HVS Monday Musings: Corporate Travel is Bouncing Back, but Omicron is a Threat to Recovery
By Mandeep S Lamba, MRICS, President (South Asia), New Delhi and Dipti Mohan, Senior Manager - Research, New Delhi
Corporate travel has been gathering up steam globally, albeit slowly, as after several months of virtual meetings and video conferencing, in-person meetings are finally making a comeback. According to a recent report by World Travel & Tourism Council, global business travel spending is expected to rise 26% in 2021 and 34% in 2022, bringing it to two-thirds of pre-pandemic levels by the end of 2022. This rebound is likely to be led by the Middle East and Asia-Pacific regions.
Corporate travel in India has also been witnessing green shoots in recent months, with most industries reverting to a full or hybrid work-from-office model. The high vaccination rate, a decrease in new cases, and the reduction of travel restrictions across states have all been contributing to this recovery. As a result, air traffic in key commercial hubs such as Delhi, Mumbai, Bengaluru, and Hyderabad has more than doubled during the Apr-Oct 2021 period compared to the previous year. Demand for office space is also improving, indicating the positive business sentiments in the country. According to ANAROCK’s latest report, net office absorption in India’s top seven cities grew by 29% in H1FY22 over the previous year. Small-to-medium-sized MICE events are also gaining momentum.
Corporate travel has, therefore, started contributing 20-25% of hotel business in some cases, a much-needed positive sign for the sector. There is a significant recovery in demand from sectors such as manufacturing, healthcare, pharma, FMCG, consumer durables, and financial services, while demand from IT & ITES is recovering at a slower pace. However, just when things were looking up, the world has been hit by a new COVID variant, Omicron, resulting in increased travel restrictions across the world. India is taking a cautious approach at the moment, imposing certain restrictions and delaying the resumption of commercial international flights, but the situation is likely to evolve further in the next few weeks. Corporate rates were already under pressure as companies continued to limit travel budgets, and this new development is resulting in an increase in cancellations, which we expect will tide over as more information about the variant becomes available. However, with rising input costs adding pressure on the bottom line and the growing concerns about Omicron, most companies will focus on critical and crucial travel in the short to medium term, slowing the segment’s recovery.