The news that BCD Travel will lose around one fifth of its total workforce through a restructuring to fit the new operating landscape in the continued COVID-impacted environment highlights how significantly the business travel industry has shrunk over the course of 2020. But, while the managed business travel specialist will look different, it remains business as usual as its recently expanded deal with Siemens illustrates.
BCD Group founder John Fentener van Vlissingen told Dutch business and financial matters newspaper Financieele Dagblad this week that COVID-19 related total job losses will rise to an estimated 3,000 positions, around one in five of its total workforce. “We had to take very dramatic measures,” he acknowledged. Many of those structural changes have already occurred, including the departure of 700 people over the age of 55 who have taken a severance package offered by the company in the US, its biggest market, which he highlighted in an interview with the Dutch newspaper.
The unprecedented downturn in global corporate travel and continued uncertainty over its recovery continue to cloud business strategy and while there are already small pockets of business travel returning it is obvious that it will be a very slow upturn. Mr van Vlissingen warns in the newspaper interview that BCD Travel will not likely return to profitability until 2023 having seen sales hit the floor at the peak of the pandemic. He projects full year earnings will be down around three quarters on 2019 levels.
Mr van Vlissingen suggests it could take five years for business travel to return to the levels seen last year. In his interview he is cited as saying: “The recovery will take longer than we thought. The virus is something we still have to take into account for a large part of next year… ‘The first two quarters will remain difficult and then sales will increase again. The company could be even in 2022 and I don’t expect a small profit again until 2023. I have to add: we were too pessimistic every previous crisis, so in 2001 and 2008.”
Many across the industry see a vaccine as the only solution to the current crisis and traveller sentiment continues to be impacted by fears over infections. But Mr van Vlissingen cautions in the interview that “once there is a vaccine, it does not stop”. There is an increasingly accepted belief that the vaccine will not be a ‘silver bullet’ with scientists suggesting that we will be living with some form of COVID-19 for many years to come.
It is also accepted that videoconferencing will have a permanent impact on corporate travel levels and Mr van Vlissingen concurs it will replace a significant amount of physical travel for companies. “More people will work from home, there will be more video conferencing,” he confirmed in the interview. However, positively he does still see a demand for regular business travel, albeit he acknowledged “the market for business travel will return but it will be different”.
“A survey of our customers – which includes a quarter of the Fortune 500 – shows that there are companies that are going to travel less, but also that are going to travel more. Pharmaceuticals, for example,” he said. “When Coca-Cola and Pepsi compete for an assignment in Singapore, the job goes to the company that goes there,” he explained in the newspaper interview. Any business that currently chooses not to travel and loses out on a contract to a business that met with the client face-to-face will quickly change their business practices to compete.
But while BCD Travel will emerge a smaller business than that which generated sales of USD27.5 billion in 2019, it will remain a key industry player, as the significantly expanded partnership it revealed with German multinational conglomerate Siemens this month clearly illustrates.
BCD Travel and Siemens have been working together successfully since 1998, including in Siemens’ most important travel markets of the US and Germany. Siemens strategically expanded its cooperation with BCD Travel in the Americas and EMEA regions on a long-term basis last year and that will now see BCD Travel support Siemens’ business travellers in an additional 38 countries totalling 64 markets in the Americas and EMEA regions. The latest contract will run for another five years.
While COVID-19 has delivered an unprecedented problem, BCD Travel revealed earlier this year that a majority of corporate travel teams felt adequately prepared to deal with the pandemic, based on an Apr-2020 survey of 125 travel managers responsible for travel programmes around the globe. Two-thirds of survey respondents said that their travel programme was ready for the disruption caused by COVID-19, while only 13% said they were not prepared. However, well prepared, they would not have expected the scale and longevity of the crisis.