Business travel reboot

Directors are on the move again after the disruption of the pandemic, but the shape of corporate travel is looking considerably different.

Infrequent flyers?

The difficulty in using Qantas and Jetstar frequent flyer points prompted consumer body Choice to lodge a complaint with ACCC in April. Qantas and Jetstar are together holding about $1.4 billion in unused flight credits and future bookings.

Surveys by Choice have found that the airlines have potentially engaged in misleading and deceptive conduct, and there are unfair barriers to using points. For example, customers can only use their credits for flights that cost the same or more than their original fare if they originally booked after 30 September 2021. It is not possible for a customer to waive the difference if the flight costs less — instead, they must buy the cheaper ticket from scratch.

Qantas CEO Alan Joyce AC disagrees with the criticisms, saying it is “the most generous policy we’ve had on credits”.

While high case numbers of COVID-19 persist across Australia, corporate travel is making a faster than expected comeback, despite lagging behind the leisure market. The pandemic resulted in the widespread adoption of virtual meeting technologies, but with the worst of the health crisis seemingly over, the value of doing business in a face-to-face setting has never felt higher.

“Corporate travel has come back much faster and stronger than we anticipated,” says Melissa Elf, managing director for Corporate ANZ at Flight Centre Travel Group. “We initially estimated 20 per cent of our market would reduce due to technologies like Zoom. However, we’re not seeing that happen anywhere near as much as expected. People are desperate to see their customers in person after two and a half years of virtual meetings.”

In March, Flight Centre’s corporate Australia sector was profitable for the first time since the pandemic began. Its global corporate business is currently at approximately 85 per cent of pre- pandemic levels. Based on current flight schedules, airlines are predicted to be back to pre-COVID-19 levels domestically within the next couple of months. But Elf notes that international travel will take somewhat longer to restart.

“Not all international routes have resumed — China is obviously still a challenge,” she says. “Ticket prices are high due to reduced availability, but the demand hasn’t dropped and corporates still see the value in paying to travel right now.”

Elf is encouraged that nations such as France and South Africa are operating close to 100 per cent or even higher than pre-pandemic volumes, which indicates that the rest of the market should follow. New direct Qantas flights from Sydney to New York and London from 2025 are also a welcome development. Similarly, Singapore Airlines announced in May that forward bookings now account for a similar proportion of ticket sales as before the pandemic — while also noting that high fuel prices due to inflation remain a concern.

Flight Centre has seen a shift of more than three per cent to premium cabins from economy class on international flights out of Australia, which Elf believes is because many travellers wish to maintain social distancing. There has been a significant uptick in the use of its travel consultants, as opposed to businesses simply booking online. “For SMEs, travel is far more complex than it ever was,” says Elf. “There’s a lot of questions and people want experts to help guide them through it.”

Lyn Lewis-Smith GAICD, CEO of Business Events Sydney. believes that any damage caused by the “Fortress Australia” policy — which saw Australia’s international borders closed for two years between 20 March 2020 and 20 February 2022 — is swiftly being forgotten. “I did feel when I went to the US in April this year, that Fortress Australia was still front and centre of peoples’ minds, but the world is moving on very quickly,” she says. “DFAT and Tourism Australia are communicating very strongly to our global network that Australia is open for business.”

Corporate lags behind leisure

CEO of Accor Pacific Sarah Derry notes corporate travel has been slower to bounce back than leisure travel. She attributes this to organisations waiting to see whether schools would remain open before scheduling in travel and events for their teams. With the Omicron wave having appeared to peak in late January (although resurgent in April–May) she expects occupancy rates to increase.

“Leisure has been incredibly strong: in some cases, it’s been better than 2019,” says Derry. “Corporate is not yet back. Occupancy is around the 60 per cent mark and we’d like to see that another 20 points stronger.”

She expects pre-pandemic occupancy levels of 2019 to return sometime in 2023, which is the same estimated timeframe in Deloitte Access Economics’ Tourism and Hotel Market Outlook 2021.

“The pace of recovery for hotels will vary across the city markets,” said Deloitte national travel and tourism leader Adele Labine-Romain, when the report was released. “Brisbane, Perth, Gold Coast, Canberra and Darwin are expected to see occupancy rates return to 2019 levels by 2023, while Sydney and Melbourne will take a longer to recover due to their high pre-pandemic occupancy rates, their greater dependence on demand from international tourists and corporate travellers, and significant new supply coming online.”

Director of Business Retreats Australia Katarina Cobain notes that large-scale events are still considered too uncertain by many companies, as a variety of factors can upend plans — such as the possibility of new variants. The stop-start nature of lockdowns eroded confidence more generally. “There’s a lot of risk at the moment for corporates, so there’s some hesitation,” she says. “COVID-19 is still a reality. What if a delegate gets sick? Who will pay for their medical treatment and return home?”

This situation has created the current trend towards smaller events, such as state-based conferences over national ones, and retreats for smaller groups. However, according to Cobain, budgets are more generous at the moment, after a prolonged period of spending virtually nil on corporate travel.

“Right now, finances do not seem to be important,” she says. “I’ve had bookings from clients such as universities that don’t normally have a budget for a conference. Retreats are usually connected to a business agenda. But a lot of clients are telling me they’re not doing any business — they just want to get together, have fun and enjoy some good food at a lovely location.”

