After nearly stalling during the COVID-19 pandemic, business travel — and profits at hotels and airlines that cater to higher-paying corporate clients — are rebounding, even surpassing pre-pandemic levels, according to a recent Morgan Stanley Research survey. Level.
Despite rising airfares and room rates, the survey of 100 global corporate travel managers found that many respondents believe their companies’ travel spending has returned to pre-pandemic levels and will continue to grow. The greatest demand comes from smaller players, meaning lower-cost airlines are likely to benefit more than larger ones.
“Travel budgets are expected to improve significantly in 2022, with a near ‘normal’ return in 2023,” said Ravi Shanker, an equity analyst covering North American transportation. “Most interestingly, nearly half of the respondents expect the 2023 budget to increase overall compared to 2019. Of those who expect a budget increase, the majority see a 6% increase in the 2023 budget compared to 2019 to 10%.”
Overall travel budgets have improved from previous surveys, with budgets for 2023 expected to average 98% of 2019 levels.
- Smaller companies lead business travel demand. More than two-thirds (68%) of companies with less than $1 billion in annual revenue expect to increase their travel budgets in the next year, compared to just 41% of companies with more than $16 billion in annual revenue. Likewise, 32% of small companies say travel budgets have returned to pre-pandemic levels, compared to 23% of large companies. “This trend may favor low-cost airlines, as smaller players tend to be more localized and require less long-distance travel,” Shanker said. “However, legacy airlines with strong corporate clout should also see gains.”
Nearly a quarter of large and small companies say their companies have returned to pre-COVID levels of travel, and 34% expect a full recovery by the end of 2023.
- Airfares have gone up, but that doesn’t affect bookings. On average, corporate ticket prices are expected to be about 9% higher than pre-pandemic prices. “Clearly, the expected increase in corporate airfares has not had a significant impact on corporate travel, as passenger traffic is expected to be roughly flat compared to 2019,” Shanker said.
- Home prices will continue to rise, although not as rapidly as they have recently. As of October this year, market home prices have soared 20% to 25% over 2019. Respondents said house prices would rise even more in the next year, but on average only 8% (9% in the US and UK; 5% to 6% in Latin America, Asia and Africa).
- Hotels face economic and competitive headwinds. While overall travel budgets are growing, companies are cutting costs by lowering accommodation charges. (Budget hotels have historically outperformed upscale lodging during tough economic times.) Alternative lodging sources also threaten traditional hotels, with 31 percent of respondents saying they plan to use short-term rentals in the next year.
- Virtual meetings are not going away. Nearly 18% of corporate travel will be replaced by virtual meetings, which will drop slightly to 17% by 2024, suggesting that this shift is somewhat durable as companies recognize the benefits of virtual meetings, from cost savings to Lower carbon footprint. Companies looking to deliver collaboration software can benefit from this shift.
For additional insights and analysis on global travel from Morgan Stanley Research, please request the full report “Global Corporate Travel Survey: Rebound” (November 8, 2022) from your Morgan Stanley representative or financial advisor. ) and “Global Corporate Travel Survey: Travel to 2023″ Budgets Nearly Back to 2019 Levels, but ~20% of Meetings Could Still Shift to Virtual” (November 8, 2022). Morgan Stanley Research clients have direct access to report Gentlemen with Gentlemen. add More thoughts from Morgan Stanley thought leaders.