Bill Gates is a man who I’ve always really admired. He’s a visionary who brought so much to modern society, both through Microsoft and through his philanthropic work. He’s also been right about many things over the years—he even rightly anticipated the outbreak of a global pandemic at a TedTalk back in 2015!
But back in November, Bill Gates made a prediction that, at least in my opinion, is wrong. He said that in a post COVID-19 world:
“Over 50% of business travel and over 30% of days in the office will go away.”Bill Gates
While I do agree with him that we will all be going to the office a lot less, it’s the point about business travel that I’d like to take a deeper look at.
Defining “business travel”
First off, it’s important to clearly define what we mean when we say “business travel”. In our industry, “business travel” is a trip taken with a clear business purpose that doesn’t include commuting or leisure. Straight off the bat, we know that going to the office less will in no way affect how much people travel for business.
Economics & pandemics
What exactly happens to the economy after a pandemic? If we look back at history through the Dow Jones market data below (Chart 1), it becomes clear that the stock market doesn't suffer from a pandemic. Through this chart, we can see the effect of different pandemics on the stock market 6-12 months after they “ended”. This basically shows that pandemics haven’t caused an economic recession in the stock market since the Second World War.
That being said, COVID-19 is the biggest health crisis we’ve experienced in modern history. It’s also not over yet, so it’s difficult for us to make claims on whether it will result in a recession. What we can see is inflation, but if you look at Chart 2 below, it’s clear that the stock market is doing just fine. It’s actually at an all-time high.
Of course, the stock market is a proxy for how the economy goes. It’s not necessarily a direct reflection of the economy at this moment. However, the catalyst for the 2008 financial crisis was the crash of the stock market. So, it’s a pretty good indicator of how the economy will progress.
That’s the first reason I believe that business travel will recover. History shows that pandemics don’t affect it— and business travel and economics go hand in hand.
What if the pandemic does cause a recession?
Let’s imagine that this pandemic does cause a global recession. During the financial crisis of 2008, business travel was minimally affected, with just a 20% drop in impact.
Yes, recessions do cause business travel rates to shrink. However, recent history has shown us that this is only temporary and that it recovers quickly with the economy. If business travel was able to bounce back from 2008, then it stands to reason that it will recover from 2020.
But, we have Zoom now!
Another argument in favor of the idea that business travel won’t recover is Zoom. People are starting to realize that you can do business digitally, so business travel will no longer be necessary.
Is that really true though? Platforms like Zoom or Google Hangouts have been around for years. Webex even started all the way back in 1995! These tools have been available for long enough that companies could have started saving on business travel a long time ago. Remember, business travel is not a “nice-to-have”—it’s actually quite a significant corporate expense.
If face to face contact could have been replaced in the business world, it would have been. Companies would have saved a lot on business travel expenses, but they didn’t. That’s because it is an expense worth bearing.
Business travel is a competitive advantage in sales
Face to face interaction won’t be replaced by digital alternatives because business travel is a competitive sales advantage. The main reason that companies travel and go on-site is to build in-person relationships with clients and customers. Think about the relationships in your life—are any of the ones you built on Zoom comparable to those you developed in person? It’s the same in business. Companies have local offices worldwide for that exact reason.
SMBs do use digital communications in sales more. That’s something we can attribute to the size of their deals. With smaller deals, face to face communication isn’t as important. But, as soon as the size of the deal gets bigger, companies switch from remote selling to face to face. It’s the significance of the customer (or deal) value that determines the need for business travel.
Why is that? There are 3 simple reasons:
- If your competitors are meeting potential customers face to face and you’re not, guess who’s more likely to get the contract. That’s right, the people they met in person.
- As I already mentioned, the point of business travel is to build relationships. The better your relationship, the better your chances of turning it into a lucrative one.
- Being physically present is also about servicing the customer. The likelihood of your deal closing increases with better customer service. If you’re not traveling to do that, you can bet your competitors are.
Remote selling is possible. 2020 didn’t introduce it, it just made it a survival necessity in this time. It’s not a long-term sales solution because the moment one competitor starts traveling again, everyone will too or will risk losing their competitive edge.
The second reason companies travel is to attend events. Trade shows, sales kickoffs, conferences, conventions, and more, are all important touchpoints in sales. I was personally never a huge fan, but even I have to confess that the networking opportunities at these conferences are second to none. That experience just isn’t the same online.
China is proof that business travel will bounce back with the economy
Data from China shows that as the transmission rates lowered, trust in travel started to recover quickly. There are currently no domestic travel restrictions in China, and according to this McKinsey report, domestic travel for business and pleasure is actually at 90% of what it was in 2019 (see chart below). This shows that as the country’s economy recovers, so too does travel.
There are even predictions by Statista that business travel spend in China will have been equal to or higher in 2020 than in 2019. Of course, these are projections and we won’t know for sure for a few months. That being said, trends coming out of our #2 global economy can be a good indicator of what’s to come.
To sum up
There's no denying that COVID-19 greatly affected business travel. It's not easy to pinpoint exactly when it will come back, and it certainly will be different than it was before. You can take a look at a few trends we recognized over the past year, and what they mean here. In my view, though, it's equally as difficult to claim that the need for business travel will be halved in the "next normal". Time will tell!
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