February 5, 2023

Eurocean 2004

Life is an adventure

The future of work and travel

IN most major coporations travel for work occupies a major facility for the worker of all types. Will business travel ever fully recover? I believe that the answer is no, but with some caveats.

Timothy O’Neil-Dunne

Interaction
between teams has long been part of the work life we are used to. So has
meeting with customers, suppliers and colleagues. Travel for work is the
function that creates a significant part of the economic activity for airlines
and other travel vendors. Enter the pandemic. Travel comes to a screeching halt
in a very short time. In some parts of the world it has recovered, in many
others it has not. Recent prognostications are welcoming back Travel but as we
are seeing with the Omicron variant it is uneven, both at the government and
the individual level.

There has
been a fundamental change in how we deal with work. WFH – Work from Home has
become a norm for vast swaths of the workforce. Just about everyone has reduced
their frequency of trips to the office and for some there is almost no office.
For a smaller number there is the WFA – Work from Anywhere change. Strangely
enough it is perverse in that those most able to WFA were the biggest travellers,
now they are the most able.

This change
has already manifested itself in some major cities such as New York where
office vacancy levels are at an all-time high of 20%.

But there
has been another major change. We have decided that we can connect virtually
without that familiarity of face-to-face. While I personally regret this
change, it is an inescapable result that we will do less business travel.

Diving into
this topic and the justification for my hypothesis, there is not a lot of
research on the topic. Consequently, there needs to be some theorizing which is
where the caveats kick in. Let’s consider different categories of travel which
will be adversely affected.

  • Small Meetings
  • Conventions and exhibitions
  • Internal meeting trips
  • Commuting trips

Each of
these will see a drop off. After 9/11 there was a cut back that was
pretty severe but that didn’t last very long.  Why then and why not now? The answer is driven
by two factors:

Factor 1 –
The technology is immeasurably better today than it was then.

Factor 2 –
learned behaviour changes with more permanence when it occurs over time.  IE we have been WFH for nearly 2 years. Some
of our colleagues have never spent much time in offices at all.

WFH and WFA
are also changing work travel. Less use of the main central office will be
powered by those who will expect to pay for their “commutes” (as they do today
for near travel). When the individual pays – he chooses cheaper options. The
reverse of OPM – Other People’s Money travel.

Travel will
be more difficult. The travel itself will appear to carry more risk and will
require more planning.  It will engender
friction which will itself reduce the total volume of travel. Cheaper options
and lower budgets will also mean less spent and more hunting for value. IE less
trips in the front of the cabin and in 4- and 5-star hospitality in favour of fewer
nights away and use of less expensive options which will boost Airbnb et al.

Travel will
also come back slower in terms of transportation inventory. The global ASKs
(capacity of airlines) will come back slower so that the airlines can both make
money and address their labour shortages.

In my view,
there is an inevitability that Business Travel must be reduced. Its share of total
spend will diminish. Eventually it will come back to the same level as 2019 but
as the global share of travel spend, it is my belief that it will never reach
the same as that year. When will that “recovery” be in place?

I believe
we are looking at 2024/5. That means on pure broad numbers, a five year loss of
travel. Global population growth is approx. 1% so that will mean at a minimum
loss of market share of at least 5% of business travel that will never return.
Personally, I think the loss will be much larger with a global loss of 7.5% for
the reasons noted above.

There is
however a silver lining for the consumer. Travel vendors will have to compete
harder for the consumer’s share of wallet. Will they? Time will tell. 

For an interesting read on the future of the geography of work, I commend Professor Raj Choudhury and his co-authors from Harvard Business School. The draft is out for peer review but you can read it here.

* The views expressed in this article are that of the author’s. Timothy O’Neil-Dunne is principal of T2Impact Ltd. He will tell you that he has been a WFA road for more than 2 decades. He can be reached at [email protected].

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