The importance of Fintech in the recovery of business travel

Business travel is making a steady comeback, but this time things will look much different than they did in the pre-pandemic years when companies globally spent $1.4 trillion on travel and accommodation for traveling employees.

Almost grinding to a halt at the start of the 2020 outbreak of the COVID-19 pandemic, businesses slashed their business travel budgets as health and travel restrictions were imposed and countries closed their borders.

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Now, nearly three years after the outbreak and the global shutdown, business travel is once again raising its head from the ashes. Only now, businesses aren’t spending as much as they used to, as airfares reach stratospheric levels and lodging prices continue to rise due to inflationary concerns.

With the fragile post-pandemic economy teetering on the edge of a recession, businesses and organizations willing to take the risk of business travel are again seeing extended timelines for recovery and have halted non-essential business travel for the time being.

The numbers show the true state of business travel

The shock wave of closures and travel restrictions during the height of the pandemic saw the tourism industry, including business travel, one of the hardest hit in the coming years.

At most, 86% of business executives and employees canceled all work-related international travel plans as countries closed their borders and instituted widespread lockdowns. Nearly 70% of companies also canceled all travel plans for domestic work.

Yet, nearly 18 months after the pandemic began, corporate travel spending was only around 10% of pre-pandemic levels in June 2021, according to Deloitte.

Now, even more than three years later, things still look somewhat bleak, as rising travel costs due to inflationary pressures and airline operational problems create further headwinds for the business travel industry.

At the end of 2022, United Airlines CEO Scott Kirby said that much of the business travel it expected during the fourth quarter of last year had already begun to plateau by mid-2022.

Delta Airlines President Glen Hauenstein noted that corporate travel demand improved somewhat steadily in January 2023, while domestic corporate sales were able to pick up 80% of Q4 2019 levels.

Rocky economic conditions, reduced consumer spending and a flurry of tech layoffs in Silicon Valley prompted some big tech companies to cut back on unnecessary business travel to help improve the bottom line.

At least that’s what Alaska Airlines CEO Ben Minicucci reported, saying that many of those companies “turned off” their late 2022 business travel plans already.

This comes as no surprise, as one tech giant after another has announced layoffs or organizational changes to continue operations against a slowing economy and looming recession.

In mid-2022, Google received a lot of media coverage after it announced that it was reducing its travel budget, in what the company called “business-critical” travel.

Now, as deteriorating economic conditions persist and costs continue to rise, it’s hard to look back at the more than $1.4 trillion spent on global business travel in 2019 and wonder how the industry will once again reach those glory days in the the coming years.

Price increases are perhaps the biggest concern

Global disruptions that have taken place in recent years have caused an economic downturn on a wide scale, with central banks raising interest rates in an attempt to push down stubbornly high inflation.

Distressing market conditions and operational chaos have only added fuel to the fire, and after years of closure, prices have suddenly reached stratospheric heights.

Business travel is no shy contender when it comes to seeing serious price increases in the past year, with 2022 reaching its peak, only to slowly fall at the start of this year.

Prices for accommodation, lodging and flights were almost 60.2% higher in the second and third quarters of 2022 compared to the same period in 2021. However, there has been a more recent decline in inflation for business travel, with quarterly reductions of 8% since the fourth quarter 2022.

Despite the steady decline and stabilization of conditions, business travel prices are 20% higher than they were in 2019 on average. Experts have suggested that while conditions are slowly improving, and companies are reintroducing corporate travel plans, or even appear to be spending more than in previous post-pandemic years, prices will remain high for much of 2023.

Even with the slight slowdown, and with most if not all countries dropping their remaining pandemic-related restrictions, the recovery of business travel remains a grim forecast.

This comes as an increasing number of companies and organizations adopt remote working policies in light of recent events. Many have realized that not only is it easier and more convenient to do business via the virtual office, but it has helped them cut down on office-related expenses.

And the numbers speak for themselves, once again.

A report by Lemon.io found that companies that offer telecommuting options for most, if not all, can save up to $10,600 per employee annually.

Reducing office space and cutting rental costs alone can save companies $5,580 per employee annually. On top of this comes $2,000 in tools per employee, $1,600 per employee in one-time office expenses such as equipment, and $1,300 in office snacks per employee that businesses will be able to save. A decisive estimate in light of turbulent economic conditions.

