Business travel is recovering after plummeting during the COVID-19 pandemic, but it will not look the same as before. A study of anonymized Ramp spend data indicates that travel spend has steadily increased this past year. Recent news of the spread of omicron will likely slow down this growth for the next few months, but conversations with finance, sales, and travel leaders make one thing clear: organizations should start rethinking how they manage their T&E in 2022 before travel resumes in full force.
Business travel spend returned in 2021
Taking a close look at the card spend for a cohort of businesses who joined Ramp prior to January 1 last year, we see a detailed picture of how business travel is trending. After an abrupt stop to business travel in early 2020, more and more companies are once again sending their employees on trips. Travel expenses for Ramp customers jumped from 2.2% of their card spend in January 2021 to 6.2% of spend in November. Indeed, a survey from the Global Business Travel Association predicts that global business travel spend will have a full recovery by the end of 2024 to the tune of $1.48 trillion. Global business spend is expected to increase by 38% in 2022 alone.
Breaking down our data by company size shows that, despite a dip in November, travel spend has risen sharply among companies with more than 250 employees.
Industries that have seen the most travel pickup include capital goods, commercial & professional services, and diversified financial services.
But with Zoom calls becoming the norm in this day and age, companies should carefully reconsider the goals of business travel before dialing up T&E spend. They need to be asking themselves: who needs to travel and why? We spoke with leaders at Ramp and Flight Centre Travel Group for advice on how organizations should think about T&E in the coming year. (Check out our page on travel and expense policy examples for more information).
New T&E headwinds and tailwinds
1. More remote workers traveling to visit offices = greater need for spend control
In the past, roles that required travel were typically siloed from those that didn’t. Sales and business development folks traveled frequently while other roles may not have traveled at all. With more businesses adopting hybrid work environments, employees who would have never normally traveled are finding themselves making visits to the office on a yearly, quarterly, or even monthly basis.
Ramp’s Strategic Finance and FP&A Lead Asher Kaplan says that a tailwind for T&E will be more travel to offices by remote workers. “There's a lot of value in having a remote workforce, but there is some concern that it comes at the cost of fostering office culture,” explains Kaplan. “So a key reason for why we want Ramp employees to meet their teams two to four times a year is definitely strategic in the sense that we want to have a cohesive workforce, we want our employees to grow those crucial relationships.” For most businesses, this increased cost of travel will be offset by the decrease in office and other operating costs.
With more employees working remotely, finance leads should start thinking about the functionality of T&E management by setting up a travel policy for remote employees and having the right business credit card and controls in place to automatically track T&E expenses quickly and prevent out of policy spend before it happens. Otherwise, finance teams may find themselves overwhelmed with an influx of decentralized spend that will only grow more complicated over time.
2. Trip ROI will be under greater scrutiny
The value of travel will be assessed differently in a post-pandemic world. While traveling to meet clients may have been the status quo before COVID-19, it is no longer the default. Instead, CFOs and other leaders are carefully calibrating the ROI of travel before they send teams OOO.
“We’re definitely giving more thought to the value that we truly derive from travel. Pre-pandemic, traveling was the norm, with the perception being that you needed to travel to see clients to complete sales, but with the pandemic, we’re thinking more about the ROI and whether travel is truly necessary,” notes Kaplan.
Sales leaders are being especially calculated in how they decide who’s traveling and who’s remaining in-office. “I’m very critical of every event that my team has to travel to. For me to take somebody off the floor or off the phone, it needs to give me a proper ROI,” explains Ancy Joseph, Head of Sales and Account Management at Ramp.
And this more deliberate spend analysis of costs and extra scrutiny of ROI will likely have an outsized effect on junior employees rather than senior management. This is mostly due to the fact that junior sales members often work more with smaller accounts, which typically aren’t as relationship-based as larger accounts. “Prior to the pandemic, junior sales executives and sales managers traveled to see clients. Now we’re of the mindset that you have to make a meaningful and strong business case to travel to see smaller accounts” notes Kaplan.
Enterprise deals, usually helmed by more seasoned sales veterans, will still necessitate travel.
“I do think that for larger deals, especially enterprise deals, the travel will pick up. This is necessary because enterprise deals are very relationship-based and require a lot of multithreading. And that can really only happen when you're in person. So I do see travel picking up primarily for the larger deals and less so for the mid-market and SMB ones,” says Joseph.
