The cancellation of the World Economic Forum’s Singapore meeting and the gathering exodus of participants from the World Mobile Congress in Barcelona do not bode well for the near-term future of business travel.
When even Davos man, with all his material advantages, connections and privileges, doesn’t feel safe enough to gather with large numbers of his own kind, it’s probably safe to assume that a return to some semblance of a normality — even of the new variety — is a long way off for business travel. The event’s organizer, the World Economic Forum, has attracted notoriety over the past year for its modest plan to “reset” just about everything that exists on planet Earth, mainly for the benefit of its own corporate sponsors. But for now, as Covid rages across Asia, it’s unable to even hold a summer version of its annual conference in Singapore.
“Regretfully, the tragic circumstances unfolding across geographies, an uncertain travel outlook, differing speeds of vaccination rollout and the uncertainty around new variants combine to make it impossible to realise a global meeting with business, government and civil society leaders from all over the world at the scale which was planned,” the organization said in a statement.
The event, whose theme was slated to be “The Great Reset”, had already been rescheduled twice and had been moved to Singapore from its traditional location of Davos, Switzerland. But Singapore is suffering another outbreak of Covid-19, which has forced the local government to close schools and postpone a long-anticipated air travel bubble with Hong Kong that was supposed to begin on May 26. Like Davos, the scheme has faced multiple delays from its initial launch date in November 2020. As a result, two of Asia’s biggest business remain cut off from each other for the foreseeable future.
Global Tech Giants Pull Out of Mobile World Congress, Again
In Europe, the organizer of the Mobile World Congress, the GSMA, insists that the show must go on even as many participants pull out. Scheduled for late June, the world’s biggest mobile trade fair has lost so many key exhibitors in recent weeks, including Samsung, Lenovo, Ericsson, Sony, Google, IBM, Nokia, Qualcomm and Oracle, that it’s now being dubbed the “zombie show”. Without these exhibitors, there’s not much of an exhibition. With a month and a half still to go, there’s time for more companies to drop out.
The MWC has been an annual event in Barcelona since 2006. It is a key showcase for global tech giants and telcos. In 2019 it drew 110,000 attendees from almost 200 countries. That sprawling global reach, once considered a major attraction, makes the event a perfect melting pot for transmission of COVID-19. Last year’s event, scheduled to take place at the end of February, was one of the first big conferences to get cancelled as industry stalwarts pulled out at the last minute.
This year’s event features a much lower capacity (40,000 people) as well as safety measures such as mandatory PCR testing (every 72 hours), temperature controls and mandatory mask wearing. The GSMA has been positioning MWC as something of a hybrid event. But with so many exhibitors dropping out because of concerns over covid, it’s not clear what the in-person dimension will look like.
If the event is cancelled a second time, the world’s biggest tech firms and start-ups will miss out on another chance to showcase their latest products to their biggest customers on the largest stage. But that is nothing compared to the economic pain that awaits for companies in the travel and tourism sector.
Airlines and travel agents will lose out on yet more flights, tours, and other travel services. It could also be the final nail for some hotels and hostels in Barcelona. Many have been closed for the past 14 months. But they are still having to pay fixed costs such as rent and taxes while generating zero income. For those that stayed open after March 2020, revenues collapsed by roughly half for the remainder of the year.
In a normal year — which we’ve not had for a while — the MWC generates 14,000 temporary jobs and around half a billion euros, much of which ends up in the pockets of local taxi drivers, owners of bars, restaurants and hotels, prostitutes and their pimps and madams, Airbnb hosts, and the thousands of professional pickpockets that converge on the city for the four-day event.
That money has all dried up. And now businesses in the city just want some sign that international tourism will soon resume. Even a pale imitation of the normal event is better than nothing, says Pol, who owns two small hostels that have been closed since March 2020:
“Even if it goes ahead with just a third of the normal number of attendees, it might give a chance for the city to begin to get back on its feet. For us, it might mean being able to finally fill four or five of our beds. Right now, that’s about as much as we can hope for.”
No Recovery In Sight for Business Travel
As vaccination take-up increases across Europe and North America, leisure travel is beginning to pick up. To take advantage, countries like Spain, Italy and Portugal are quickly reopening their borders and reversing Covid-19 restrictions. For these countries tourism represents a huge chunk of the economy. And last year was a complete wipe-out, leaving thousands of businesses on the brink. In Spain tourist arrivals by air, land, and sea collapsed by 77% from 2019, according to the National Statistics Institute (INE).
But there is no recovery in sight for business travel. And it’s business travel that is the most lucrative source of income for airlines, essentially subsidizing leisure travel’s lower fares. Airlines have already cut capacity drastically on business-travel routes.
Business conventions, conferences and other junkets were also huge money makers in the pre-pandemic era. In Germany and the UK they generated $123 billion and $92 billion respectively in 2017. That money has now run dry.
