The corporate travel sector is ready to fly. Is it time?

The ride back to business could be bumpy

Corporate travel is a bit like a weathervane—constantly being buffeted by a series of economic, environmental or technological storms. To work in this business, you have to be prepared for sudden shifts in market conditions and adjust your strategies accordingly.

Grant Hurrle has weathered his fair share of storms over three decades in the industry. Hurrle is one of three corporate partners behind Forbes Travel International, a Vancouver-based agency that historically has focused on the corporate segment, which pre-pandemic accounted for 75 percent of its revenue (leisure travel making up the rest). Within that segment, Forbes has built a reputation as the go-to agency for companies tied to B.C.’s resources sector—particularly mining, oil and gas.

Hurrle says the past 20 years have been especially turbulent times for Forbes. It started with the fallout from 9/11 and continued through the SARS outbreak a couple of years later. “The 2008-09 recession was probably the biggest hit we ever took in the corporate division,” Hurrle explains. “After that, we saw a lot of belt-tightening—and clients really cut back on anything that wasn’t considered essential to running the business.”

While corporate travel budgets eventually bounced back, Hurrle says, there was a growing sense among the partners that things had reached “a bit of a saturation point,” with growth stalling by the end of the 2010s. And then COVID-19 hit.

“When the taps got turned off in March 2020 and all essential travel stopped, we struggled to bring people back to their home bases,” Hurrle recalls. “We had travellers stranded all across the globe—and, of course, absolutely no new travel was being booked. The only thing we were doing was cancelling trips, refunding whatever was possible and bringing people home.”

One of those stranded far from home was Ron Hochstein, president and CEO of Lundin Gold and a longtime client of Hurrle. “Late last year, I said to Grant: One time, I used to talk to you two or three times a week about travel. And this is the second time I’ve talked to you this year,” remembers Hochstein, who oversees Lundin Gold’s Fruta del Norte project in Ecuador.

Hochstein estimates that he used to travel 85 percent of each week—to the mine site and back, to visit various offices, or to attend investor meetings and conferences. “I went from jumping on a plane almost every day to twice in all of 2020: to Ecuador in March, and back in August.”

For the first three months of the pandemic, Hochstein says, the international airport in Quito was shut down—and while travel has since become easier, with vaccine passports replacing cumbersome quarantines, there’s still great uncertainty in the air.

“I was supposed to be going to Denver for a large conference this week,” says Hochstein when we speak in September. “And just within the past few days, we made the decision to go virtual, rather than be there in person.” Lundin Gold’s travel expenditures for 2021 will add up to less than 5 percent of what was spent by the company in 2019.

Give me a reason to stay

As the world took its tentative first steps to opening up in 2021, many in the corporate travel sector hoped that brighter days were just around the corner. Then this summer, the Delta variant took off, throwing any return to “normal” into doubt. Now travel restrictions prompted by the highly transmissible Omicron variant are threatening more havoc.

That uncertainty—combined with the business world’s increasing comfort with virtual meeting tools, and growing discomfort with the carbon costs associated with travel—has tempered expectations of a big rebound. Some companies—including JPMorgan Chase & Co.—have even rolled out new policies, banning business travel and in-person meetings for employees who aren’t vaccinated (or who won’t disclose their vaccination status).

The decline in travel spending at Lundin Gold has been dramatic, but a similar trend can be seen across companies and industries—and starting well before Delta’s spread. A survey by Deloitte of 150 travel managers and executives with travel budget oversight, conducted in late May and early June, projected that overall spending would remain well below pre-pandemic levels through the year—with expenditures in the fourth quarter only reaching 25 to 35 percent of 2019’s total.

To put that into context, says Nancy Tudorache, 2019 was “the pinnacle year” for business travel, with global spending reaching a record US$1.4 trillion. Tudorache is Canadian vice-president for the Global Business Travel Association, whose membership includes 9,000-plus business travel professionals. Over the course of 2020, she says, global corporate travel spending dropped to US$737 billion—a more than 52-percent decline. In Canada, she adds, business travel sank more than 80 percent in the last eight months of 2020, accounting for $2.6 billion in lost spending each month.

While Tudorache is hopeful that things will turn around, she thinks it will be a slow, multiyear recovery. The focus in 2022, she says, will be on defining “business-critical” travel. “I think companies were just moving along in their merry way before COVID,” says Tudorache, who spent 10 years with the Metropolitan Hotels chain before joining the Burlington, Ontario–based GBTA in 2013. “Now companies really need to assess and understand what type of business travel and meetings are important to their business—and what the ROI is for that type of travel. And they need to have some proper evaluations and metrics around that.”

READ MORE: How leading Canadian travel brands are welcoming people back

For some companies, increasingly sophisticated technology points the way toward more virtual meetings, and Tudorache believes there will be some permanent erosion in the sector as a result. But, she adds, “business travel is essential to a growing economy and to a growing business—and nothing will replace face-to-face.”

She also sees some positives in tools like videoconferencing. For one thing, it could offer a dispersed global audience access to conferences held in one fixed location, using a hybrid of virtual and in-person delivery. And for hotels struggling to regain lost corporate dollars, they could repurpose existing facilities into flex spaces for businesspeople working remotely—or add collaborative spaces for virtual companies needing somewhere to meet.

However things shake out post-pandemic, it’s clear that many players in the travel sector will have to up their game if they want to bring business travellers back. “Business travel hasn’t changed very much in 30 or 40 years,” says Jarrett Vaughan, a UBC marketing professor with over a decade’s experience in the luxury hotel business, most recently working for Four Seasons Hotels and Resorts. “It used to be seen as glamorous to travel as a businessperson,” he says. “But in the last 20 years, it’s become massively inconvenient.”

