We’re creating a more connected travel industry, underpinned by sustainability and long-term investor relations.
Global Head of Corporate Communications, Amadeus IT Group
An interesting trend our landmark report, Shaping the Future of Travel, explores is the spending habits of western business travellers, which have been slow to recover since the 2008 financial crisis. Modelling by Oxford Economics indicates that business travel expenditure by US and European passengers is not forecast to reach pre-recession levels until this year and 2018 respectively. This is in stark contrast to Asia, where trend growth in business travel expenditure was unaffected by the financial crisis.
Travel budgets have always fluctuated in line with the economy; firms are more relaxed about travel spend in the good times and tighten their belts in the bad. During the recent belt-tightening in Europe and the US, Western companies have become more cost-conscious, introducing more sophisticated tools to control business expenses and making smarter use of technological alternatives.
Having lived through previous recessions, many interviewees were sceptical of any reports of the “death of business travel”. A general suggestion was that business travel had gradually recovered from the effects of the last recession.
However, there had been changes in corporate travel policies meaning that the yield on such travel may have declined (whether through downshifting from business class to premium economy/economy, shorter hotel stays, changing to restricted fares or other means). Changes in the business travel market may be having a lasting impact on business class ticket sales, in particular.
Premium air traffic data from IATA shows that whilst long-haul (intercontinental) premium traffic recovered quickly and robustly from the financial crisis - particularly that connecting advanced to emerging markets - short-haul travel demand has been much more sluggish. North American and European short-haul markets are still yet to recover to 2008 levels.
Some of the difference between intra and intercontinental traffic growth could be explained by the fact that emerging market growth is helping to propel the latter. However, more broadly speaking, the potential reasons for sluggish short haul/intracontinental growth in traditional European and North American markets were hinted at by some interviewees. Changing business travel policies in the wake of the global recession have meant that companies may be more reluctant to pay for short haul business class flights, while continuing to recognise the value of long haul business class.