The corporate travel market is one of the hospitality industry segments, also known as domestic and business travel. Since companies and businesses usually run without a break, corporate guests are always available for hoteliers and vacation rental owners and could be an attractive customer base.
Many countries also make a significant contribution to the corporate travel market and increase this sector’s investment capacity. However, the recent pandemic disrupted all the predictions and left some adverse effects on the business travel market, as well.
Although the recovery process seems to have quite prolonged, it is predicted that the corporate travel market will continue expanding. Furthermore, domestic business travel could be one of the main focuses of financing for the first post-pandemic years since it is expected to rebound faster than other sectors.
The Benefits of Corporate Travel Market
The corporate travel market, which rarely faces an off-season, could be an excellent investment for vacation rental stakeholders to make loyal guests and secure their revenue stream. It is also a remarkable point that only 26% of all business trips take one-day long, which means a huge part of this market needs longer stays. According to Booking.com Report, roughly 70% of business travellers are willing to lengthen their trip by a few days for better exploring the city.
Besides the long-term benefits that loyal business travellers bring, they have many other advantages, as well. They usually look for some basic services, and more importantly, they are less price-sensitive once they feel at home and are satisfied with the service provided. Last but not least, they typically do less damage to the property because they want to create a good relationship with the accommodation provider.
During the current situation of the COVID-19 pandemic, the corporate travel market was the only sector of the vacation rental business that has remained operational and helped the industry pass the worst of these turbulent times.
All the above have made the business travel market a regular business source and a lucrative segment, beneficial for hoteliers and property managers. But, another important factor is corporate travel market size. Statistics say that this market has been growing over the years and become a potential investment source.
The Global Business Travel Market Before 2020
Before the COVID-19 pandemic, the corporate travel market size experienced remarkable growth. This rise could be attributed to the increase in the investment amount in the business travel market across the world. At a short glance, this market had held 24.1% of the worldwide travel and the hospitality industry by that time.
The global business tourism capital in 2016 was estimated at $1,082 billion and continued to grow during the following three years. For example, for European businesses, the average travel spend more than doubled and increased by 217.85% per company between 2016 and 2019.
In 2017, the total business travel market outlay was around $1,112 billion worldwide, with 5.8% growth compared to its previous year. The related data gathered by the global business travel association (GBTA) are shown in the following table.
In 2018, a total of 1,228 billion USD was spent for the purpose of business travel across the world. In the same year, around $328 billion was allocated for international and domestic business travels within the US.
The business travel market spending reached a peak of 1,283 billion USD in 2019, which was the highest expense on the corporate travel market during the last 20 years. Therefore, the corporate travel market scale had seen an ascending growth from 2016 to 2019 by attracting more investments in the vacation rental market.
The Global Corporate Travel Market During The Pandemic
Like other hospitality industry segments, the COVID-19 outbreak impacted the corporate travel market severely and slowed down its emerging growth. Many international seminars and conferences were cancelled or postponed due to travel bans and social distancing restrictions. Thus, many companies were forced to shift to remote working, leading to fewer business travellers.
According to the data, the business travel global market reduced by half in 2020 during the pandemic, and it lost $810.7 billion based on estimations. In this regard, the two biggest corporate travel markets held by China and the US experienced a bit different trends. The US saw a 90% decrease in this market in the second quarter of 2020, and business travels were equal to 5-15% of 2019, McKinsey reported. But in China, the business travel market came back to 80% of 2019 in late July 2020.
The Domestic and International Business Travel
In August 2020, a survey was carried out among GBTA member companies, in which 94% of members indicated that the pandemic had removed all or most of the international trips while 74% claimed the same trend for domestic travels. Based on the second poll, the number declined by 19% and even got lower in late winter 2020 regarding the domestic corporate travel market shrinking. But the predictions about closing the international sector were still meaningfully high.
This data reveals that GBTA members are increasingly willing to allow employees to participate in domestic business travel, and more businesses seem to be directing positively toward domestic trips.
What Would the Future of Business Tourism Look Like?
It is hard to predict the future of the corporate travel market due to the uncertain condition that is still going on under the COVID-19 shadow. But historical data could be a great source of information to give a more vivid picture of the possible future.
Historically, after economic downturns like the 2008-2009 global recession, the business travel market returned slowly, and also the international market didn’t fully recover for five years. However, the nature of this global crisis is entirely different.
The corporate travel market will eventually rebound because the vaccination will most likely boost confidence about public safety, and many business travellers still believe in the importance of face-to-face meetings to build better and more stable relationships. Some predictions say that the global business travel market spend will increase gradually year by year and reach $2,364 billion by 2029 (see Figure 1).
But coming back to normal will be happening in phases due to the unique rules and travel-policy restrictions that each country would take.
The first sector of business tourism that will likely return before the others is domestic business travel. Since personal journeys could replace flights with cars or rental vehicles, the regional business trip will return sooner than international business travel. Besides, the American and European corporate travel markets will probably return at a slower pace than that of Asia-Pacific due to their different economic structures (McKinsey).
The business travel market had started a meaningful development in the industry and showed a growing capacity to invest. The interruption that the pandemic created slowed down this market’s growth. It is also predicted that the returning process might be slow; however, many recovery plans are underway.
The business tourism market is taking a multilayer recovery, and it needs some time to fully rebound. Meanwhile, regional business travel is assumed to be the first to take a faster recovery process in the corporate travel market. Accordingly, investing in the business travel industry, especially the domestic business travel sector, is a wise strategy due to optimistic predictions about this market’s annual growth.
Last but not least, the corporate travel market could help the vacation rental business survive during the crisis. As it was mentioned in our previous article, the pandemic has possibly made business travellers lean toward serviced apartments. Thus, investing in serviced apartments favouring business tourism seems beneficial, and ignoring this noteworthy segment could be a huge mistake, but who knows for certain?