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Deloitte: Business Travel Begins to Take Off, But Full Recovery Sees Further Delays

A recent Deloitte survey finds that corporate travel spend will likely be smaller than pre-pandemic, as U.S. and European companies weigh ROI and sustainability goals amid ongoing flexible work arrangements and increased use of technology.

Though leisure travel has reached pre-pandemic levels, corporate travel has been slower to return. A variety of factors appear to affect the decision to travel for business, including employee safety, client interest in meeting in person, the value of attending a conference and whether virtual conferencing platforms can replace a trip.

“As business travel continues its climb, higher airfare and hotel costs are likely slowing the increase in trips taken,” said Eileen Crowley, vice chair, Deloitte & Touche LLP, and U.S. transportation, hospitality and services attest leader. “As business leaders take a strategic view of their travel plans – and the industry adapts to a new normal – live conferences and events in particular are proving they can offer effective opportunities to connect in person, especially as remote and hybrid work remain fixtures of the corporate world.”

The third edition of Deloitte’s corporate travel study, “Navigating Toward a New Normal,” examines why and when employees are expected to travel for business, as well as the dynamics creating headwinds and opportunity for the sector.

The study is based on a survey of 334 U.S.-based and European executives with travel budget oversight, between Feb. 7 and Feb. 23, 2023.

Live events and international travel account for much of expected growth in 2023

While full recovery to 2019 levels appears possible by late 2024 or early 2025, accounting for inflation and lost gains would potentially leave the corporate travel market between 10% to 20% smaller than it was prior to the pandemic. Amid higher airfares and room rates, the number of trips is likely to lag even further behind. However, international trips and live events are set to account for much of expected growth in 2023.

  • Corporate travel spend in the U.S. and Europe is projected to surpass half of 2019 levels in the first half of 2023 and rise to two-thirds by the end of the year. Full recovery following the pandemic appears likely by late 2024 or early 2025.
  • Live events are set to comprise a significant share of corporate travel, advancing from the fifth biggest driver of increased spend in 2022 to the top spot in 2023. More than half of travel managers in both the U.S. and Europe expect industry events to spur travel growth this year.
  • International trips will account for a larger portion of the recovery this year: The international share of travel costs for U.S. companies is expected to rise from 21% in 2022 to 33% in 2023.

Workplace flexibility and technology continue to shift the course of business travel

Although pandemic concerns about travel generally declined among those surveyed, the ability to leverage technology in lieu of trips, ultimately reducing costs, continues to impact business travel’s growth trajectory. According to the survey, technology can support nearly every business need travel serves – to some degree. In addition, a future work from home rate is expected to be 3.2 times higher than before the pandemic. Together these factors will continue to impact how and when employees travel for work.

  • Business leaders are weighing the benefit of in-person interactions, as internal trainings and team meetings (44%) are rated the most replaceable by technology, compared to client rapport building (11%) and client acquisition (7%).
  • Amid increased workplace flexibility and use of technology, travel for clients outweighs travel for team building and internal meetings.

Contract negotiations aim to right-size travel costs

Companies likely garnered significant cost savings from not traveling during the pandemic. Now, after three years of reduced travel, higher airfare and room rates driven by inflation have many companies working to accommodate shifting expectations from their employees.

  • Travel buyers are renegotiating contracts with suppliers and balancing lower expected trip volumes with higher rates for hotel rooms and airfare.
  • When negotiating contracts with suppliers, about 1 in 5 (19%) companies say hotels are less accommodating on rates because they expect lower volume, and 11% report the same for airlines.

Sustainability drives some travel decisions

Travel, in general, attracts attention as a significant contributor to carbon emissions. However, 49% of companies noted that choosing sustainable providers drives costs up. As a result, business leaders are forced to weigh the expense and environmental impact of trips.

  • One-third (33%) of U.S. companies and 40% of European companies surveyed say they need to reduce travel per employee by more than 20% by 2030 to meet sustainability targets.

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