Post-Pandemic Travel Slashed?

As the travel industry experiences a pandemic-induced slump, many are wondering about the future of air travel and how long it will take until people are comfortable enough to fly for work or leisure.

According to the recent Survey of Business Uncertainty (in the U.S.) conducted July 13-24,  firms anticipate slashing post-pandemic travel budgets and tripling the share of external meetings (those with external clients, patients, suppliers, and customers) conducted virtually.

The findings cast doubt on the prospect for a quick and complete rebound in business travel. Firms anticipate slashing their pre-pandemic travel expenditures by nearly 30 percent when concerns over the virus subside (see Figure 1). The expected decline in travel expenditures is particularly severe for information, finance, insurance, and professional and business services, which record a nearly 40 percent reduction in travel spending after the pandemic ends.

Such a large, broad-based reduction in travel spending not only suggests a sluggish and potentially drawn-out recovery for the travel, accommodation, and transportation industries. It also indicates that firms expect to shift from face-to-face meetings to lower-cost virtual meetings. And, as Figure 2 shows, that’s exactly what was determined when firms were asked about the share of virtual meetings that they held in 2019 versus the share that they anticipate to hold in a post-COVID world.

 

The services sector seem to be higher than others on virtual meetings. At best, it could be a hybrid with some physical presence and others on Zoom. The implication of all this is that, less office space is required, less travel for physical meetings and conferences, less requirements for food and lower need for accommodation/hotels. That’s beyond the 40% reduction in travel spending after the pandemic ends. Everyone – employers and employees – have to re-configure how we do business in the future.

 

Reference: 

Businesses anticipate slashing post-pandemic travel budgets,  David Altig, Jose Maria Barrero, Nick Bloom and Steven J Davis, Brent Meyer, Emil Mihaylov and Nick Parker, Friedman Institute, Sept 18, 2020