Heading into the second half of 2023, travel budgets show no sign of retreating even as corporate travel leaders look to reduce costs with virtual meeting technologies, according to Morgan Stanley research.
Travel manager respondents expect second-half 2023 travel budgets to be up more than 9 per cent on average year over year and project a strong 2004, according to a Morgan Stanley survey, which collected responses from 92 corporate travel managers globally from May 16 to May 31. Travel managers surveyed had an aggregate global travel spend of approximately $5 billion.
Thanks to easy comparisons against the omicron-impacted first half of 2022, first-half 2023 budgets were estimated at 10.9 per cent above the same period the previous year, according to the report.
However, easy comparisons weren't the only factors in play, as travel managers predict budgets will be up 9.4 per cent year over year during the second half of 2023, and up 8.4 per cent for full-year 2024, according to the report.
Projected budget increases for corporate travel spending for 2024 is "materially above" consensus full-year 2024 revenue per available room increase "expectations for the largest hoteliers," according to Morgan Stanley.
Most hotel companies forecast 2024 RevPAR growth to be 1 per cent to 4.5 per cent year over year, according to the report.
While somewhat encouraging, this data may be cold comfort for travel managers who are making room in their budgets for increasing air travel and even food and beverage costs, the authors wrote.
Travel managers also cited cost-saving measures amid rising prices and spend expectations as well as macroeconomic uncertainty as significant barriers to business travel, according to the report.
To overcome these hurdles, some travel managers are scaling down hotel tiers to reduce costs.
According to the report, 39 per cent expect to use more mid-tier hotels in their programmes, and those planning to use "fewer upper-tier hotels in an effort to reduce costs" rose to 37 per cent from 27 per cent in Morgan Stanley's October 2022 survey, and 15 per cent the year prior.
Additionally, corporates are looking to virtual meetings technologies to aid in budget savings.
According to Morgan Stanley research, travel managers expect 18 per cent of their travel volume to be replaced by virtual meetings in 2023.
That data "also suggests that virtual meetings are here to stay, and adoption could quickly pick up in an economic downturn if corporates try to cut cost, as their performance was proven during Covid," report authors wrote.