Is the business trip dead? Europe’s top banks think so, but travel firms and their investors are betting on a return in business travel of a slightly different kind.
HSBC, Lloyds Banking Group and ABN Amro have said they will radically reduce the number of business trips their employees make. Noel Quinn, chief executive of HSBC, says his own travel will be cut in half.
The pandemic has shown how vulnerable office staff are to their jet setting colleagues. In March last year, HSBC was one of the U.K.’s first major firms to send staff home as Covid-19 tore through its London headquarters. The super-spreader was never named though many suspected frequent flying colleagues.
Then, as travel was canceled for the rest of 2020, corporates realized just how much they were saving on travel costs. For HSBC it was about $300 million according to the bank’s most recent results.
But a slow resurgence is now underway. According to data from TravelPerk, a travel management company for businesses, U.S. domestic business travel is already at 75% off its pre-pandemic peak.
During the past week, shares in the domestic carrier, Southwest Airlines, have soared ahead of Delta and United Airlines, its more international competitors, as the U.S. gets back to work.
The same shoots of growth are evident in the U.K. and continental Europe, only business travel is not what it was pre-pandemic.
For a start, trains are back. At a time when banks are making their own investments according to environmental principles, it would seem hypocritical to send staffers on long-haul flights every five minutes.
According to calculations by the Financial Times, the U.K.’s four largest banks could save 120,000 tonnes of CO2 emissions if they were to cut travel by 50%.
Banks like ABN Amro are therefore banning flights between European offices, instructing staff to take a train instead. France has already said domestic flights between towns and cities with good train links will be banned.
“Longer trips and slightly less frequent,” is the other trend Avi Meir, CEO and co-founder of TravelPerk, has witnessed. “Because of the restrictions, it makes more sense to group two trips into one and stay a bit longer and then hop between cities instead of several trips.”
With negative Covid-19 tests or quarantine periods required when entering most countries, business travelers want to reduce the “friction” when going abroad, says Meir. The introduction of Covid certificates or passports will only add another layer of admin to travel.
Frequent flyers might welcome these changes, but what about their juniors?
“If you’re a road warrior from HSBC that has flown to New York 223 times you’re probably happy to be staying home now,” says Steve Domain, CEO and co-founder of Duffel, which provides travel booking software. “But the new grad that is joining HSBC now will be more than happy to make the trip.”
Before the pandemic, Graham Wilson, who had just joined a London-based wealth manager a year prior to the outbreak, was looking forward to meeting his U.S. colleagues and clients. “Now that’s not going to happen,” he says. “The idea of flying to New York just to meet a couple of people for lunch is crazy. Now it’s just going to be on Zoom.”
For new recruits, like Wilson, this not only means another perk removed from their desk-bound jobs, but career progression will be harder as well.
Small talk with your superiors is never going to happen on Zoom the same way as it would over lunch.
Investors Bet On A Business Travel Revival
On Thursday (29 April), TravelPerk announced it has raised $160 million in a Series D round.
“Actually, we weren’t going to raise now. The original plan was to do it at the end of the year maybe or Q1 of next year,” says Meir.
However, one of their backers, Greyhound Capital reached out and suggested an early capital injection. “We started talking with them and they realized that business travel is coming back and fast and they wanted to pre-empt that and be ahead of the curve,” says Meir.
There were other investors but Greyhound led the round. “There is no doubt that from 2021 onwards the average business trip will look very different to how it did in 2019,” says Pogos Saiadian, a partner at Greyhound Capital. “We are confident that business travel will recover and thrive in the years ahead.”
They are not the only investors bullish about the return of business travel. In January, TripActions, a business travel management platform, announced it had raised $155 million in a Series E round co-led by Addition, Elad Gil, and Andreessen Horowitz.
Even airlines are raising money. Private equity firm Bain Capital has taken over Virgin Australia less than a year after its collapse. Private equity has also piled money into Breeze, a new Salt Lake City-based airline founded by JetBlue’s founder, David Neeleman.
Since a third of some airlines’ revenue comes from business travelers, this represents a major vote of confidence in the industry.