Bloomberg Línea — Nearly 30 trips per year from Brazil to Europe, many of them “in-and-out” to Germany. This used to be the routine for the President and CEO of Volkswagen Truck and Bus, Roberto Cortes, before the COVID-19 pandemic.
The experienced executive used to accumulate the equivalent of 35 circumnavigations of the Earth in distance traveled by flights. In five years, he filled out five passports with stamps. And Cortes was one of the most frequent passengers on the German airline Lufthansa worldwide. But the routine of him and other frequent-traveling executives has changed as companies resume corporate travel for meetings or events. With the transformation of the work model in companies of various sizes and the widespread use of digital technologies for communication and meetings, corporate travel has become less frequent and has changed its profile in the post-COVID recovery.
As the global head of Volkswagen’s heavy vehicle brand and a member of the executive board of the German group Traton - the owner of Scania, MAN, Navistar, and Volkswagen Truck and Bus - Cortes still travels to Europe at least once a month, but the frequency has dropped by half from what he was used to before the pandemic. “In other areas of the group, trips have fallen by about two-thirds. It’s a learning process; today, many issues can be discussed virtually, although some meetings are still in person,” said Cortes, who, due to his position, still has as one of his responsibilities to participate in-person in meetings that decide the direction of the conglomerate. “Before, it was my children who asked when I would travel again. Now it’s my grandchildren,” said the executive in an interview with Bloomberg Línea.
The change in the executives’ routines has been reflected in the numbers of the corporate travel sector. Although it has recovered its pre-pandemic revenue, there has been a decrease in the number of trips.
Data from the Brazilian Association of Corporate Travel Agencies (Abracorp) show that in August, the volume of domestic air travel (one of the 11 segments monitored by the association) was 13% below the same month in 2019, before the pandemic. However, revenue increased by 16.5%.
In parallel, the revenue from car rentals in August more than doubled compared to the same period in 2019, according to Abracorp, indicating a shift from air travel to land transportation for shorter distances.
“As the demand for corporate travel continues to grow and the average airfare has increased significantly, we believe there has been a greater flow towards car rentals,” said the executive director of Abracorp, Humberto Machado.
In the cumulative data for 2022, the sector generated R$ 11.2 billion in revenue, below the R$ 11.38 billion recorded in 2019, the pre-COVID level.
For Gol, the leading company in the corporate travel segment, there are both positive prospects and areas that require caution, according to CEO Celso Ferrer, who commented on the second-quarter results call at the end of August.
“We started the year with a stronger first quarter, and we expected the corporate segment, when you move away from the high season of the first quarter, typically the second and third quarters have a very important role for business passengers. And May and June were months in which this demand came in a much more timid way than we expected,” he said during the conference call.
“Now, we are assuming that the pace of this business segment will be different. It is growing. The good news is that it is growing. However, the growth rate is slower than what we had assumed, and therefore, this brings caution,” the executive stated at the time.
Cultural Shift
On the side of companies that are not in the aviation sector, there are many reports of a decrease in business travel.
One example is the consulting firm KPMG. After the pandemic, the approval of business trips became much more rigorous within the company, according to Luciene Magalhães, the leader of human capital at KPMG. The executive once visited five South American countries in just one week.
“During the trip, I slept on the plane every night. It was a circumstance of my role and the modus operandi of the time,” the executive said. “Would we do it again today? After the pandemic, we have started to discuss and question this type of situation much more,” she reflected.
Magalhães used to travel internationally from Brazil up to twice a month due to her job. Many times, she would take a flight to London, have a six-hour meeting, and then catch a return flight.
“The pandemic came and changed everything. In general, what we see in the market and within KPMG as a whole is a significant reduction in travel expenses,” she stated.
She recalls making numerous trips from São Paulo to Belo Horizonte for meetings that lasted just one hour. “This has been abolished from our agenda for various reasons. Technology allows us to conduct these meetings virtually. Moreover, we need to align with decarbonization demands.”
According to Magalhães, after the pandemic, companies started evaluating whether in-person meetings are the only possible solution, especially with the steep rise in airfare prices.
“We’ve seen a significant reduction in ticket issuance, hotels, and vehicle rentals at KPMG. This new culture is a challenge; it’s a shift in mindset where we always question whether the trip is truly necessary.”
Magalhães noted that quick in-and-out trips no longer happen, and both the cost and the duration of the stay at the destination are crucial for travel approval. “This is a trend that’s here to stay.”
In a report by Citi on September 20th, analysts stated that there is an increase in demand for airfare compared to pre-pandemic levels, but the demand is showing pattern changes, including consumers who “are no longer in the office five days a week” and fewer business trips.
In a June report, Citi also mentioned that “many investors are not confident in the evolution of the new normal for airlines.” According to the bank’s analysts, we need to wait and see if the demand changes are structural.
“It’s worth noting that office occupancy rates in the United States have decreased post-pandemic, and adjustments in consumer habits may be fueling changes in travel and ticket-buying patterns,” they said.
The investment bank cited the booking pattern as an example: purchasing tickets closer to the departure date, which is generally more expensive (a characteristic of corporate travel and a major source of revenue for airlines), has shown less strength today compared to 2019. On the other hand, prices and advance bookings seem stronger.
New Normal
According to Bruno Martins, CEO of the specialized consultancy Trilha Carreira Interativa, corporate travel has been extensively reshaped. “Now, it only happens when there’s a need to close a deal, when discussions are already in an advanced stage,” he said.
The consultant noted that companies are adopting remote work models to save expenses, and as in-person meetings demand more from the schedules of those involved, this impacts the volume of business trips. “In this context, I see a new culture in the corporate world.”
On the other hand, demand for conferences and team integration events has been growing, especially for destinations with a natural appeal, the specialist emphasized. “For this type of activity, the company’s budget has increased.”
Martins projected that business trips will continue to decrease in his view. “Companies won’t return to investing in corporate travel as they used to.”
Executives who travel frequently have maintained some perks from the pre-COVID times that help alleviate the exhausting travel routine, even though the frequency has decreased.
Roberto Cortes from Volkswagen Truck and Bus enjoys certain privileges due to his frequent flying status, which falls under a differentiated passenger category. The executive is entitled to a special transfer service by Lufthansa and typically doesn’t face queues like other travelers. He also has his preferred seat, receives two pillows, and a lighter blanket.
“This reduces the stress of boarding, and the team already knows my preferences,” he said.
At Frankfurt Airport, one of the busiest in Europe, Lufthansa’s car picks up the Volkswagen chief at the aircraft door, especially when connections are tight. “It’s a convenience; I don’t have ‘airport stress.’ But when I travel for leisure, it’s not like this,” he emphasized.
These privileges primarily alleviate “in-and-out” trips. In some cases, Cortes faces 30 hours of travel to attend a three-hour meeting, especially as a board member of Traton. “We even have some of these meetings at the airport,” he mentioned.
Nevertheless, he has noticed a change in habits that is likely to further reduce corporate travel over time. According to Cortes, technology has been used for longer in the United States, while in Germany, they still emphasize the “four-eyes principle” - the famous face-to-face meeting.
“The current number of corporate trips indicates a long-term trend of these journeys decreasing by half compared to the pre-pandemic period,” he estimated.
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