26 July 2016
Although growth has been modest, disruptive travel businesses like Uber, Lyft and Airbnb have all recently jumped on the bandwagon, trying to capitalize on this profitable market sector that is ripe for more seamless services.
For example, competition among transportation companies has been intensifying in recent years.
Two years ago, in a bid to corner the steadily growing corporate travel market, Uber launched Uber for Business, simultaneously signing a partnership with travel-and-expense management company Concur Technologies. Meanwhile, Lyft – its rival – secured a high-profile partnership with Apple.
Similarly, Airbnb has also been stepping up its bid to attract business travelers as it competes with other online lodging services such as HomeAway, who look to profit from the fact that home-sharing bookings by business travelers are up 56% from last year, according to a recent report from Concur.
As they further embrace self-service technologies and personalized travel options, business travelers make up 10% of Airbnb’s business, a proportion that continues to rise.
In fact, research shows that in some cases companies can save up to 37% through Airbnb.
The company recently signed partnerships with three major travel management companies: American Express Global Business Travel, BCD Travel and Carlson Wagonlit Travel, giving it a serious boost in its campaign to break into the corporate travel market.
With current technological advancements, providing a seamless customer experience and keeping up with consumer needs have become priorities for businesses in this industry, whether through updated technology, state-of-the-art infrastructure or service availability.
Interestingly, although the business travel industry is rapidly evolving in its offerings, the same can not be said of the industry’s overall growth, which for the most part has been modest.
According to a new report released by the Global Business Travel Association (GBTA) Foundation, industry spending topped $1.2 trillion USD last year, growing 5% since 2014. In addition, it is forecast to reach $1.3 trillion this year – double the figure in 2000 - and to grow nearly 6% on average over the next five years, to $1.6 trillion by 2020.
Despite growth, the industry has struggled with volatility over the past 15 years.
Business travel plummeted, for example, in the 18 months following the 2008 financial crisis, clawing back to positive territory with considerable effort. It enjoyed robust recovery in 2010 and 2011, but growth since then has been measured, if steady – no small achievement given global uncertainty and signs of a weakening global economy.
With risks from unexpected events like the UK referendum removing Britain from the European Union, global terrorism threats, increasing risks in domestic and global economies, an attempted coup in Turkey and the upcoming US elections (to name just a few), cautious optimism rules the forecast when it comes to the business travel market.
"Cautious," though, is the operating word. The Brexit vote, for instance, has left travel industries (and many others) with many questions and few answers. Among them are: Will UK citizens maintain EU passenger rights protection? How will new trade agreements affect business travel demand overall? What happens to border control rules for business and leisure travelers? And what about visas for expats?
Although travel management companies like American Express GBT and BCD Travel have made statements expressing the fact that travel process and route access changes are not imminent, uncertainty still runs rampant and as a result, UK travel stocks have declined.
All that said, business travel is skyrocketing in some regions. In a market sharply defined by the prevailing economy and technology, the industry has been driven by increased globalization and technological progress.
This year, China’s business travel market took the top spot from the United States and is forecast to grow 10.1% this year, compared to only 1.9% in the US. Despite the slowing Chinese economy, investment in travel infrastructure continues and, as GBTA Executive Director and COO Michael McCormick noted, “China’s business travel market remains one of the fastest growing in the world.”
Meanwhile, India has witnessed the world’s greatest growth rate in corporate travel. Thanks to globalization of organizations and rising income levels, it is quite possible that India will reach Chinese ($291.2 billion) and American ($290.2 billion) levels of spending in the next decade or so – a huge increase for a market with current spending at $25 billion.
The tides are shifting. The business travel industry is in a critical transition phase where lightning technological advancements are forcing the industry to evolve at a time of high uncertainty, defined by moderate growth.