3. Conferences are coming back
The industry was decimated in 2020, but as we move into 2022, the business convention forecast is looking far more optimistic. A recent report from Allied Market Research predicts that the global events industry will generate $1,552.9 billion by 2028, from $1,135.4 billion in 2019. While Zoom is an adequate replacement for 1:1 business meetings, industry events have been harder to replicate virtually.
“We’re already seeing [a comeback in conferences] occurring,” says Flight Centre Travel Group’s SVP of Corporate Brands Chris Lynes. “Throughout the pandemic, companies have been largely dispersed and in remote settings. Some companies were set up well to thrive in these conditions, while many struggled to adapt and are seeing their company cultures diminish. Our event business is busier than ever planning and executing both large and small-scale conference travel.”
Conferences also appear to be an exception to the rule of junior team members traveling less. Business events offer these employees an opportunity to have in-person meetings and interactions with prospective clients. “As we have more events happening, like SaaStr and Money 20/20, you'll see more junior reps attend those events because they'll be manning booths, looking for leads, and passing out business cards,” says Joseph.
4. Travel logistics are shifting
Travel is coming back, but everything from preferences to the planning process will be markedly different. Shifting travel preferences are necessitating new types of logistics and vendor support. For example, our data shows that Airbnb has experienced a substantial rise in bookings, with a 5x increase seen year over year from 2020 to 2021.
And as Robinhood recently noted, “only about 22% of Americans plan to stay in hotels this season. Room prices have jumped as demand recovers, but sales at Hilton and Marriott are still down from pre-pandemic. Marriott’s international bookings plunged a whopping 40% from 2019, as overseas travel continues to lag US leisure. On the flip side, Airbnb just had its best quarter ever, as travelers embraced longer-term stays in rural cabins and yurts." While there was a dip in Airbnb transactions on Ramp cards in November, likely owing to the holidays, we’re expecting business travel preferences to follow a similar trend as the consumer figures.
Last-minute bookings and laissez-faire trips have been replaced with a greater need for planning and consideration of logistics. “The booking process now requires much more emphasis on the pre-departure planning than ever before,” says Lynes. “Travelers are relying on their travel consultants with greater reason as they attempt to navigate their way through the volume of information regarding destination requirements, accepted proof of vaccination, and testing both before travel and when returning home. The entire process is different, resulting in added stress to business travel that didn’t exist pre-Covid.”
Lynes explains that there are numerous factors that all add up to a greater need for preparation ahead of travel. “Add to that reduced airline capacity, schedule changes, scaled down airline staff, and less options should you run into flight disruptions, the result is more time and effort overall in the booking and planning of travel.”
While airlines may be experiencing staffing and scheduling issues, travelers are ready to take to the skies once more. According to our data, airline spend is rising steadily. For the first time since the pandemic began, airline spend is greater than 25% of total travel spend.
Those traveling by car are becoming increasingly more comfortable with taxis and rideshares. Spend in that category increased from 4% in January to 8.2% in November, while spend on car services dropped from 12% to 1% within the same time period.
Strategies to keep T&E costs under control
T&E used to be primarily sales focused, but in 2022 travel will become a need of every employee, especially in companies that have moved to home offices. How do you go from monitoring T&E costs for a few dozen people to an entire company?
First make sure you create a new T&E policy that defines how often employees should travel and what business expenses can qualify for reimbursement.
Next, consider what tools, workflows, and T&E processes are needed to ensure that employees comply with your policy.
One way to help increase controls and stay on top of decentralized spend is through finance automation. Automating your T&E expense management can help you save time and money, decrease manual processes, simplify T&E reporting, and prevent your finance team from having to be the “bad cop” of enforcing expense policies.
Examples of using automation for spend controls include:
- Automatically issuing a corporate card to all of your employees (yes, really).
- Creating card-level controls to automatically enforce your T&E policy, such as daily transaction limits for per diems and business expense category restrictions.
- Creating multi-level approvals, so you can guarantee that approvals are reaching the appropriate contacts, without a bottleneck.
- Automatically matching receipts in real-time to automate costly employee expense reporting.
- Automatically categorize and code transactions to reduce expense accounting time.
This is the second in a series of reports based on completely anonymized spend data on the Ramp platform. The data comes from a cohort of businesses on Ramp who joined prior to January 1, 2021. At Ramp, we believe in the power of data to help everyone reach financial fitness.