It is impossible to know how much of this activity will recover in the long term. In the short term the signs are not encouraging. Companies have discovered that it’s perfectly possible to service most existing clients remotely. And they are saving huge sums of money in the process. What’s more, many seasoned business travellers don’t exactly miss life on the road, or up in the sky.
“For a lot of people, frequent business travel has become more of a burden than a perk,” said Scott Cohen, a professor at the University of Surrey in England who studies business travel.
Almost half of the executives surveyed by healthcare provider Bupa Global said they believed they had better mental health from travelling less. At least one in four intend to cease all time spent away from home for work this year. Obviously, some business travelers can’t wait to get back in the saddle. But the longer the pandemic remains a threat, the more businesses will be forced to seek alternatives.
There is also a growing realization of the environmental impact of excessive business travel. In February, Lloyds Banking Group pledged to reduce its travel carbon emissions by more than 50% from their pre-pandemic level. Standard Chartered, which is based in London but does the lion’s share of its business in Asia, Africa and the Middle East, forecasts that travel will fall by a third. Dutch lender ABN Amro is telling its employees to travel by public transport, and use only trains to move between its locations in Europe.
The impact on airlines has been brutal, particularly for those most exposed to the high-end business segment. In the US Delta has positioned itself to cater specifically to business travelers, particularly on international routes, and is now paying the price. As my WOLF STREET colleague Wolf Richter reported yesterday, Delta has been hit harder than other US airline during the Pandemic.
Its net loss of $12.4 billion in 2020 was the highest in the industry, compared to American Airlines’ net loss of $8.9 billion and United Airlines’ net loss of $7.1 billion. Southwest, which is focused on leisure travel and has only a few international routes, lost $3 billion in 2020.
Delta CEO Ed Bastian told the Wall Street Journal last week in terms of the US domestic business travel segment, “We’re only right now 25% to 30% of where we should be. I think by the end of the year that will be at least twice that.” So by the end of 2021, domestic business travel would be about 50% or 60% of where it “should be?”
“International business is going to probably be another year from now,” he said – meaning down by about 50% by the end of 2022?
For cities like Barcelona that have come to depend upon business travel and the sprawling ecosystem that’s sprung up around it — the luxury hotels, restaurants and shops, the exclusive tours, junkets and car rental companies — a return to some semblance of normalcy seems a long way off. For the many businesses that have grown up around that ecosystem, time and money is fast running out.
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Is there any record of what Diogenes said when he was hounding the megamaniacal Alexander?
As it happens, on an interstate drive last week I belatedly listened to Hubert Horan’s interview with Izzy Kaminska for FT Alphaville about the airline business and touching on business travel more broadly. Here it is, icymi (from September, still germane).
How heavy was the traffic during your travels?
interstate in Australia that is, so, not particularly heavy – long distance between cities where the largest population town in between might be ~40,000. I’ve been on a few flights this year fwiw and they’ve been pretty busy, sometimes full, though I don’t think the carriers are running as many services as in 2019.
I would like to think that this fall in business & tourist travel is long-term. Countries and locales should get back to living without the expectation of people by the millions being able to use energy-gobbling machines to travel around the world to spend cash, take some photos, enjoy a sex worker’s services and then use more energy travelling home. If we are serious about mitigating climate disasters this will be the case. But I see no reason to believe this is anything more than temporary. My local airport here in NE England was the subject of the recent mayoral election with candidates vying to win first place as to who could expand it fastest.
Is it a GA (general aviation) airport? A news story last week stated that Bend OR was expanding their airport due to increased private jet traffic. The reason given was that the local rich wanted to avoid Covid on commercial flights.
Zoom is so much less expensive than Travel and Hotels.
Meeting large clients, I can see recovering to some extent.
The future of trade shows is Virtual, without the beautiful models.
Back to the ’50s, when plane travel was occasional if at all.
I’m old enough to remember when the term “jet set” was in common use. Those who were considered part of this set were those who could afford to fly more than once or twice in a lifetime.
I first flew at 22 months old, and have flown over 3 million miles.
Air trips I recall as a child, in the ’50s and early 60s, a a UK Expat in Nigeria, were wrapped in luxury.
The contrary thought, from a former marketer of very high end financial services, is that travel will be back on. “If you don’t travel, the guy who does will eat your lunch.” Conventions and intra-company travel may be greatly reduced, but visits for the sale of pricey and complex products and services will return once the execs and managers are back in the office (which most companies outside tech keenly desire).
It is already back on. My husband has a packed business travel schedule. He has said it is pretty grim on the flights. And he is a total extrovert. He is going to have to fly in and out from our beach trip while I drive kiddos and dogs.
