Business travel and COVID-19: Travelling for work likely to decline after pandemic

Once upon a time, way back in 2019 before most of us had ever heard the word "coronavirus", in an average week there were more than 1000 flights between Melbourne and Sydney. It was the world's second busiest domestic air route. Today there are around a quarter that number, and that route doesn't even make it into the top 10 of the world's busiest domestic routes.

One of the reasons for this one-time stellar performance was the strength of business traffic between the two cities. Early morning and evening rush-hour flights between the two capitals were crammed with briefcase-toting suits.

Much of that business travel has gone, and in the view of Bill Gates it might never return. Toward the end of 2020, the Microsoft co-founder predicted "We will do some business travel but dramatically less. Over 50 per cent of business travel will go away."

Mr Gates was making the point that video conferencing via communication platforms such as Microsoft Teams have made in-person, face-to-face meetings largely redundant, but there are plenty who argue that business travel is far from dead, including Alan Joyce.

At the airline's half year results media conference in late February 2021, the Qantas CEO addressed this very issue, saying "On the business side, there's some concerns around the world that with Microsoft Teams and Zoom, that we're going to see a hit of people travelling for business purposes. When we've done our research on it, one of the great things that we're seeing, this market is very different. Sixty per cent of our business traffic is fly-in-fly-out workers. We're actually seeing a growth in that sector… with resource sector prices going through the roof."

"So, the segment that will take a hit are professional services, which will use this technology probably more than travel. At the end of the day, we think the net number for us, in this market as a whole, is around a 13 per cent drop in business travel."

Airlines can pivot away from capital-city links to leisure destinations, as Qantas has done with the recent announcement of snow-season flights to Cooma and Albury. Given the restrictions on overseas travel, travel to leisure destinations such as the Sunshine Coast, Byron Bay and the Gold Coast is booming. Expect to see that stoked even further by the government's $1.2 billion tourism and aviation package to include half-price flights, but only to regional destinations.

What's not so rosy, and what will see zero benefit from that package, is the outlook for CBD hotels that once hosted business travellers, and provided the venues for their conferences and events. For them there is no pivot, their custom further undermined by the total absence of international travellers.

According to Simon McGrath, CEO of Accor Pacific hotel group, "Business has been subdued by around 50 per cent. We have started to see the corporate segment begin to move, we have also started to see an increase in reservations for business events. We are confident that post Easter we will see a surge in business travel."

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The impact on individual hotels varies with location, adds Mr McGrath. "Regional leisure destinations are fairly buoyant but we are still waiting to see around business travel rebound."

Jerry Schwarz is the Director of Schwartz Family Company, the largest private owner of hotels in Australia.

"I've got seven CBD hotels in Sydney, one in Melbourne and another in Canberra and two in Newcastle and two others which are regional. Every area has its own story and unfortunately the sad story is CBD hotels and business travel. Apart from Mardi Gras in Sydney last weekend our occupancy rate at the moment is in the realms of 20 per cent averaged over a week.

"On weekends it increases up to 60 or 70 per cent but during the week it's down to 5-10 per cent. That's because we are so dependent upon international leisure which is non-existent and corporate which is pretty much non-existent right now."

There are some green shoots for the resumption of business travel, and for the capital city hotels that service the trade. A study by business news channel CNBC found the Asia-Pacific region is the only among those surveyed where a majority of corporate chief financial officers expect a rebound to pre-pandemic levels of business travel within three years.

Does this suggest a different business culture in the Asia Pacific region, one that favours face-to-face interaction? After all, a Zoom meeting is fine for the nuts and bolts, especially when involves getting together people at scattered locations, but it lacks the same currency as eyeball-to-eyeball across a desk. You can't go out for lunch with a client over Zoom, you can't admire the photos of their kids on their desk, you can't play a round of golf, and those off-field social interactions lubricate the way business is done.

"I agree with that CNBC study," says Mr Schwarz. "Coming out of COVID, where people have been Zooming and seeing each other on screens, we all want to get back together, we want to see each other in person. Australians are quite gregarious, so I think we've realised with conferencing it's not only the talks that you go to but it's for connections that you make with people during and afterwards that are an important part of making business happen."

"The statistics of hotel occupancy already show that the return to travel is quicker in the Asia Pacific than worldwide. In Europe and the US hotel occupancies have dropped by about 60 per cent from pre-COVID figures while the figure for the Asia Pacific is about 30 per cent down. Certainly a return to pre-COVID levels by about 2023 is what I see from most of the reports I get."

See also: Five times the price: Flying into Australia is expensive; flying out is cheap

See also: Five-star hotels slash rates as cities struggle to attract visitors

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