A new Zoom nation of workers has led to companies no longer needing business and corporate travel, and for those who have continued their travel efforts, budgets can now be further cut and funds redirected to other facets of the company.

A combination of tumultuous problems, ranging from inflation, skyrocketing prices, telecommuting and even sustainability efforts have seized the former luster of business travel, despite much of the pandemic’s headwinds now in the rear view.

Could Fintech be the solution needed to restore the industry?

More recently, there have been ongoing conversations about whether several innovative industries, including tech and fintech respectively, can help restore business travel to what it once was before the pandemic and other workplace trends grabbed the industry by the throat.

Kelly Murphy, spokesperson for Conference Source, a conference management firm for clients in the biotech and pharmaceutical industries, says that while business travel is slowly making a comeback, companies will be required to take a more modern approach that can help build simplified solutions for modern travelers.

“The pandemic taught us how technology and software can help replace legacy systems that are no longer a viable solution in the modern workplace. Companies must be more open to adapting, innovating and integrating technological solutions that not only help improve operational activities , but which also helps them and their employees succeed in a new era of travel, says Murphy.

Although fintech can be considered as a possible option to help restore what was once a famous industry – its technological applications are nothing new to the travel industry.

Today, fintech applications and software platforms can help people make more seamless transactions across borders. Money can be exchanged digitally, from one currency to another, without having to visit a foreign exchange office.

People can transfer money, issue cards, make digital payments at multiple merchants abroad and open accounts on multiple different platforms without ever having to visit a bank or legacy financial institution.

With all these uses already a possibility, how can they contribute to the rebuilding and restoration of the business travel industry?

Murphy says perhaps its most notable contribution is that it can give companies more flexibility and freedom to access the key data metrics they require to help adjust and set forward-looking budgets.

“If companies can better track and monetize business travel spending, it will give them a better idea of ​​how they need to adjust their budgets in the coming years,” she says.

By having better access to the data offered on these applications and platforms, companies can better understand and use data that can help them make more defined and informative decisions.

Doing this alone is not easy, and due to the complexity of these data sets and their measurement, fintech companies and startups now offer more than software to businesses, but rather offer them a more service-based approach to their data needs.

Instead of relying on outdated infrastructure, fintech companies are now providing a more avant-garde approach to corporate business travel needs. A better understanding of how budgets can directly correlate with travel expenses will help them predict future needs more accurately.

Then there is the back-end implementation, which means companies can connect fintech partners with administrative and accounting services to have an all-in-one integrated network that gives them more accurate data points.

Having these different components connected, and giving them more flexible access to primary information means that instead of unreliable legacy models, business leaders will know exactly how to execute and implement financial strategies related to business travel.

Perhaps less seen, these systems are designed to manage and control everyday workloads, helping to relieve employees of the burden of duties and tasks that take up a large portion of their workday.

This is an important addition for travel companies, aggregators and those who use their services for business travel.

Faster and more reliable systems will help translate into more accurate customer service and booking experiences for travel companies.

Now, instead of businesses clicking on their favorite booking site, or setting up itineraries through travel websites, fintech platforms can give them direct access to the best and cheapest travel packages and put them in direct contact with the service providers they need.

The full-scale integration of these efforts requires not only the expertise, but also the economic and financial resources to get these systems up and running, and for smaller businesses, this can come at a price beyond their traditional reach.

Although balancing this is still in its infancy and requires more institutional investment from fintech, the concept is already alive and well, helping corporate businesses better understand the future of business travel and how changes in the economy may affect their business strategies.

Parting thoughts

Although travel has produced unprecedented returns, business and corporate travel still requires some formal recovery before it can be restored to the once thriving industry it was.

However, more efforts have come from several sectors of the digital economy, including fintech among others, which look set to become a more central solution for companies hoping to regain a better understanding of business travel and its future.

While not everything is certain these days, it’s helpful to know that even in an age where most businesses are neglecting the importance of business travel due to skyrocketing inflationary pressures, labor market conditions and virtual offices – business travel remains a crucial, functional facet of the corporate world .