This article reads like the stories of how introverts and extroverts are coping with the Pandemic. Only here, you have those that love jetting off to a place like Davos and mixing with the elite along with those great restaurants while you have the other group who would rather sleep in their own beds, save on the jet-lag and living out of a suitcase and just do their work over zoom. You hear about similar with some bosses demanding that their workers risk their lives coming to work just so those bosses can lord it over them and establish who is top dog. Meanwhile, other companies are learning to do telecommuting with their workers and are saving a mint with office floor space that is no longer needed.
I doubt if the ramifications of all of this are fully understood, even now. There is a complete high-cost international economy organised around business travel, which includes hotels, restaurants, taxis, and in many countries trains. That’s where the money is spent, that’s where the profits are, and that’s what keeps many of these institutions afloat. Moreover, there’s been a tendency in recent years for towns and cities to plunge into this market, to close down boring and dirty factories making things, and to gamble everything on being upmarket convention and tourism centres. Whilst you’re seeing the beginnings of the return of low-end, low-profit tourism, that’s not, by definition, where the money is. I wonder what’s going to become of all these splendid new conference centres with luxury hotels attached, and the interpreters, support staff, concierges and taxi drivers who make their money from servicing them?
That said, I can’t help worrying that the virus may also encourage all the worst habits among the bean-counters and penny-pinchers who run organisations these days. The reality is that you can’t do any kind of international negotiation, up to and including formal diplomacy by Zoom. It’s just not possible, and indeed we saw the Brexit negotiations last year return to this mode as soon as it was feasible. The same is broadly true for any kind of international process that is built on personal contacts. There was a time when I was involved with exports to different parts of the world, and it was noticeable that those European companies that prospered were ones that were prepared to put the effort in. There are Asian cultures, for example, where you buy only from people you know and trust, even before you get to price negotiations. In such cultures, you are expected to prove your interest and commitment by making repeated visits, perhaps over a course of years, before you become accepted and trusted. On the whole, British companies were reluctant to put the time, effort and money in to such activities, which is why they generally lost out as well. The same applies in government: one reason the US has a lot of influence, is that it deploys massive resources. As one Asian government official complained to me “if I have a problem there are ten Americans in my office the next morning. With you lot I’m lucky to get my call to the Embassy returned.”
Fantasies that technology would replace in-person teaching, meetings and negotiations were always more popular among technology pundits and evangelists than they were among those who actually had too use the technology. The virus has rather put all that into perspective.
I think you can replace _some_ of the in-person stuff, but that’s the one which tends to be fairly technical where both sides operate from the same set of facts etc., and importantly, they have already established a rapport.
If there’s no rapport (trust, whaever you want to call it) established, no amount of online meetings will make it.
Although I have to say that there are people around NC who I think I might have some rapport with over the years despite never meeting them in person. But it took years to build (if I do).
But it took years to build (if I do).
Your wisdom has always been much appreciated by me and I, for one, hope you continue
If demand collapse of business travel also has the knock-on effect of raising the floor on subsidized low fare tickets prices — at least for international travel — it think it bodes well for a) slightly ameliorating the “vulgar American tourist” stereotype and b) allowing popular tourist destinations to recover from crapifying the lives of their local residents.
When everything is a commodity, it’s devalued. If seeing the Louvre or Great Pyramids or The Sistine Chapel is slightly more of an inconvenience than hitting up the local McDonald’s, any reverence for the locales and the locals evaporates. I would hope a higher price point for those seeking to experience such treasures would incentivize them to exhibit more reverence for the place and its people. My Deutsch is generally good enough to pass as German outside of Germany itself. Americans just don’t give a fsck and exhibit no self-awareness abroad, so I never consort with them.
That said, maybe it’s the mobile phone era that’s to blame for most of it.
Cameras are not allowed in the Sistine Chapel.
It is magnificent.
> When everything is a commodity, it’s devalued. If seeing … The Sistine Chapel is slightly more of an
> inconvenience than hitting up the local McDonald’s, any reverence for the locales and the locals evaporates.
Amen. :-) Actually, the Sistine Chapel is a very good example. In the hallway just before you enter, there is a sign saying something to the effect that it is after all a consecrated chapel and to please show some respect, including “Silence!” But when you get inside, there is cacophony. At one end of the room is a small platform, standing on which is a priest or deacon or somebody, with a microphone. When the noise level gets too bad, he’ll say “Silenzio!” and the chattering will instantly cease. But it only lasts about ten seconds (or less) until a low buzz starts again and in no more than two or three minutes all reverence has once again evaporated, forcing microphone man to do his thing all over.
Capitalism failed to restart. A recent hardware or software change might be the cause. To fix the problem:
If you do not have this disc, contact your symbol manipulator or economist for advice.
Status: 0xc0ffc0ff
Info: The Great Reset failed because the network is inaccessible.
(There is still time to switch to Linux.)