For many in the corporate events industry, the pace has gone from stock-still to frantic. “There is so much pent-up demand, it is a bit overwhelming, to be honest,” says Lewis-Smith. “In the last half of this year, we will have held 60 per cent of the international events that were going to happen in the past two years.”  

On 17 May, Amex announced that it had rebounded to 72 per cent of its pre-pandemic levels, from just 25 per cent at the peak of Omicron. “We believe we have reached a pivotal moment in the business travel recovery, with transactions reaching 72 per cent of 2019 pro forma levels in the last three weeks of April 2022,” American Express Global Business Travel (Amex GBT) CEO Paul Abbott told Bloomberg.

“In the events industry, we make long-term plans,” says Cobain. “But right now, that’s not the case — everything is happening now. Everyone is under a lot of pressure and understaffed. Of course, the large-scale association events are still being planned in advance, but there is enormous competition for venues because there is the backlog of postponed events, including weddings.”

Bring the family

Experts like Labine-Romain believe that the pandemic has fundamentally changed corporate travel — and many of the changes are for the better. Newfound flexibility in work styles has given rise to the blending of leisure and business: a hybrid trend dubbed “bleisure”.

“You see it in the lounges — people are working in a different city until Thursday and then staying for the weekend... and we’re starting to see families travelling with their corporates,” says Derry, adding that her 13-year-old daughter recently accompanied her on a two-day business trip.

Similarly, Lewis-Smith has noticed that conferences are beginning to offer childcare facilities, while Deloitte has a work-from-anywhere policy that enables its teams to take a two-week holiday somewhere and then remain for another six weeks.

“So far, we’ve worked out the tax arrangements in around 10 countries that represent the bulk of where our people have family ties, including the UK, India and Singapore,” says Labine-Romain.

Ditch the day trips

Day trips have long been prominent in Australia, and in 2019 the Melbourne-Sydney route was declared the second busiest in the world by the Official Airline Guide. In 2019, there were 154 flights per day, which amounted to 54,000 a year — and an enormous amount of carbon. “That route may never be as busy as it was before, because people have reconsidered how and why they travel,” says Labine-Romain. “There’s no doubt that some day trips will fall away to Zoom conversations.”

“A lot of corporations have seen the potential to save on expenses by not jumping on a flight to Melbourne, having a one-hour meeting and coming back the same day,” says Lewis-Smith. “But I do think that stickiness will remain for internal meetings.”

However, she says that investing in face-to-face meetings and events could become a competitive edge over those who opt to go fully remote. “If you’re on Zoom and not in the room with your clients, suppliers, stakeholders and shareholders, you’re going to lose market share,” she warns.

There is a new emphasis on purposeful travel, says Labine-Romain, with less frequent but longer trips becoming popular. This is in part due to a heightened focus on sustainability. In a recent poll by Flight Centre’s flagship corporate travel business FCM, 39 per cent of respondents said that sustainability was the most important aspect of their travel program.

“Make decisions about travel that consider your organisation’s sustainability ambitions,” suggests Labine-Romain. “A lot of companies are meeting those ambitions simply by flying less.”

Sometimes, the logistics of travel are such that opting for sustainability isn’t straightforward. In time, the sector may make it easier for better choices to be made. “When it comes to selecting an airfare, do you make a choice based on price, the traveller experience, the best route or airline, or the most sustainable option?” says Elf.

Stay over

Labine-Romain thinks the new sweet spot for corporate travellers should be a two-night trip. It allows for a full day in the destination rather than back-to-back travels — and with the advent of hybrid working, it provides for a second opportunity to meet with staff at the office. “A day trip should never be the first choice,” she says. “Prior to the pandemic, it was a challenging perspective to have, because most organisations wanted evidence of how many meetings a person would fit in. ‘Could you do that in a day trip?’ someone would ask.”

Derry welcomes the chance for Accor to make a lasting impression on guests that linger. “In the past, business travellers may not even stay in a hotel — they might just meet there for lunch or a meeting. Having the opportunity to connect with guests when they stay is helpful.”

Investing in tomorrow

For many, the pandemic provided a unique opportunity to invest for the future. Accor made significant investments, such as the Accor Stadium in Sydney, and it formed unique loyalty partnerships with Qantas, the AFL and NRL. Derry concedes that investment decisions required a certain amount of optimism.

“When we moved into that first lockdown, we didn’t know how long it would last,” she says. “After we came through those initial lockdowns, there was some form of recovery, which was great. Our approach became quite different — we started thinking about how to invest for the future. Over the past few years, we learned that every time a border opened or there was an opportunity for people to travel, they started travelling. That gave us confidence the sector would come back strongly.”

Similarly, Cobain says many retreats seized the chance to invest in their facilities. Many chose to go green by eliminating single-use toiletry bottles and fitting water filters on each floor. According to the Deloitte report, around 20 new luxury hotels opened in every state and territory in 2021, accounting for more than 3700 new rooms, among them Melbourne’s new Hyatt Centric, which features environmentally conscious bath products. Pullman Cairns International, owned by Accor, has invested $10m in the first phase of upgrading its rooms to include new artwork and design, and another $1m upgrading its meeting/events spaces.

In June 2020, Accor launched its global AllSafe program of stringent cleaning and hygiene standards, which is internally and externally audited. Heightened standards of cleanliness will likely endure across the industry, says Labine- Romain, as for many travellers in present times, cleanliness is equated with safety.

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