The global business travel industry has lost billions in client revenue due to the pandemic, creating an overcrowded marketplace among business travel agencies, and some firms will need to consider mergers and acquisitions (M&A) to consolidate competition, drive revenue, and develop operational efficiency, reports GlobalData, a data and analytics company.
The international sector was by far the worst affected, facing a 75 per cent drop in total trips, while domestic business tourism also suffered, dropping by 56 per cent (a 63 per cent decrease overall in 2020).
As a result, GlobalData predicts the industry might see mergers happening between Small and Medium Size Enterprises (SMEs) to give themselves more purchasing power in the industry. Some major players could also look into merging to reduce overheads and increase sales and revenue.
Craig Bradley, associate travel tourism analyst at GlobalData, commented: “Consolidation often occurs so a business can become a leader within an industry. When a company purchases or merges with another company, it reduces the number of competitors and enlarges its client base. However, in the current climate, revenue, efficiency, and cost reduction are the key motivators for M&A. The increase in overall revenue will give merged business travel firms more influence in the industry, allowing them to control pricing, take on niche markets and generate more leverage with its suppliers.”
As organisations have scaled, so have business travel agencies. Corporate clients, once worth millions in revenue, are worth a fraction of the value now. Many industry commentators have argued that this is just a momentary shift. However, many business travel clients have adapted to the pandemic by becoming more efficient and innovative, developing new ways to communicate, likely leading to a reduction in travel demand for the long-term.
Bradley added: “Communication technologies such as Zoom, Microsoft Teams and Citrix have helped companies maintain employee engagement, collaboration, and partnerships throughout the pandemic, resulting in many companies questioning their corporate travel budgets.
“According to a recent GlobalData poll, 43 per cent of respondents said their company’s corporate travel budgets would ‘reduce significantly’ in the next 12 months, suggesting that businesses will continue using communication technologies and carefully consider the necessity of using precious capital for flights and other travel expenses.”
