When countries went into lockdown to stop transmission of the coronavirus, travel — particularly business travel — took a brutal hit.
"Business travel as we knew it is never fully coming back," Airbnb (ABNB) CEO Brian Chesky told Yahoo Finance Live (video above). "The bar to get on a plane to go for a meeting is now higher, and fewer people are going to do it."
And though demand for travel is slowly picking up as the country heads into the summer, business travel will still face an excruciating uphill struggle, according to a new Barclays report.
"Global business travel — especially long haul — will likely be among the last markets to recover," Barclays economists wrote in a special report on May 25. "Companies were quick to halt international travel as the pandemic struck, and businesses will also be careful when it comes to restarting travel for work purposes."
Pre-pandemic, business tourism-related spending accounted for 21.4% of the global travel and tourism industry in 2019, with bigger contributions in countries like Canada, Japan, the United Kingdom, and the U.S., the authors stated.
Business tourism contributed to 1.5% of global GDP, and had been growing at an average of 3.6% over the last five years, they added, with the U.S. and China accounting for nearly 45% of all global business travel.
But between April and the end of December 2020, global spending on business travel fell 68% and is estimated to have fallen more than 50% year-over-year. (In contrast, in 2001, business travel fell around 11%; in 2009, it fell around 7.5%).
"Corporate travelers are disproportionately important for the aviation industry," Barclays noted. "They make up just 12% of airline passengers, but are twice as lucrative as non-business passengers, and account for nearly 75% of airline profits in some cases."
One of the key reasons for a possibly anemic recovery is that a state of "persistent pandemic may render some border restrictions permanent," said Barclays, "making international travel more difficult."
In other words, the dizzying variation in entry requirements and quarantine rules may give businesses a reason to rethink how much flying is actually necessary for their employees.
"Business travelers will likely reassess how much flying they need to do, balancing health risks associated with intermingling compared to virtual meetings from the comfort of their office," Barclays said. "Work-from-home and the swift adjustment of many work categories to video conferencing has led to behavioral changes that may be difficult to reverse. Increased productivity, with less time, energy, and money spent on travel is an added advantage."
And even if people are anxious to get back on a plane, countries' varying border restrictions will "make companies reassess what may or may not warrant a trip due to the higher cost of compliance and the risk of traveling for work in an uncertain or insecure environment," Barclays added.
For instance, if a country imposes a multi-day or multi-week quarantine requirement (such as in Australia), travelers have to spend it in hotels at their own cost. That is a "key impediment" to the industry's recovery, stressed Barclays, given that some quarantine periods are longer than the length of travel in a typical pre-COVID time period.
Chesky thinks that "there will be a new type of business travel that ... will emerge." For instance, when employees who are fully remote — having moved out of their company's state, for instance— come back for meetings, they may stay a longer duration than traditional business travelers pre-pandemic. So, Chesky added, "when they do make trips, they're gonna make them longer. It might be longer stays."
U.S. airlines are faring much better
The international aspect is key.
Domestically, while the situation isn't that much better for overall travel, some airlines are outperforming competitors, Jefferies Senior Research Analyst Sheila Kahyaoglu told Yahoo Finance Live (video above).
"Domestically-focused airlines are doing the best," she said. "[Southwest Airlines] LUV has been our top pick in the space. And if you look in Q2, their capacity is down about 16%. The other airlines are down anywhere from 25% to 40%."
Though traveling within the U.S. is much easier for citizens due to the lack of restrictions for Americans, there's still plenty of room for recovery.
"Overall, what we're seeing for air capacity from the U.S. major airlines, is [we are] about down 40% versus 2019 levels," Kahyaoglu said. "Domestically, we're down 22% for the upcoming week and into Memorial Day ... And internationally, we're down about 67%. So international is still quite weak."
Aarthi Swaminathan is a senior reporter for Yahoo Finance.