereby justifying associated expenses.
A recent report by The Global Association of the Exhibition Industry (UFI) highlights a noteworthy trend, indicating a progressive increase in 'normal' exhibition activity. Notably, 79% of companies reported such activity in the first half of 2023, marking an uptick from 72% in December 2022. As the year unfolded, this positive trajectory continued, with 90% reporting 'normal activity' during most months in the latter half of 2023.
However, within the realm of meetings and incentives, businesses are adopting a more measured approach to travel. The prevalence of virtual work environments, coupled with intensified budgetary constraints, has led companies to recalibrate their travel strategies. Many are opting to sustain virtual meeting formats, while incentive travel takes a backseat as a pragmatic cost-cutting measure.
A Morning Consult study underscores these shifts, revealing that 32% of participants witnessed alterations in their companies' business travel policies. Furthermore, 60% reported a reduction in travel frequency, and 56% observed a decline in the number of employees sent on trips.
On a global scale, China and the U.S. emerge as pivotal players, jointly contributing over 50% to worldwide business travel spending. Nevertheless, North America and Western Europe are poised for robust recoveries, buoyed by established infrastructure and ascending corporate travel budgets. North America, specifically, is anticipated to achieve a 23% compound annual growth increase (CAGR) in business travel spending by 2026, closely followed by Western Europe at 17%.
The Asia–Pacific (APAC) region anticipates a resurgence, with spending projected to surpass 2019 levels by 3% in 2024. Despite a potential economic slowdown, China is predicted to reclaim its status as the leading market by the close of 2023. India, too, is earmarked as a significant MICE market, driven by governmental investments and a robust economic outlook.
Meanwhile, the Middle East and Africa (MEA) region witnessed business travel spending reaching 86% of pre-pandemic levels in 2022, poised to fully recover by year-end. Recognized as a burgeoning MICE hub, the region's initiatives in infrastructure development underscore its potential to support global business events.
Leading the Charge: Pharmaceuticals and Technology Steer the Course
The extent to which companies are embracing the resurgence of in-person travel varies across sectors, with Finance and Pharmaceuticals showing remarkable growth in 2023 compared to the previous year. The financial sector, in particular, heavily relies on face-to-face interactions to facilitate deal closures and drive investments, positioning it as a clear advocate for increased business travel.
Although the technology and IT sector has not fully rebounded, experts express confidence in its pivotal role in the business travel economy. Both Pharmaceuticals and Technology thrive on in-person networking and project robust Compound Annual Growth Rates (CAGR) over the next five years, positioning them as key catalysts for Meetings, Incentives, Conferences, and Exhibitions (MICE) travel in the future.
Other sectors, such as Construction and Manufacturing, are showing promising signs of recovery, buoyed by their dependence on in-person visits, meetings, and inspections. Emerging sectors like Renewable Energy are also catching the attention of experts as potential drivers of revenue in the future.
Navigating New Realities of Business Travel
Several factors contribute to the surge in travel spending. Favorable economic conditions have led to a more stable financial landscape than initially predicted, with global real gross domestic product (GDP) growing by 6.3% in 2021 and 3.5% in 2022. Despite initial setbacks, many advanced economies are now exhibiting signs of stability.
Chinese travelers are resuming air travel, with business travel intentions tripling after a 4.6% drop in spending in 2022. The country's rebound is expected to inject significant revenue into the sector.
As companies eagerly embrace the return to in-person events, there is a robust demand for business travel. An overwhelming 82% of business travelers, according to a recent survey by GBTA, believe that corporate travel is instrumental in achieving their business objectives.
This heightened demand is driving increased investment in travel as companies aim to boost sales and strengthen global ties. However, this pattern, coupled with rising interest rates and oil prices, is pushing costs higher as the sector competes for resources with leisure travelers. Emerging markets like Saudi Arabia, India, and Morocco are establishing themselves as MICE hubs, fostering growth.
Despite these positive trends, the industry is not without significant challenges. Elevated airfares and room rates are impacting the volume of business trips, while understaffing remains a prevalent issue in many hospitality companies. Seven out of 10 travel suppliers report labor shortages or recruitment challenges. Rising interest rates are adding pressure on hotels and airlines, and geopolitical instability is affecting travel, especially in regions closer to conflict zones.
