Mike Heck is VP of supplier solutions for Fox World Travel.
Airlines, car companies and hotels are increasing their flexibility regarding customer contracts coming out of Covid. It remains to be seen when corporate spending will return to pre-Covid levels, but experts are predicting a small surge in business travel after Labor Day and a much larger surge in early 2022. Suppliers themselves are dealing with smaller sales teams and reduced levels of support from their corporate headquarters.
Airlines
There is significant volatility in the airline space. A look at United Airlines provides great insight into what the industry has dealt with due to Covid. Pre-Covid, United Airlines operated to 295 international markets with 417 daily frequencies. At the height of the pandemic in April 2020, United operated to just 10 markets with 11 daily frequencies, according to the carrier. Their schedule for August 2021 shows service to 199 markets and 261 frequencies. Back, but not all the way back.
Overall industry demand is also improving. Domestic demand is back to 83 percent of pre-Covid levels, and the demand for international travel is at 48 percent, according to the International Air Transport Association. On an international level, demand in Latin America leads the way at 90 percent, transatlantic demand is at 54 percent, and transpacific demand lags at just 17 percent.
One must also watch what seems to be daily changes in a traveler’s ability to fly internationally. Canada just announced that fully vaccinated travelers from the U.S. can start arriving in mid-August, and fully vaccinated travelers from other countries will be welcomed by early September.
Airlines, in an attempt to protect market share, will continue to focus on their most frequent business travelers, those holding elite status. Delta Air Lines announced that all current elite levels will be rolled over and protected through January 2023. Watch for other airlines to follow suit.
Looking ahead, it will be extremely challenging for corporate customers to estimate how much spend they will return with. Because of this, airlines are focusing a great deal of effort on midmarket sales agreements. These agreements generally require a minimum of $250,000 in spend and do not require negotiations on discounts or goals. (Both are set based on current share gaps with the specific carrier.) Customer discounts are based on a customer’s current share gap, possibly even using pre-Covid numbers for greater accuracy.
For corporate customers with larger amounts of spend, it is critical during this period to rely on your travel management company. Fox World Travel is seeing some very aggressive proposals as airlines rebuild their networks and fight for market share. Each major carrier will have a modified network moving forward, positioning aircraft in routes that can quickly respond to consumer demand. It is important to communicate with your supplier regularly, sharing as much information as possible as your own companies return to travel, as well as your specific market needs.
Car Rental Cos.
The car rental space has its own unique challenges. Not only are corporate customers not sure when more robust business travel will return, but the car industry is also dealing with a microchip shortage. New cars each have anywhere from five to eight or even more microchips controlling various systems. Without these chips, car production slows, impacting new car production as well as the rental market. A customer may see shortages with their preferred provider in random markets, and the potential for increased daily rental rates is legitimate. It is critical for corporate travelers to book a car rental as soon as they know of their travel plans. It’s also suggested to not game the system and rent a car for more days than you need and return the car early.
Hotels
Hotels are also struggling. A significant number of employees were laid off or furloughed during Covid. Hotel chains are struggling to get these employees back, as many employees simply left the industry. This employee shortage has a direct impact on corporate customers. We are coming up on the calendar period when corporate customers start to engage with their hotel partners over 2022 pricing. Marriott recently announced a plan to roll over pricing for as many customers as possible. However, with hotels also fighting for corporate customer market share, strategize with your TMC over what the best strategy for your business might be.
The common theme as we climb out of Covid? Things will be very volatile for several months, if not longer. It also remains to be seen the impact on travel from the delta variant. Stay connected to your TMC and gather all the information you need to properly guide you in making decisions that impact your travelers.