Bracing for Tough Times: Corporate Travel During a Recession
Is the US economy in recession as of 2022? This is the question being contemplated by economists as this article is being authored.
According to the most widely agreed upon definition of a recession, which is two consecutive quarters of negative GDP, the US undeniably entered recession in the summer of 2022. However, this only holds true if you consider that definition in isolation. When you consider the fact that recessions are normally correlated with mass unemployment and low corporate earnings growth, the situation becomes a little muddier.
The US is currently enjoying a very strong labor market, with low unemployment and high corporate earnings growth, which suggests that, while we may certainly be on the cusp of a recession, the economy has yet to fully tip the scale in that direction. However, organizations would still do well to prepare for the worst.
Recession Travel
As we discussed in our previous article on post-COVID corporate travel, this sector of the industry is seeing a slower recovery from the pandemic induced downturn than its more leisure focused equivalent. And it seems likely that any further economic downturn will only serve to further hamper the sector’s recovery.
"We continue to see progress as business travel makes its way back to being a $1.4 trillion global industry, pre-pandemic," said Global Business Travel Association CEO, Suzanne Neufang, in a statement. "It is also important to understand the context of global business travel's recovery. Asia is still opening its borders, international business travel, in general, started picking up only earlier this year across the globe, and the U.S. has only permitted unrestricted travel since June."
Recent research by the Global Business Travel Association has identified that a majority of business travelers and travel procurement decision makers expect the current economic climate to have a significant impact on corporate travel. While the survey of over 400 corporate travelers and 44 global corporate finance executives defined their outlook as positive, they also identified that COVID-related travel concerns were giving way to macroeconomic and geopolitical issues.
According to the survey, two thirds (69%) of business travelers and three quarters of corporate finance executives are concerned a recession will impact travel and force decision makers to reduce spending on corporate travel in favor of alternative options such as video conferencing. This is especially concerned when you consider separate findings from the GBTA which predicts flight and hotel prices will rise more than 8% year on year in 2023.
"Business travel and meetings & events are back with a vengeance spelling long-awaited growth and new beginnings for your employees,” said GBTA is their report on the findings. "Travel buyers have a lot to consider as post-COVID-19 recovery and the effects of geopolitical issues impact supply and demand dynamics.”
Achieving More with Less
Should recession fully bite here in the US, corporate travel decision makers and procurement teams are likely to see their budgets tightened. This, combined with a rise in overall travel costs, will see tough decisions needing to be made regarding corporate travel in the near future.
In this environment, corporate travel should be reserved for those situations where face-to-face meetings are essential to the goals and objectives of the business. Business travelers meanwhile may have to become accustomed to journeys in slightly less luxurious surroundings than they’re used to – swapping business class for economy for example, or by flying on an airline at the more frugal end of the spectrum.
Automation in the procurement process can help with adjusting to the needs of recession based corporate travel. Automated tools can scour vendors for the best deals and achieve the right balance of comfort and cost. These digital tools can also help your procurement teams seize upon last-minute deals and find free seats on otherwise booked up flights which will often be sold off at a discount in order to maximize capacity.
Final Thoughts
Budgetary constraints and a decrease in non-essential corporate travel in the wake of a full-blown recession would likely put increased pressure on procurement teams to cut costs and reduce overall reliance on expensive trips where they aren’t necessary. However, with the trajectory of the economy still very much up for debate and its impact on this sector of industry unclear, there is still cause for optimism.
Whilst we would suggest corporate travel procurement teams prepare for the fallout of a more serious economic downturn, we would caution against going all in on full travel austerity at this stage. "Fail to prepare means prepare to fail” and all that.
The potential impact of a recession on corporate travel is sure to be part of the conversation at FIMA 2023, being held in April at the Westin Copley Place, Boston MA.
Download the agenda today for more information and insights.