Heading into the second half of 2023, travel budgets show no sign of retreating even as corporate travel leaders look to reduce costs with virtual meeting technologies, according to Morgan Stanley research.
Virtual and Hybrid: Here to Stay?
Virtual and hybrid meeting technologies have become a permanent feature of the business travel landscape and stand to replace up to 18 percent of corporate travel through 2024, according to Morgan Stanley. Cost is a significant factor, but panelists at The BTN Group's Strategic Meetings Summit this week in New York cited other reasons for companies to turn to technology.
Budget saver: In an attempt to cut travel costs where possible, utilizing already budgeted virtual and hybrid meeting technology can be a cost saver, according to panelists, especially for organizations that hired remote workers during the pandemic and now have to budget for those travelers.
Internal meetings: Hybrid options can mitigate the increasing demand for internal meetings. According to supplier panelists at the Strategic Meetings Summit, internal meetings are increasingly important for their corporate clients for training and town-hall forums. Some participants may travel to a meeting site, while others may not. Additionally, hybrid is "often [used for] meetings that are happening in the office, because they're equipped for it," Bizly CEO and founder Ron Shah said, but not all participants can attend in person.
Well-being: "It used to be if you were invited to come to meeting, the ‘invitation' was a nice word for a command: ‘You need to be there.' Now, we accommodate people that [might not be] comfortable traveling, or have issues with family [commitments], etc.," said American Express Meetings & Events global VP of strategic meetings Linda McNairy.
Personal safety: Hybrid options can support attendees who may be uncomfortable or feel unsafe traveling to certain regions, for reasons that range from severe weather patterns to illness or even unfriendly political climates for certain groups. Consultant Kevin Iwamoto, speaking at the meetings summit, pointed to new state laws that could promote anti-LBTQIA+ sentiments that might discourage some attendees from traveling to a location.
Travel manager respondents expect second-half 2023 travel budgets to be up more than 9 percent on average year over year and project a strong 2024, according to a Morgan Stanley survey, which collected responses from 92 corporate travel managers globally from May 16 to May 31. Travel managers surveyed had an aggregate global travel spend of approximately $5 billion.
Thanks to easy comparisons against the omicron-impacted first half of 2022, first-half 2023 budgets were estimated at 10.9 percent above the same period the previous year, according to the report. However, easy comparisons weren't the only factors in play, as travel managers predict budgets will be up 9.4 percent year over year during the second half of 2023, and up 8.4 percent for full-year 2024, according to the report.
Projected budget increases for corporate travel spending for 2024 is "materially above" consensus full-year 2024 revenue per available room increase "expectations for the largest hoteliers," according to Morgan Stanley. Most hotel companies forecast 2024 RevPAR growth to be 1 percent to 4.5 percent year over year, according to the report. While somewhat encouraging, this data may be cold comfort for travel managers who are making room in their budgets for increasing air travel and even food and beverage costs, the authors wrote.
Travel managers also cited cost-saving measures amid rising pricing and spend expectations as well as macroeconomic uncertainty as significant barriers to business travel, according to the report. To overcome these hurdles, some travel managers are scaling down hotel tiers to reduce costs. According to the report, 39 percent expect to use more mid-tier hotels in their programs, and those planning to use "fewer upper-tier hotels in an effort to reduce costs" rose to 37 percent from 27 percent in Morgan Stanley's October 2022 survey, and 15 percent the year prior.
Additionally, corporates are looking to virtual meetings technologies to aid in budget savings. According to Morgan Stanley research, travel managers expect 18 percent of their travel volume to be replaced by virtual meetings in 2023.
That data "also suggests that virtual meetings are here to stay, and adoption could quickly pick up in an economic downturn if corporates try to cut cost, as their performance was proven during Covid," report authors wrote.