Citi’s annual survey of corporate travel managers suggests a recovery in business travel may be further away than first thought- perhaps to the tune of 6 months. U.S. travel managers are more bullish and expect 2023 budgets to be 11% ahead of 2019. Europeans on the other hand expect 2023 budgets to be between 0% (UK) and -12% (France) below 2019 levels. The outlook for hotel pricing is more optimistic than for airline pricing
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Key takeaway #1 — Travel budgets are likely to be slightly better in 2022 than they were in 2021, but 2023 is expected to see a more marked improvement in spend versus 2022.
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Key takeaway #2 — Over the last year, the timeline for a normalisation of travel spend has been pushed back, with 2023 now being the consensus first normalised year. Nevertheless, on average, managers think that travel budgets have been structurally impaired by -c14%.
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Key takeaway #3 — Relative to last year, more respondents highlighted the importance of in-person meetings and travel for driving growth. Fewer managers also expect a reduction in long-term travel given the rise in VC. Beyond this, we see an increase in the willingness of employees to travel for business.
Budgets and ‘Bleisure’
60 US firms employing over 20,000 people each responded to the Citi travel survey.
2022 travel budgets were seen essentially in-line with 2019 levels, and are expected to increase by 11% in 2023. On the flipside, longer-term, respondents expect travel budgets to fall roughly 9% below pre-pandemic levels, although the timing of this pullback was less clear and U.S. respondents saw less of an impact versus U.K. and European counterparts.
Citi has already acknowledged that there is likely to be some permanent impairment to business travel given wider acceptance of virtual technologies. However, analysts note a significant rebound in travel from smaller U.S. business (less flight dependent), increased leisure demand, and evidence of more business-leisure (or “bleisure”). Corporate negotiated rates were only slightly down from 2019 levels at a little more than a 2% decline – and Citi analysts noted that other sources of demand likely to offset this decline.
On reasons for travel, analysts noted an increase in expected attendance at large meetings, conferences and trade shows – only slightly below 2019 levels in 2022 and increasing to 26.7% in 2023 from 26.2% in 2019.
These findings are in-sync with what analysts are hearing from hotel owners and managers, who have noted a significant acceleration in group-booking activities and improving sentiment regarding larger meetings. Likewise, in company off-site meetings are up. Analysts said this could be a direct result of increased work-from-home policies, with companies looking to maintain corporate culture and facilitate in-person meetings.
Offsets include a decline in client meetings, which likely reflects the impact of virtual meetings as well as the increase in work-from-home trends.
Business Travel Spending
Managers expect travel spending to remain depressed relative to 2019 levels. US based travel managers appear more optimistic. The magnitude of the reported weakness relative to 2019 seems surprisingly small if you look at the following chart:
Travel budget expectations (% of 2019) |
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© 2022 Citigroup Inc. No redistribution without Citigroup’s written permission. |
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Source: Citi Research |
Managers were more cautious asked about their long-term expectations. Respondents expect that the damage from COVID on travel budget is likely to be permanent and close to -15% vs. pre-pandemic levels, as the next chart shows:
Long-term expectations for corporate travel budget (vs. 2019) |
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© 2022 Citigroup Inc. No redistribution without Citigroup’s written permission. |
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Source: Citi Research |
While low frequency is likely to continue the number of employees traveling is likely to recover by 2023 as the next charts show:
Number of times employees travel p.a. on average |
Proportion of employees travelling during each period |
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© 2022 Citigroup Inc. No redistribution without Citigroup’s written permission. |
© 2022 Citigroup Inc. No redistribution without Citigroup’s written permission. |
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Source: Citi Research |
Source: Citi Research |
It seems clear that the pandemic has generated wide ranging changes in behaviour and working practices, many of which are likely to stick to some degree at least. For all the changes, the Citi travel survey strongly suggests that business travel remains important, regardless of the greater reliance on, and confidence in, virtual meetings. For more information on this subject, please see Global Leisure and Airlines - Corporate Travel Managers Survey, first published on March 3.
Citi Global Insights (CGI) is Citi’s premier non-independent thought leadership curation. It is not investment research; however, it may contain thematic content previously expressed in an Independent Research report. For the full CGI disclosure, click here.
