Everyone has an opinion on the return — or looming extinction — of business travel. Do the predictions match the view from the the top executives across corporate functions, and across all sectors of the global markets, who have actually done much of the corporate jet-setting themselves in recent years?
Bill Gates says 50% of business travel will disappear.
The CEO of Southwest Airlines says it could take 10 years for business travel to bounce back, but some of his peers are more optimistic. Delta Air Lines CEO Ed Bastian recently estimated in an interview with the Associated Press that business travel might settle into a “new normal” 10% to 20% lower than it used to be — it is down more than 80% now.
Wall Street analysts have their predictions, related to air and hotel stocks, too.
So CNBC recently asked two select groups of senior executives who manage daily business activities representing trillions in market value, and not tied directly to the airline or hotel companies, for their business travel outlook as a vaccine goes into distribution. We surveyed those who control the budgets — chief financial officers. And senior technology professionals involved in the remote work shift that has rapidly upended long-held work assumptions. Their predictions for when business travel budgets will be back to the pre-Covid-19 level includes from bad-to-worse news for a travel industry that, all in all, is accustomed to being a trillion-dollar sector itself.
Members of the CNBC Technology Executive Council say it will take years for business travel to recover, and 20% say it will never return to the level that was normal before the pandemic, according to the Q4 2020 CNBC TEC Survey. But the largest group, just under half, think it will only be two to three years before travel budgets are back to a level commensurate with the pre-Covid business world.
“I don’t anticipating traveling the way I used to in the past,” says Rajat Taneja, president of technology at Visa and a founding member of the CNBC Technology Executive Council. “On Visa’s technology team, we’ll see a level of permanent change created by the all-virtual, all-video work we’ve been doing for the last 40 weeks.”
He said after navigating a 40-week shelter-in-place period, the frequency of updates and releases related to collaboration platforms is unlike anything he has ever seen. “It was a forced simultaneous global test of virtualization of our travel and in my view, it has shown us that we can do many more things virtually then we ever thought before. This is big as many of the technology meetings that would have once required travel can continue to take place in the virtual setting.”
That doesn’t mean travel ceases, though. “Social experiences, like a meal or drink together, are hard to have on video. So for me and my team, I think we will have travel but it will be for unstructured work that requires more presence, more ideation and more energy from each other,” Taneja said.
“The way we worked pre-pandemic, including business travel and the need for face-to-face meetings, is likely forever changed,” says Sanjay Macwan, Vonage chief information security officer and a member of the CNBC TEC, citing the uptake by more businesses of programmable video capabilities via APIs, which can be easily embedded within existing applications to replicate the value of in-person interactions.
But forever changed does not mean abandoned for good. Macwan believes that the new hybrid work environment that is likely to become permanent at many organizations implies an eventual resumption of “most of our pre-Covid business practices, including travel.”
The timetable for recovery will look different around the world. In China, for example, IHG Hotels & Resorts already has seen encouraging signs of recovery as demand has picked up steadily. “The recent news on the approval and distribution of the vaccine is encouraging and we expect there will be a lot of pent up demand for travel once the vaccines are widely distributed,” said George Turner, chief commercial & technology officer for IHG, and a founding member of the CNBC TEC. He does think leisure travel will bounce back quicker than business travel.
CFOs forecast major travel budget reductions
Technology professionals are more optimistic about an eventual rebound in business travel than their peers that approve the budget expenditures. Among CFOs surveyed in Q4 for the CNBC Global CFO Council, U.S.-based and Europe-based chief financial officers have the most pessimistic view of business travel’s future, with more than half of CFOs from these regions saying pre-Covid business travel budgets will “never” return to a pre-pandemic level.
CFO consultant Jack McCullough, president of the independent CFO Leadership Council, said it is no surprise that a significant percentage of CFOs say business travel is never going to get back to a pre-Covid normal. In fact, in reference to half of CFOs saying corporate travel is gone for good, he said, “I am surprised that it is that low. I don’t know any CFOs who are confident that business travel will ever return to their pre-pandemic levels.”
The Asia-Pacific region is the only among those surveyed by CNBC where a majority of CFOs expect a rebound to pre-pandemic levels of business travel within three years.
“One thing that we have learned in the last several months is that many of those trips are not critical. Nobody is suggesting that the trips were wasteful or unproductive, but this crisis will end up lasting more than a full year before it ends, and we have learned to function with a lot less travel. There is no reason to go back to prior levels,” McCullough said.
Covid-19 illustrated how much travel could be curbed, but according to Diane Swonk, chief economist at audit, tax and advisory firm Grant Thornton, it also underscored where relationships matter the most. That includes a potential tailwind for business travel, she says, because the ability to operate successfully without forging new relationships may be unsustainable. “Many companies were able to mine the deep reserves of their business relationships during Covid. There will be a burst in travel to replenish those reserves and seed new relationships once firms feel safe that their people can congregate again,” Swonk said.
IHG’s Turner said many companies have successfully adapted to working in a completely virtual environment, but face to face interaction and the valuable relationships that come from that will ultimately lead to a rebound. “Business travel will bounce back and continue to play an important role for all companies, regardless of size. We are seeing encouraging signs such as small businesses starting to travel again and are hopeful that larger corporations will follow suit,” he said.
Travel that is returning: Office commutes
One trip that executives do see in their company’s future: commutes back to the office. With the recent CNBC surveys showing more 2021 corporate planning being designed around vaccine optimism than concerns about the current Covid surge, a continued reduction in remote work and return to the office is expected for more employees. Dr. Anthony Fauci said on a CNBC’s Healthy Returns livestream Wednesday that life could return to normal by mid-fall if most Americans get a Covid-19 vaccine.
The Q4 CNBC Global CFO Council Survey found that as Covid-19 cases surge again, CFOs based in the U.S. and Europe expect significant numbers of workers to remain remote next summer, while Asia is the only region in which some CFOs say all employees will be back at the workplace by July. But the remote work numbers are expected to decline. By July 1, 60% of U.S.-based CFOs said less than half of their workforces will be remote.
Alphabet said this week that its remote work policy will be extended until September, but its CEO Sundai Pinchar said it will not be made permanent and employees should expect three days in the office per week as a regular schedule eventually.
Over 90% of members of the CNBC Technology Executive Council taking the Q4 survey said that their teams are experiencing remote work fatigue — roughly two-thirds “a little” fatigue and one-quarter “a lot.” At the same time, over 90% indicated that productivity has maintained or exceeded the level from six months ago. These numbers help explain why equal percentages of TEC members say the promise of a Covid vaccine (43%) or long-term remote work capabilities (43%) were having the greatest impact on their 2021 planning.
Thirty-five of the 78 members of the CNBC Technology Executive Council responded to the Q4 survey, which was conducted from Dec. 2–Dec. 14, 2020. The Q4 CNBC Global CFO Council Survey was conducted from Nov. 13-Nov. 29 among 43 of the Council members.
Source: Business - cnbc.com
