As the travel industry emerged from what, for most travel suppliers, has been the worst quarter they’ve ever known, many noted demand growth from small and midsize travel programs as a slight but noticeable trend.
Dallas-headquartered American Airlines, for example, saw its small- and midsize business bookings out of Texas drop to “almost zero” in the first week of April, but they begin to show some slight recovery in subsequent weeks as the state began easing restrictions, chief revenue officer Vasu Raja said in the carrier’s second-quarter earnings call.
“They were about 10,000 a week, which is not even single-digit percentages, but by June 15, after Texas went through Phase 3 reopening, they had increased 300 percent to 45,000 or so,” Raja said. “That still is relatively small, and they are far from where we would like them to be.”
Bookings from larger corporate clients, however, did not change at all in that period, Raja said. “So, it’s likely to think that for a period of time, business bookings are going to be very different.”
Who Is Traveling?
A few factors are getting SME travelers back on the road faster than their larger corporate counterparts. Part of it is simply structural. SMEs are less likely to have dedicated corporate security departments than their larger counterparts and, as such, are less likely to be subject to wide-reaching travel bans as a company policy.
In some cases, maintaining travel is a matter of survival for SMEs. They simply do not have the resources to withstand multiple quarters without the revenues related to business travel, so their options are either keep travelers moving or shut down permanently.
“Smaller companies can be far less flexible in how they can raise funds to bridge burn rates,” said Chris Ulph, VP of global marketing for FairFly. “They have intrinsic needs related to travel.”
The idea of “essential travel” amid the Covid-19 pandemic already is difficult to define, but it takes an extra layer when it is necessary to maintain operations. That might not only include travel for sales to win new business but also to maintain current business, such as companies that have clients on subscription-model services. There’s also travel needed simply to continue operations, such as for data server maintenance, Informatica global travel manager Rick Wakida said.
As such, many SMEs are not operating under a hard definition of essential travel—if it had been defined as a trip generating at least $5 million in revenue, for example, would a trip that would potentially generate $4.9 million be turned down?—but instead are looking on a case-by-case basis.
“Essential travel is determined by approval,” Wakida said. “We’re requiring three levels of approval.”
Even so, as Raja indicated, business travel levels remain low even for those SMEs that are traveling. Mark Walton, EVP of strategy for Options Travel, a travel management company that works largely with SME clients, said most clients are currently operating with travel levels about 20 percent to 30 percent of last year’s levels. No client is operating much above 50 percent, he said.
Smaller companies can be far less flexible in how they can raise funds to bridge burn rates. They have intrinsic needs related to travel.”
FairFly’s Chris Ulph
Right now, industry segment is a bigger factor in whether and how much a company is traveling than size, Walton said. Retail clients, for example, are traveling a lot to their stores around the country, and health care clients are traveling to hospital for training, he said.
Amanda Vining, president of Corporate Traveler U.S.A., said she saw the biggest spike in business travel right after the July 4th holiday. As with Options Travel, it has varied by segment, such as pharmaceutical companies that need to conduct drug trials, financial clients making acquisitions or oil and gas clients with critical projects. Travel is returning at a quicker rate for smaller clients, she said.
“A lot stems from the fact that they have to travel,” Vining said. “It doesn’t mean the larger companies are spending more than they should be, but for growing companies, it’s critical to get those deals across the line.”
Altour chief risk and security officer John Rose said he’s also seeing travel pick up among the entertainment industry, but as with the others, he said most travel at this point is for crucial needs.
“We’re now seeing clearly that meetings and events aren’t going on right now, and not discretionary travel,” Rose said. “If an account is in jeopardy or they need to open up a new market, that’s what’s needed now.”
Unsurprisingly, travel among SMEs is largely limited to short domestic trips, said David Marcus, VP of business development and client solutions for ABC Global Services’ hotelConnex division. “The ones reliant on international travel are pretty much frozen,” he said.
Testing the Waters
For salvage operator Resolve Marine, travel never stopped, which has required working around restrictions depending on a project location, project coordinator Britton Davis said. For example, project workers in Florida have had to deal with reduced amenities at hotels. The hotel restaurant, for example, was not open when the work began, and the crew had limited options elsewhere.
“The crews work extensive hours as it is—they go from the jobsite to the hotel and don’t do a lot of social activities—and things are closing earlier, so that’s something new we now have to work around,” Davis said. “The cleaning schedule was different, too, so we were able to work out a schedule that worked for them.”
Car rental availability also has been difficult, especially on weekends, she said.
More remote projects have presented different challenges, such as one in Alaska’s Aleutian Islands, she said. Travel there requires quarantines both on the mainland and then on the island, for which crew schedules have had to be adjusted, and even getting there has proved a new challenge. Commercial flights to the islands were halted, so Resolve had to work with charter services, which Corporate Traveler helped to coordinate.
“Corporate Traveler worked with local vendors and helped create a system, which made our jobs easier and alleviated stress for travelers,” she said. “In times of cancellations or changes to flights, they’ve helped.”
Davis’ colleague Hugh Leckey, meanwhile, has been coordinating travel for a project in Italy, one of the first major Covid-19 hotspots in Europe. While it has required new steps, such as Covid-19 testing, health checks and getting authorization as “essential” employees, he said he has not had many issues with flight cancellations or delays.
