Restarting business travel post-pandemic wasn't a straightforward exercise in 2022. Pent up leisure travel had rocketed out of the gate spiking prices for airfares and hotels. According to the U.S. Bureau of Transportation Statistics, U.S. domestic airfares hit their post-pandemic height in 2022 at about $415 on average for Q2, Q3 and Q4 after falling to pandemic-era lows of under $300. Hotels were way up as well. Average daily rates were more than $148, up more than 13 percent over previous record highs in 2019 and up more than 43 percent from pandemic lows.
Rising prices also were attached to labor shortages across airlines, hotels, travel management companies, restaurants and more. Associated with that were rising wages that pushed costs and pricing up. Inflation -- especially with food and fuel -- was reducing margins. Travel customers of all stripes bore the brunt of some of those costs.
For managed travel, in particular, dissatisfaction with travel management company partners was on the rise. TMCs had been gutted in terms of travel agent staffing, and it was not easy to win those employees back. Many had retired or moved to other industries. Adding to the difficulty in revving up agency engines was the fact that travel remained very complex in 2022, with one TMC industry leader estimating that 40 percent of itineraries required agent service in some respect as compared to 10 percent prior to the pandemic. Frustration levels were high on both sides, with agencies eking out margin on depressed volume with increased servicing requirements.
Indeed, corporates that had survived (and sometimes thrived) with drastically reduced business travel seemed hesitant to head full force back into the expense of travel. Suppliers remarked consistently in earnings reports on the lagging recovery of transient business travel from large corporates. Accor CEO Sebastien Bazin predicted international business travel would remain 20 percent reduced forever -- he later publicly acknowledged that prediction was shortsighted. (The omicron variant swept across the globe in January and February put an additional damper on optimism for robust winter business travel.) But there were a couple of rising stars in that commentary as well, becoming especially apparent by the second quarter:
Groups & meetings -- Companies couldn't get enough of getting their people together in 2022. They concentrated on smaller events after Zoom fatigue and other impacts of an extended period of remote work had turned into feelings of worker isolation, collaboration gaps and, in many cases, loss of loyalty to the organization.
In addition to reimplementing traditional meetings, companies had become well aware of the "Great Resignation," which had been building since March 2021 and was in full force in late 2021 and going into 2022. Businesses were working hard to reinforce their cultures even as many workers continued to demand the convenience of remote work from day to day. Getting teams and some larger corporate groups together at offsites created opportunities to reinforce corporate bonds through shared experiences. Meeting space and other offsite event spaces were in high demand, but companies still felt the sting of meetings cancellations from Covid. The result was drastically shortened planning times combined with market compression. That, of course, led to higher prices.
It should also be noted that while the idea of 'hybrid' events remained top of mind for companies and travel managers, the shine was coming off the concept as companies realized how expensive hybrid events could be. Planners reported it was like organizing two separate events. Technologies like Hopin -- which had reached Unicorn status in the depths of the travel downturn -- began losing value and laying off workers as an industry thirsty for in-person human interaction pushed for real face-time.
Small & Midsize Enterprise Business Travel -- While large enterprises overall were holding back on traveling at 2019 volumes, the small and midsize business sector was leaning into full travel mode. Hotels and airlines alike reported the return of the SME sector to business travel en masse and many travel suppliers shifted their business travel focus to that sector, which in large part was -- and still is -- unmanaged. Travel management companies -- including the megas -- began making concerted moves to attract and serve that market as well. Loyalty programs were at the center of those efforts as travel suppliers looked to woo travelers themselves. Give it another year, and you'll see new SME-focused business programs roll out from a number of major suppliers.
American Express Global Business Travel completed its acquisition of Egencia in November 2021 and through 2022 began reformulating its strategy around shifting the growing SME segment to managed channels. CTM continued its SME acquisitions in 2022, buying 1000 Mile, as specialist in the market, after taking over U.S. midmarket specialist Travel & Transport in 2021. Both Travel Perk and Navan (then still known as TripActions), whose business models had already attracted primarily SME customers, were making major acquisitions. After acquiring Reed & Mackay in 2021, Navan went on a European tour picking up TMCs in Sweden and Germany in 2022 and launched its ToGo platform with Lufthansa. The TMC attracted a $300 million investment and filed initial paperwork to public, but held back on the latter. TravelPerk, after acquiring NexTravel and Click Travel in 2021, raised another $115 million and increased its valuation to $1 billion.
