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COVID-19’s blow to business travel expected to last for years

The coronavirus pandemic delivered a lingering, and possibly permanent, hit to business travel that is likely to weigh on employment and economic growth in some communities for years.

Beyond the blows to airlines, hotels, travel agents and rental-car companies, the drop in business travel is rippling through whole ecosystems of related commerce, including airport shops, downtown bars and restaurants, construction companies building convention stages, entertainers, taxi drivers and aircraft-parts manufacturers.

Domestic and international business travelers in the U.S. directly spent $334.2 billion in 2019, supporting 2.5 million jobs, according to the U.S. Travel Association. But when considering the follow-on effects, it estimates the economic output and jobs supported by business travel were roughly double those figures before the pandemic.

“When a large convention or event is happening, the entire city is involved,” said Tori Emerson Barnes, the association’s head of public affairs and policy. “The florist that provides the flowers, the dry cleaners that prepare the linens, the coffee shop that serves travelers. Whole downtown areas have been revitalized due to the meeting and events business, and they’ve really struggled this past year.”

When global restrictions to control the spread of COVID-19 were put into place last spring, businesses and road-warrior workers were forced to adjust, making sales calls and attending board meetings through videoconferences rather than on-site visits, and adapting to virtual training and networking instead of conference-center seminars.

Executives learned that remote work, to a degree, was more possible than they previously envisioned, which could lessen the need for some types of business travel in the future, even after vaccines conquer the coronavirus. And some companies stung by the pandemic’s economic effects may be slashing travel budgets to compensate for years of lower revenue.

Delta Air Lines Inc. Chief Executive Ed Bastian this past week said on an investor call that the airline’s recent customer surveys forecast around 70% of pre-pandemic corporate travel will resume by 2023, including international trips.

In the near term, the travel business still faces painful adjustments.

“Perhaps by the end of 2021, our assessment is that domestic business could be in the range of down 50% to 60%” from the pre-pandemic level, Southwest Airlines Co. CEO Gary Kelly said at an industry conference last month.

The job losses have already been severe. About one million travel-related jobs have been lost since February, according to the Labor Department, including more than 600,000 hotel positions and 120,000 airline and related staff. Also cut were thousands of positions in fields ranging from restaurants to aerospace manufacturing to convention-center operations.

Frank Culbertson, 62 years old, was laid off in March from his job as an event custodian at the Oregon Convention Center in Portland. He said it was a well-paying job he enjoyed, building stages, arranging seating, cleaning and directing visitors at events ranging from the Grand Prix of Portland race to trade shows to country music concerts.

His last day of work was March 16, when Oregon’s Gov. Kate Brown, a Democrat, banned gatherings of more than 25 people. “Most everyone assumed it would be two months, max,” Culbertson said. Events aren’t expected to be scheduled at the center until the fall, and Mr. Culbertson said his union warned not to expect a return to the normal slate of events until 2023 or 2024.

“The international convention business has just evaporated,” he said.

To get by, Culbertson applied for food assistance and public health care offered by the state. He has been unable to find employment, outside of a few shifts cleaning the convention center when it served as a shelter for wildfire victims last year. That has curtailed his ability to spend at locally owned shops he liked to frequent.

“I manage my money as carefully as possible because I don’t know when my next job is coming,” he said.

Meeting and event cancellations caused 70% of the convention center’s workers to be laid off or have hours cut, according to its management.

“The global pandemic brought an immediate closure to large-scale venues resulting in economic impacts at a scale never seen in our lifetime,” said Craig Stroud, Oregon Convention Center executive director. “When conventions and meetings resume, we will return to the generation of vast economic benefits for our region.”

Travel industry executives and corporate leaders remain split on when—if ever—pre-pandemic levels of business travel will return. Some project a permanent decline, while others are more optimistic.

“There will be different types of travelers, different reasons for people traveling, but I think business travel has got a very, very strong opportunity to return over the next two years,” Delta’s Bastian said.

Big U.S. airlines typically generated half their profit from the higher fares paid by business travelers, who accounted for less than one-fifth of their seats before the pandemic.

Joseph Palma, 41, said he was laid off in March from a customer-service representative job at a unit of Spain’s Eulen SA, working for American Airlines Group Inc. at Miami International Airport. After the $600 federal unemployment supplement expired at the end of July, he moved out of his apartment and into a small room. To save money, he limits trips to the grocery store and purchases bruised produce and food near expiration since it is less expensive.

He said he has applied for jobs at retailers, which are likely to pay less than the $17 an hour he earned at the airport, but he hasn’t been called back. He said his feeling of despair rivals that of when Hurricane Andrew struck the city when he was child.

“I thought Andrew was the end of the world, and I feel this way again,” he said. “There are no jobs for me in Miami.”

Palma’s challenge will be similar to that of other travel-industry workers. While jobs in airports and hotels tend to pay below-average wages, the pay is often better than at retailers and restaurants.

Palma was among 600 Eulen employees laid off in Miami last spring. Since then, 191 have been rehired, a company spokesman said. Employees were laid off due to contract cancellations or suspensions from the airlines, he said. As airline passenger traffic improved, the company started rehiring workers as needed, though a December bump in bookings hasn’t carried through into the new year.

“People who worked for the airline industry and major hotel chains had reasonably well-paying jobs, and good job security. You could have a career there,” said Steven Davis, an economist at the University of Chicago. “Those folks who lost jobs could have a hard time getting back on that track.”

Overseas air travel has been hardest hit, down almost 90% through November compared with 2019, according to the International Air Transport Association. Travel bans, quarantines and a broader economic slowdown have forced companies to adjust sales and marketing practices to reduce or eliminate in-person meetings, especially overseas.

“Our teams have become very creative in how we continue very good sales work with our customers,” said Rob Smith, CEO of Konecranes Oyj, the Finland-based maker of heavy lifting equipment for ports and factories. Rather than send four or five staff to a customer, the company is sending a local representative with colleagues joining remotely. Smith said he expected reduced business travel would be part of the new normal.

This article originally appeared on Fox Business

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