Business Travelers’ (Justified) Fear Of COVID-19 Is Starving Travel Companies Of Revenues They Need To Stay Alive

Travel service providers and travel management companies globally are foregoing an estimated $122.5 billion a month as a result of corporate decisions to keep all or nearly all off their road warriors at home.

That’s the conclusion of the latest of five “lightning polls” conducted by the Global Business Travel Association since the global spread of the coronavirus began early this year. The latest survey took place April 1-4.

The results of the latest GBTA survey hardly are surprising, given the rapid collapse of most normal economic activity in nearly all nations as individuals seek to reduce their exposure to potential infection. But the numbers – and they would translate into almost $1.5 trillion in foregone revenue for the multi-faceted travel industry should business travel all-but cease for 12 months – are staggering. That’s true even to those accustomed to dealing with and thinking about the enormous numbers common in travel business, which when all its facets are included arguably is the world’s largest industry.

That unprecedented drop in revenue is putting a painful cash squeeze on most, if not all travel service companies – from global airlines and hotel companies to travel management companies and agencies, all the way down to mom-and-pop tourist attractions and restaurants. By their very nature, travel companies cash flow-dependent. Unlike, say farmers and agricultural concerns, or for that matter, retailers, that tend to earn all or most of their money during short peak times and therefore organize their operations to survive on that cash over a full year, travel companies depend on new customers making purchases every day.

Big travel companies like airlines and hotels have enormous physical assets which they can leverage to raise cash in a pinch. But that increases their debt burden and repayment cost over a longer period, limiting their flexibility, attractiveness to investors, and, potentially, their ability to compete effectively against better-finance rivals. Smaller travel companies, however, can be handsomely profitable in good times, but typically have little asset value and few ways to survive without a consistent stream of cash coming in weekly or even daily. Thus they can go from riches to rags very quickly.

The good news emerging from the GBTA survey of nearly 1,000 of its member companies around the world is that “travelers are eager to get back on the road,” said Scott Solombrino, GBTA’s executive director. “Once this pandemic is successfully combatted, business travel can return to being a positive economic driver of the global economy.”

That adds some strength to those economists and close travel industry observers who’ve been arguing for several weeks now that no matter how bad things get in turns of travel demand during the pandemic, demand, especially among business travelers, will come roaring back once travelers and their companies are convinced that the health risks have all-but eliminated. The question remains, however: how soon will business travelers be able to resume their high-flying ways?

Slightly more than half (51%) of the GBTA’s responding member companies – all of which are involved in providing some sort of travel service – said they expect business travelers to be back on the road within three months. More specifically, 32% said they foresee the return of business travelers within two months, while another 19% said they expect that to happen within three months. Given the time frame of the survey itself, that would mean a return of more than half of all regular business travelers by the end of May or end of June.

But not all travel companies share that relatively optimistic view. Approximately 16% of the survey respondents said they were unsure about when business travelers would get back into action. And a sobering 28% said they believe business travel won’t pick up in any significant way for more than 12 months.

Two thirds of the GBTA member companies responding said “most” (33%) or “some” (33%) of people who previously traveled for business would be willing to travel again after the danger of infection subsides. But 13% said some such travelers will continue to be unwilling to travel, at least for a while, after the danger has passed, while a 2% said they expect most former business travelers to remain unwilling to travel for work again even after the coronavirus threat is greatly reduced.

The travel companies responding to the survey also reported that 55% of their client companies have out-right banned business travel during this threat period. Another 41%, they said, have canceled or suspended all non-essential business trips by their employees but will allow some travel that is deemed essential.

The survey also showed that the response has been uniform pretty around the world. For obvious reasons companies have canceled or suspended 99% of previously planned travel by their workers to or from China and Hong Kong, plus 98% of the travel that was to have included Taiwan. But the percentage of canceled or suspended business trips to other regions of the world are very close behind: Europe 97%; Middle East/Africa 98%; Latin America 97%. Even business travel to and within North America has been canceled or suspended at very high rates: 95% for Canada and 94% for the U.S.