Sustainability
In the industry push to return to full travel volumes, the simultaneous rise of sustainability efforts in organizations across the gamut made for an odd bedfellow. Travel suppliers -- particularly airlines -- were at the center of the sustainability dialog and it's hard to overstate the unprecedented number of announcements coming from the travel industry in 2022 about their sustainability efforts.
Hertz was among the most dramatic, investing in a huge purchase of electric vehicles and pledging to support the development of a cross-continent charging grid. The car rental company announced at the tail end of 2021 that it had made a deal to buy 100,000 Telsas to add to its fleet. It would take that delivery over time, and by 2024 EVs would make up 20 percent of its fleet. The company said it would make a huge investment in the U.S. charging grid as well. Within a couple of years, however, the deals would languish and Hertz would announce fleet sell-offs for its EVs.
Airlines were pledging to buy sustainable aviation fuel at outstanding rates; they were investing in refineries and working up schemes to ensure corporate clients were able to buy into shared purchases. On the other hand, companies like Shell, Accenture and Amex GBT were looking for ways to certify and track those SAF purchases to ensure that purchases were credited to the buying companies, but also by design aggregating corporate customer demand and allowing airlines to access that demand in one place.
Indeed, TMCs made themselves central to the sustainability efforts of their clients. In a depressed travel volume environment, focusing on carbon emissions data, reporting and consultation was one way TMCs could produce another revenue stream, but also clients were clamoring for the data. The European Union spent 2022 passing the Corporate Sustainability Reporting Directive, which eventually would require businesses of a certain size to offer a numeric value for carbon emissions, specifically for business travel. As a result, the industry reacted with a flurry of partnerships with the likes of Thrust Carbon, Chooose and Squake for carbon calculation capabilities. How that number might then inform programs that would reduce carbon emissions would be the next step -- some companies made huge strides toward mitigating carbon emissions associated with travel. To date, those reductions have been tied to reduced travel and/or changing travel modalities from air to rail, particularly in Europe.
In the U.S., at least, the Biden Administration had baked sustainability initiatives and incentives into both its Inflation Reduction Act and its infrastructure bill that laid down foundational plans for an EV charging grid, enhanced rail services and other large-scale projects as well as incentives for states, businesses and individuals to make their own investments to reduce climate change. Politically and practically, such moves became untenable in the U.S. when Donald Trump was elected back into office and stopped many of the initiatives that Biden put in motion -- at which points corporations themselves became quieter about what green initiatives they might be funding or participating in. The EU, for its part, also pushed back the dates for companies to begin reporting their carbon emissions.
Technology & Distribution
New Distribution Capability announcements continued to trickle down the pike in 2022, but none were as breathtaking as American Airlines' December announcement that it would remove 40 percent of its inventory from EDIFACT channels by April 1, 2023, and that agencies would be required either to connect with the airline directly or consume, display and enable purchasing via New Distribution Capability content by that date or risk losing access to the content.
The response to the announcement varied from agency to agency. For many, however, it meant taking their focus off improving call center technologies and agent servicing levels and shifting those resources to solving for a looming NDC cutover on April 1. The move engendered resentment from agencies, and when American made good on its promise come April, the industry response was negative overall.
Despite understanding American's desire to reduce distribution costs and increase control over retailing -- and admitting that the hardline stance would force the industry to advance -- agencies were critical of the carrier's lack of specific guidance on its requirements for agencies to retain their "preferred" status and what that status delivered. While many agencies were able to offer booking for NDC content, most were unable to service that content on the launch date. Buyers responded by pushing travelers to other airlines, a move that ultimately would punish the carrier significantly in terms of earnings. American in 2023 would make more changes to its approach to corporate clients -- many of which would not go well.
Also, in November 2022, openAI would launch ChatGPT. BTN did not report on it at the time, but its availability and the launch of additional large language model artificial intelligence would change the trajectory of business travel's future.
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