To harness the anticipated growth, hotels must adapt to the evolving realities of business travel, adjusting their models to align with the transformative trends shaping the sector.
Perpetual Allure of Hybrid Events
Hybrid events, initially propelled into prominence by the demands of the pandemic, continue to captivate business leaders. According to a recent UFI study, 56% of respondents expressed a belief in the ongoing prevalence of hybrid events within the industry. The enduring popularity of this format lies in its unique ability to simultaneously address two pivotal corporate priorities.
By adopting the hybrid approach, businesses can preserve the benefits derived from events — including exposure to innovative ideas, markets, and clients — while concurrently achieving cost reductions and lessening the environmental impact associated with travel.
This trend presents a potential boon for hotels as well. Positioning themselves as hybrid event venues allows even smaller establishments with limited on-site capacity to host large-scale gatherings, potentially rivaling larger chains. However, to capitalize on the growing demand for hybrid events, venues must strategically invest in technology. Virtual events necessitate reliable, high-speed internet to ensure uninterrupted services for guests and attendees.
Attendees require dedicated technology support, and organizers must engage skilled moderators capable of fostering interaction within a virtual setting.
Focus on Eco-friendly Offerings
Sustainability is emerging as a paramount concern for companies, given that travel significantly contributes to corporate carbon emissions. In the U.S., transportation alone accounts for 29% of all greenhouse gas emissions.
To address this concern, businesses are actively seeking ways to offset the environmental impact of travel. A recent Escalent survey revealed that 64% of respondents indicated their companies track travel emissions, while 43% are actively working to integrate sustainability into their corporate travel policies.
Looking ahead, companies are likely to include clauses in their request for proposals (RFPs) specifically focusing on corporate sustainability, a practice already adopted by 34%.
Increasingly, businesses will prefer hotels and airlines that can transparently articulate the eco-friendly aspects of their offerings, showcasing features such as energy-efficient systems, eco-certifications, and sustainably sourced products.
Evolving Supplier Dynamics
Hotels find themselves at the nexus of high-impact opportunities and have the potential to negotiate more assertively with buyers. During the pandemic, supplier contracts were often frozen at pre-negotiated rates. As contract negotiations resumed in 2022, buyers presented lower-than-expected trip volumes, giving hotels and airlines increased leverage over rates.
While airline prices are now declining, hotels, particularly in Europe, are holding firm. Approximately one in five buyers note that hotels exhibit less flexibility on rates than in the past, signaling a shift in the balance of power within the buyer and supplier dynamic.
In the realm of technologies shaping business travel, hybrid capabilities represent merely the surface. Augmented reality (AR) and virtual reality (VR) tools facilitate remote showcases of hotel venues to travel managers, while artificial intelligence (AI) manages customer inquiries, and reservations, and provides tailored recommendations. Buyers leverage online booking tools (OBTs) and AI to streamline bookings, regulate employee travel, and enhance reporting.
As event organizers seamlessly integrate physical and virtual components, platforms like the Metaverse bring attendees together in immersive environments.
Now, more than ever, technology propels business travel forward, and hotels must stay at the forefront. In a fiercely competitive sector, venues making strategic technology investments today are poised to attract and retain business as the industry undergoes transformation.
A Future-forward Approach to Business Travel
Despite rising costs, the outlook for business travel remains robust. A notable 94% of travel managers express optimism about business travel activity, with 85% anticipating that their organization's 2023 trip volume will surpass that of 2019.
Embracing this optimism requires a proactive approach, and here is where WegoPro, as an automated expense and travel platform, emerges as a key player. This forward-thinking platform empowers hotels to streamline and optimize their practices, ensuring they are well-positioned for success in the evolving landscape.
The pandemic has permanently altered the landscape of business travel, offering event organizers new avenues to connect with customers globally. As suppliers experience a resurgence in in-person events, they must also prepare to meet the evolving needs of the next generation of business travelers.
In a post-pandemic era, where global connections are paramount, WegoPro stands as a beacon, providing the tools and technology necessary for hotels to not only meet but exceed the expectations of the next generation of business travelers.
As companies adopt strategic approaches, WegoPro becomes the linchpin, enabling hotels to establish themselves as indispensable partners by prioritizing sustainable and technology-driven events that will shape the future of business travel.
Stay tuned to WegoPro for the latest updates and news on travel and expense management!