“In terms of getting the crew out here, the process has been the same,” Leckey said. “Italy as a whole, especially where we are, is recovering quite well. It was locked down for so many months, it’s probably the safest place to be in Europe.”
While Resolve Marine was never able to shut down travel, some other SMEs just now are getting their programs moving again on a limited basis.
From a pricing perspective, if they’re ready to travel, there’s a significant opportunity.”
HotelConnex’s David Marcus
Otsuka Pharmaceutical, for example, in recent weeks just began a pilot program for hotel overnight stays: one night only, and not associated with air travel. The company in June made a decision to let its field teams have meetings with healthcare personnel only by driving, and the team had been requesting the ability to stay at hotels as well, senior corporate travel and expense manager Danielle Amoroso said. The company looked at the business case for allowing hotel stays and found it would not necessarily be a benefit on the financial side but eventually decided to do the pilot to understand what the industry is doing, she said.
“This is not to increase performance, but to learn,” Amoroso said. “How are we going to work with suppliers [on] how to implement a new process that could apply to more travel?”
While hotels are spelling out their Covid-19 protocols, for example, how can travel buyers ensure those are actually being followed at every property?
To answer that question, Otsuka developed the pilot involving a small percentage of the sales force, all of whom are pre-selected and given the option to opt out. They are allowed to book only through Otsuka’s TMC, JTB, and not through online booking tools, and they must submit a request at least a week prior to travel. Hotel stays are allowed at only a handful of brands, with JTB ensuring that individual hotels meet standards to prevent Covid-19 spread, and they also monitor the county in which the stay is occurring to make sure the pandemic is under control there—and that it remains so up to the time of travel. In addition, JTB is helping travelers to make sure they understand what precautions they need to take, such as avoiding using gyms or riding elevators only when they can get on them by themselves.
Travelers who were chosen overall seemed eager to participate, and Amoroso said she hoped it would be a first step toward further expansion.
“We plan for this eventually to get us to a point where that will safely guide us as we are restarting travel,” she said. “Prior to Covid, we didn’t have a pre-approval process, and I would love to see us get back to that point.”
Otsuka’s approach of trying hotels before flights does not seem to be uncommon. Options Travel’s Walton noted that in July 2019, hotel bookings were 7 percent higher than air transactions. In July 2020, they were 308 percent higher.
As for Informatica’s Wakida, he’s seen a grand total of three hotel bookings so far this quarter. None of those were based on a customer request. One was someone who needed to travel to a data center to do maintenance, one was related to a relocation and the third was someone who needed to return to their home country per visa requirements.
“It’s probably the first time we’ve had 100 percent program compliance,” he joked.
Roadblocks & Opportunities
In order for business travel levels to rebound beyond survival levels, SME will have to clear many of the same obstacles currently blocking travel for larger companies, which in some cases, will be a bigger challenge for them.
For one, the same lack of corporate security departments that may be allowing for some travel also leaves SMEs with fewer resources to handle disruptions that will be more commonplace in a post-Covid world, Altour’s Rose said. Beyond the risk of travelers contracting Covid-19 themselves, they also could be stranded by sudden quarantine requirements or face other unrelated threats, such as being in a hotel where a flash protest suddenly erupts, he said.
“You could have business travelers stranded during mass repatriation or facing concerns of whether they can even go to a certain country, or they could get to their hotel and see that nobody is practicing social distancing or wearing [personal protective equipment] and need to change hotels,” Rose said. “Or, you could have them on Michigan Avenue when a riot breaks out, and who do they call for advice? Their travel departments aren’t really equipped for that.”
Altour had been focusing on risk management for SMEs prior to Covid-19, and interest growth since the epidemic began has been “exponential, hard to measure” Rose said. In recent weeks, Altour launched an around-the-clock safety hotline for clients to help meet that demand.
Options Travel’s Walton said business travel would see little bounce-back until companies are sure they will not be liable for infections and other Covid-related incidents on the road. Smaller companies without large legal departments might be less equipped to handle such questions on their own, hotelConnex’s Marcus said.
“That has to be handled through legislation,” Walton said “If it’s on a voluntary basis, even if individuals are willing to do so, that doesn’t remove the liability for the company.”
In the meantime, SMEs might need to revise some of their policies in advance of travel returning. Informatica’s Wakida, for example, said he in particular has been looking at policies allowing travelers to tack on leisure time to business trips. If they get stuck by travel restrictions on a business trip that includes personal time, it might create confusion as to who is responsible for costs should they need to add extra time to their stay.
For those SMEs returning to travel, one silver lining is that now could be an excellent time to build relationships with their supplier partners. Hotels, for example, are not only hurting for business, but also have sales teams that likely are not occupied with large corporate clients, as they would be in a seller’s market. Not only will there be a long-term benefit in building the relationship, but it also will benefit short-term should issues arise as hotels face lower staffing levels and reduced services.
“From a pricing perspective, if they’re ready to travel, there’s a significant opportunity,” Marcus said. “Now more than ever, the direct relationship is the key.”