• tnwcorp2019

Will business travel in Dallas-Fort Worth ever be the same?

Source: Dallas Business Journal; Jul 13, 2020, 10:12am EDT

American, Southwest and North Texas corporate travelers are coming to grips with how business travel will change because of COVID-19.


The pandemic has Paul Treangen rethinking things.

Treangen is the CEO of Dallas-based TNW Corp., a shortline railroad operator. Like other companies, TNW embraced technology during the time of COVID-19. Some changes, he thinks, might even be permanent.


“I anticipate less business travel for TNW in the future,” Treangen said.


As companies like TNW and others across North Texas embrace videoconferencing technologies, some wonder how much it can take out of the business travel market going forward. If people get used to jumping on Zoom or Skype to talk with a client across the country, will they get back on a plane to conduct the same meeting after the pandemic is over?

Air travel demand fell off a cliff in March because of COVID-19. Four months later, leisure travel is coming back faster than business travel, said Jeff Pelletier, managing director of Dallas-based Airline Data Inc. This is evidenced by airlines adding capacity to leisure markets like Florida, Las Vegas and the Rocky Mountains. Before businesses start traveling again they will open up offices — something that hasn’t happened yet for many people.

“Even in my own industry, many of my meetings are now virtual even though we are travel professionals,” Pelletier said.


The question of when business travel comes back impacts North Texas greatly, which is home to two of world’s largest airlines in addition to a host of Fortune 500 giants.

Major corporate traveler customers in Dallas-Fort Worth contacted for this story like AT&T, Toyota North America, Lockheed Martin and Raytheon Technologies said employees haven’t resumed traveling, except for a few critical positions. It’s unclear how or if major corporate players in North Texas will alter their business travel strategy after the pandemic.

“Regarding post-COVID adjustments, we are actively assessing any permanent adjustments,” said Ken Ross, spokesperson for Lockheed Martin, which employs over 22,000 people in North Texas. “Too soon to say what may change.”


Importance of business travel

Economies of the world’s largest countries boomed and annual global travel spend, which includes air travel, hotels and food, steadily rose past $1 trillion last decade, according to the Global Business Travel Association.


Dallas-Fort Worth is an airline town. Between American Airlines’ and Southwest Airlines’ corporate headquarters and major airports locally, the two carriers employ 43,000 people in North Texas.


How quickly business travel returns will have a major effect on airline earnings, as corporate clients book expensive overseas, refundable or last-minute tickets. Last year, United Airlines accidentally revealed that Apple spends $150 million on flights annually with the airline.

Fifteen percent of global travelers are corporate, but 40 percent of airline revenues come from the corporate sector, said Mark Manduca, a travel industry analyst at Citigroup.

“A 1 percent movement in corporate travel volumes impacts airline profitability by 10 percent,” Manduca said. “That means that airlines are going to be unprofitable for the next few years.”


Videoconferencing here to stay?

With offices shuttered and conferences cancelled, people have embraced videoconferencing technologies. Tools like Skype and Zoom aren’t new, but managers’ hands have been forced without the ability to connect with employees and clients face-to-face.

Hank Benedetti, American’s global head of Corporate Travel, isn’t worried that the proliferation of videoconferencing will take a scoop out of business travel market share going forward. Why? Look at the past.


“There’s been no technological development in history that has inhibited travel,” Benedetti said. “Whether it’s the telegraph, telephone, fax, email and even videoconferencing. Videoconferencing existed before COVID. The truth is none of those things ever diminished demand for travel permanently.”


Benedetti said corporate travel is down 85-90 percent for American year-over-year, but some industries are starting to creep back like energy and defense contractors. There’s also a trend emerging between large and small companies.


“The smaller the business, the more likely they will continue to travel, if they traveled before,” Benedetti said. “The larger the business, the less likely they are to be traveling just because they can weather this.”


Return timing uncertain

When business travel does return, there’s a thought it won’t be gradual. That’s because businesses will generally start flying around the same time, said Doug Parker, American’s CEO and chairman, in May.


“I don’t want to sound too bullish on things none of us know. But what I do believe is once business starts to return, that’s not going to be that gradual,” Parker said during an industry conference. “Once business starts to return, business will return.”


Nailing down when that return will happen is difficult. Cases of COVID-19 have flared up in states like Arizona, Texas and Florida recently, and the U.S. as a whole keeps reporting record new cases of COVID-19 nationwide.


Before these last few weeks, Holly Hegeman thought business travel would start to return in September. Hegeman, a travel expert and founder of industry blog PlaneBusiness Banter, is now unsure of that return date.


“The airline industry is pretty much at the mercy of the increase in the number of infections,” Hegeman said. “If you had asked me two weeks ago, I would have held to that September date. The other thing of course are corporate events and people fly to those corporate events. They’d already postponed them to the fall, and now everything’s getting pushed back to 2021.”


Southwest looks to strike

Southwest has never been a big player in business travel. It doesn’t fly to international corporate hotbeds like Europe or Asia and it’s famous for its lack of a first class.

But that mentality of simply ceding the corporate flyer to American, United Airlines or Delta Air Lines is changing. Southwest made major investments to its corporate travel arm, Southwest Business, by improving technology and building its account manager headcount from 20 people to about 170.


“Hasn’t changed at all,” said Dave Harvey, vice president of Southwest Business, when asked if the airline’s plans around beefing up its corporate travel department have been altered because of COVID-19. He said the company is even ahead of schedule on some developments.


“It actually allowed us to get a little bit more focus and resource investment faster,” Harvey added. “With this being a big strategic priority for Southwest Airlines, it’s allowed us to get these things over the finish line with that much more sense of urgency.”

Those technology improvements include coming online with Travelport’s Worldspan and Apollo global distribution systems. Partnering with these GDSs give travel managers greater flexibility when booking or changing flights for their clients, and is key to penetrating the corporate travel market.


COVID-19 could actually present an opportunity for Southwest. When the economy worsens, that’s when businesses start taking a harder look at things like business travel strategy. With new investments coming online, Harvey thinks Southwest is set up to capture market share.

“This is relatively untapped potential for Southwest because we haven’t made the investments like some of the other guys in some of these distribution capabilities, as well as the sales team to go win the business,” Harvey said. “This is the highest-yielding customer. They’re going to buy a lot more of our refundable tickets because they need the flexibility. So, it’s a big step change and one of the most significant growth opportunities we have as a carrier in the next five-year horizon.”

14 views0 comments