In the last decade the main focus of CFOs on corporate travel was getting employee overspending in line. Expenses – especially falsified expenses – were a top priority for most senior finance expenses. In fact more than two-thirds of CFOs in a JP Morgan survey during the second half of the decade thought their business would benefit from greater control over travel and expenses.
The arrival of COVID-19 will certainly now allow them to take greater control as closer attention is made on every outgoing. We all understand that corporate travel will be a little different as we emerge on the other side of this pandemic. We had expected that to have already occurred, but this unprecedented crisis still shows no signs of relenting, if anything it is getting worse in many parts of the world. But, how different the world will look remans far from clear.
In the short- and medium-term we can agree that levels of travel will reduce. All business trips will face more intense scrutiny and in many cases will require approval from both line, senior and even c-suite management. They will also be much better planned with multiple actions (meetings, conferences, etc) combined to ensure their effectiveness.
Right now there is increased talk about pent-up demand for travel. A recent survey from Hilton found nearly nine in 10 people count travel memories as some of their happiest. As such, the hotelier’s CEO Chris Nassetta is upbeat about travel rebounding post-pandemic with the uptick in leisure travel the past few months only the beginning of a larger trend.
During an interview aired last week as part of Yahoo Finance’s All Markets Summit, he said: “There’s a huge amount of pent-up demand. People love traveling. They want to get out. And, by the way, even business travel. People like business travel. It’s a break from the monotony, in some cases, of their work.”
Mr Nassetta acknowledges the company has seen that “leisure is more resilient” than any other form of travel, with “business travel probably second and then group and meetings business last because it’s a longer lead business,” but on the business side that pent-up demand remains subdued as many companies have not yet reinstituted business travel and the events that drove business travel have mostly gone virtual for the foreseeable future.
Right now there is little reason to travel and CFOs in particular may be secretly quite happy with that. Amazon’s CFO Brian Olsavsky revealed this week that the giant had incurred more than USD7.5 billion in incremental COVID related costs in the first three quarters of 2020 and expect to incur approximately $4 billion in Q4. Big, big numbers. But at the same time the company has saved almost USD1 billion on travel and expenses as a result of the restrictions brought in because of the pandemic.
“We saved nearly USD1 billion in travel this year because travel’s ground to a halt, internal travel, travel on expenses,” he confirmed to analysts and investors during the company’s third quarter earnings call. He foresees that business travel will “resume at a later date” but that it “maybe not get to the same levels as the past”. They “won’t be as artificially low as this year,” but could mean some significant and much-needed savings for any business.
Cost control has always been one of the most significant factors when it has come to travel approval and finance executives will certainly now want an even stronger control in the future. But despite this, wellbeing is sure to still be the new king when it comes to business travel and a world where permissible travel is the new norm.
While we are seeing some green shoots, recent business travel sentiment surveys suggest only a small percentage of organisations expect any form of business travel to be undertaken in the near term, and this would be for domestic travel. Internationally, the expectation is further impacted with only one in ten expecting to undertake international trips.
In fact, American Airlines says the customer has changed so disproportionately that the airline is reviewing its business model on the very real basis that its core business travellers may well not return to business travel until well into vaccine availability, if at all. Major organisations are also maintaining travel bans or limiting it only to business-critical travel.
Health concerns and travel restrictions continue to make business trips untenable in the time of COVID-19, while the rise of the remote workplace and the embrace of video-conferencing technology have also made them largely unnecessary. The longer we have to wait until we see some normalcy the more we will adapt, but business travel still remains a critical component of industry and that is it will rise again when we finally emerge out of the COVID crisis.