Vaughan argues that COVID has sped up the need for hotels, in particular, to innovate if they hope to survive. He notes that one of the last big innovations in the industry—Four Seasons’ introduction of a 24-hour concierge and 24-hour room service—is decades old. “Hotels have to fight to figure out ways to add value to the business traveller’s life. Because without it, all business travellers want to do is get back home as soon as possible.”

The prospect of losing corporate dollars is terrifying for many hotels, Vaughan adds. Business travel gives them a countercyclical buffer to the tourist market—filling up rooms midweek and during the quieter off-season. While corporate travellers typically pay less on the average daily rate for each room, “what’s important is that they’ll come when nobody else will.”

Since COVID hit, the business market has become much less predictable. That’s a big problem, says Vaughan, because a lot of corporate travel—especially meetings and conventions—is planned up to a decade ahead. “Hotels count on having a certain number of rooms sold at a specific rate far in advance, which allows them to budget for big capital expenditures like renovations.” With the convention business on hold, many of those big expenditures are, too.

It was, of course, the Pacific Dental Conference (with more than 15,000 attendees) in early March of 2020 that proved to be the first superspreader event of B.C.’s COVID saga—and one of the last major conventions Vancouver has seen. The meetings and conventions business, which used to be the lifeblood of downtown Vancouver’s economy, quickly came to a halt and has only recently started to show signs of life.

At Destination Vancouver, which helps orchestrate many of those conventions, it’s been a difficult 18 months. According to president and CEO Royce Chwin, the conference trade that comes through his organization typically accounts for about $1.6 billion in revenue annually; that doesn’t include direct bookings to the hotels and the conference venues. “And we know that at least 5 percent of our overnight visitors to Vancouver are coming for a convention, a trade show or some sort of conference,” says Chwin, who joined Destination Vancouver in July 2020 after a decade with Travel Alberta. 

Within weeks of showing up in Vancouver last year, he had to make some tough decisions. “We unfortunately had to cut our team by more than half; that was the reality of managing survival. So we’re working with a much smaller team now, but that team actually has been very busy throughout this year.” Chwin says, on a hopeful note, that 60 percent of the conventions cancelled in 2020 have since been rebooked—for 2022 through 2028.

Still, the shape of conventions and meetings in Vancouver will invariably change, and Chwin is fully expecting a smaller overall travel market. Pre-pandemic, travellers (both business and leisure) spent $14 billion in the city each year, with 46 percent of that coming from U.S. overnight and same-day travel; he’s expecting only a modest rebound to $11 billion by 2026.

“Prognosticators are suggesting that business travel and convention travel will be down somewhere between 5 and 20 percent permanently,” Chwin says. “I don’t think anybody really truly knows, but either way, there’s a lot of ground to rebuild. It’s not even restarting anymore; it’s rebuilding this industry.”

Flight Delay

A September survey of 600 travel professionals, conducted by the Global Business Travel Association, found that the return to normal will be slow and painful—if normal ever does return.

38% of companies cancelled or suspended most or all domestic business trips in September

77% of companies cancelled or suspended most or all international business trips that month

If cancelled or suspended most or all trips:

28% plan to resume domestic business travel in the near future (1-3 months)

18% plan to resume international business travel in the near future (1-3 months)

Has your company re-evaluated the ROI of business travel?

Yes – 41 percent

No – 28 percent

Not yet, but considering re-evaluation – 18 percent

Not sure – 18 percent

Numbers do not total 100 due to rounding. 

From business to pleasure

When Ron Hochstein reflects on some of his reasons for discretionary business travel—beyond the requisite site visits to Ecuador, where Lundin Gold has 1,800 employees, or to various Lundin offices around the world—it was simply the business norm.

“You needed to meet and greet the investors,” he says of the global conferences. “That was the whole reason for going: for investors to be able to come to somewhere like Denver and meet with several mining companies, the CEOs and senior leadership team, all within a two- or three-day period. But now we realize that there’s no reason why it can’t be done virtually.”

Hochstein says that, going forward, attendance at conferences will be much more limited—he says that he sent one person to the MINExpo conference in Las Vegas in September, instead of the typical four or five—and those trips will be clearly tied to business objectives.

In 2022, Hochstein expects Lundin Gold to resume quarterly meetings in Ecuador. And he expects that many of the analysts who cover the company, along with the big investors, will want to get back to Fruta del Norte for a site visit as well—given that many have only seen the project under construction, if at all.

As for whether he’ll miss all that time in the air, Hochstein pauses before answering. “It felt so weird returning to an airport last year,” he says. “The Air Canada flight attendants used to know my name by heart. I had Super Elite status by the end of February one year; that was my life. But would I go back to that life? No.”

Hochstein’s travel agent, Grant Hurrle, has seen the writing on the wall. “Business travel has always been highly susceptible to changes, but it was always coming from the traveller’s side. Now the majority of changes that occur are coming from the operations side—airlines cancelling flights or changing itineraries. And that’s really time-consuming for us.”

While this new era of travel, with vaccine passports and COVID testing, is no less daunting for leisure travel, Hurrle sees greater prospects in the resurgent tourist market. Even before COVID, Forbes Travel was shifting its focus onto the leisure traveller, and it’ll continue to do so in 2022, he says.

“That market is ripe for the picking, and now there’s the added pent-up travel demand that has occurred because no one got to do anything that they wanted to do for the last year and a half. There’s money to be spent.” After a gloomy year of lockdowns, business disruptions and endless Zoom meetings, the winds seem to be pointing toward…more time on a beach.