How to Create a Smart Budget for the Comeback of Business Travel
If nothing else, the past two years have taught business travel managers that it’s wise to plan for the unexpected.
At the beginning of the COVID-19 pandemic, many of us thought we’d be back to business as usual in a couple of weeks. Yet nearly two years later, people are lined up in droves to get tested for the omicron variant. And business travel, while higher than it was at this time last year, isn’t predicted to return to pre-pandemic levels until 2024, according to research by the Global Business Travel Association.
A lot of uncertainty remains around the future of corporate business travel, which is no surprise as we consider some factors surrounding the industry: new variants of the virus continue to disrupt the world, many people have come to rely on video communication platforms to conduct business meetings and some companies’ travel budgets have been reduced.
According to a recent Skift survey, however, 45 percent of corporate travel decision-makers said their company’s COVID-related travel policy changes were temporary, while 22 percent said their organization hadn’t altered its policy at all. Business travel is trending in a positive direction, particularly as global travel bans ease up in many countries.
As corporate travel increases, it’s important to plan 2022 budgets to meet the needs of your employees, especially as the cost of traveling is expected to rise for businesses, too. Here are a few expectations for the industry, followed by suggestions for better business travel budgeting.
A Few of Our Business Travel Predictions
As mentioned earlier, the GBTA business travel index forecasts that global business travel spending will surge in 2022. A return to pre-pandemic spending of $1.4 trillion is expected in 2024. Despite setbacks in recovery in 2021, the research predicts that pent-up demand in 2022 will help business travel spending reach more than $1 trillion.
At the same time, hotel rates are expected to rise 13 percent globally in 2022. This includes higher room rates for upscale hotels, which are expected to experience higher occupancy levels as business travel returns. Airfare won’t surge quite as much but is anticipated to cost 3.3 percent more in 2022 than in 2021.
Corporate travel and entertainment is normally a company’s second-highest indirect expense just behind payroll, according to Mastercard. While it would make sense on paper to slash corporate travel in favor of Zoom, Microsoft Teams or other video communication platforms, it’s hard to replicate face-to-face meetings, especially when you’re meeting a new client for the first time or closing a sale.
Based on these predictions and trends, here are a few takeaways to make the most of your 2022 travel budget.
1. Plan Your Spending Wisely
To make the most of your 2022 allocation, business travel managers should take a look at corporate travel spending in 2018 and 2019. Account for the number of business trips taken, the average length of stay and the cost of airfare, ground transportation, food, lodging and entertainment.
Next, consider what new areas you spent money on during the pandemic. Did you provide employees with personal protective equipment (PPE) or communication materials about health and safety guidelines? It’s important to continue providing these measures to help keep your employees safe and comfortable while traveling, so make sure to include these in your budget.Has your employees’ preferred method of transportation changed? Morning Consult’s State of Travel and Hospitality report found that out of people who have to travel for their jobs in the next three months, 62 percent would take their personal vehicle, 46 percent would fly and 25 percent would rent a car. This suggests that companies might begin to spend more on ground transportation, including gasoline, than in previous years.
Because of rising travel-related costs across the board, it’s important for company travel managers to require employees to book their trips through preferred vendors, such as a core list of car rental companies and preferred hotels. A Deloitte study found corporate travel decision-makers are rethinking travel spending by encouraging the use of corporate booking platforms and agents, which will optimize the money allocated toward business trips.
2. Rely on Technology to Optimize Budgets
Some expense management technologies that formerly focused on decreasing the cost of processing expenses have expanded into managing employee spending habits and integrating corporate policies into decisions related to business travel expenses.These digital tools can handle traditionally time-intensive tasks like finding hotels with pre-negotiated rates, locating employees on the road in case of emergencies and auditing and reconciling travel expenses. When you consider the number of hours it takes to manually organize and manage the details of business trips, from making reservations to reconciling receipts, it’s easy to see why companies are investing in technology that saves time and keeps increasing business travel costs at bay.
3. Prepare for the Unexpected
Although speculation remains about how the business travel industry will bounce back, events like this year’s CES prove that businesses still want to meet and conduct events in person.
As business travel rebounds, related prices are expected to be higher than they were before COVID-19. Business travel managers can use travel management platforms to help them do their jobs more efficiently.
Greg Williams is the SVP of Operations at CLC Lodging.