Middle East, Africa Set for 2022 Business Travel Recovery

The Middle East and Africa this year are poised to see some of the largest year-over-year increases in business travel demand globally, as the Covid-19 pandemic and a travel slowdown have done little to slow down growing travel costs across many of the region's key markets.

A majority of the markets in the region measured by the Corporate Travel Index as of the fourth quarter of 2021 had both hotel and total business travel costs above the same period in 2019. A November report from McKinsey & Co. and the World Travel and Tourism Council projected that business travel to the Middle East this year will be up 32 percent compared with 2021, when it increased 49 percent compared with the prior year, and at a faster rate of increase than leisure travel. In Africa, business travel spending this year is projected to increase 23 percent, following a 36 percent year-over-year increase in 2021, according to the report.

"It's been a bit of a roller coaster, but it's been a bit smoother and not as bumpy for some markets" in the Middle East and Africa, said Ciarán Kelly, FCM Travel managing director for the Middle East and Africa. "The outlook for travel is now a lot brighter than we thought it would have been."

As long as Covid does not have another resurgence, the business travel outlook is positive for the region, said Stephane Birochau, CWT's VP and head of customer management in the EMEA region. "We could recover over the course of this year—even more in 2023—but we should see a slight increase in traffic and demand immediately this year in the region, especially between this region and Europe," he said, qualifying that the projection was also dependent on how Russia's invasion of Ukraine further affected business travel from Europe.

For South Africa, of course, the fourth quarter included the emergence of the Covid-19 omicron variant, which was first identified in the country and resulted in some countries banning travel from there. Cape Town and Johannesburg were two of the four markets in the region with lower hotel costs in the fourth quarter of 2021 than in 2019, and Cape Town's drop was the steepest in the region, down 42.9 percent. In Johannesburg, hotel costs were down a milder 6.7 percent, and total business travel costs still were up year over year.

Since then, however, business travel activity in South Africa has "recovered and is ahead of forecasts," Kelly said.

Claude Vankeirsbilck, American Express Global Business Travel COO for South Africa and Nigeria, concurred, saying that while the variant brought business travel in South Africa to "a complete standstill" in January, that was a time when low volumes were expected anyway, and the market has "bounced back quickly."

"We're quite optimistic about the business travel space as we're moving forward, though we're also quite cautious, should governments start changing their minds again," he said.

Once on the ground, travelers are not facing severe restrictions upon arrival. "Even though we are still in a restricted situation, we are pretty much free to go wherever we want," Vankeirsbilck said. "Restaurants are fully open."

Domestic and regional business travel in Africa has been returning at a higher rate than international travel. Heavy restrictions from some of the key feeder markets into the continent has remained a barrier for international business travel growth, Birochau said.

South Africa, for example, traditionally has a lot of business travel from the U.K., which did begin to improve once the U.K. scrapped its "red list" that put heavy restrictions on travelers from South Africa and other African nations, he said. For Kenya, one of its largest markets is Dubai, which had a ban on travel to it and other African nations until last month. Asia, and China in particular, also was a major source of international business travel to Africa.

"China is completely closed, so there's no real opportunity to grow in this market," Birochau said.

As such, international air capacity to Africa remains well below pre-Covid-19 levels. A recent report from the African Airlines Association noted that air connections within Africa were at 76 percent of the pre-Covid level as of January 2022, and while African airlines had restored nearly 80 percent of international routes that they had pre-Covid, frequencies on those routes remain low. As such, business travelers could face tighter availability of air tickets as business travel recovers, particularly as the region sees more leisure travel as well, Vankeirsbilck said.

South African hotels have had a particularly difficult time throughout the pandemic, some having closed and then, upon reopening, found themselves forced to close again, he said. About 80 percent currently have reopened. In Nigeria, meanwhile, hotels largely never closed "and are doing quite well," according to Vankeirsbilck. Lagos hotel rates in the fourth quarter still were tracking 15.2 percent below 2019 levels, according to the Corporate Travel Index, though they were up 21.7 percent compared with the fourth quarter of 2020.

African airlines continue to face financial difficulties as well, with AFRAA projecting they lost $8.6 billion in revenue last year due to the pandemic and will lose an additional $4.9 billion this year. Several African carriers are facing or are emerging from bankruptcy, South Africa Airways is among the largest, having restarted service in September. Air Madagascar and Air Seychelles each entered bankruptcy protection, and Air Namibia ceased operations altogether, said Olivier Benoit, principal and VP of BCD Travel consulting arm Advito.

There have also been some new entrants, including Ethiopian Airways-backed Zambia Airways, low-cost Nigerian carrier Green African Airways and United Nigeria Airlines, and Nigeria expects to launch a new national carrier, Nigeria Air, next year. "There is definitely a growing demand from these African countries," Benoit said.

In the Middle East, meanwhile, restrictions also are loosening up in key markets. United Arab Emirates at the end of February ended its PCR testing requirements for vaccinated travelers, and Qatar has simplified its entry requirements as well, FCM's Kelly said. Dubai's Expo 2020, the long-delayed world fair that finally started its six-month run last October, has been a "phenomenal success" that has pushed up average hotel rates, he said.

In the Corporate Travel Index, Dubai's fourth-quarter hotel rates were up nearly 60 percent compared with 2019 levels, the highest increase of any market in the region. Abu Dhabi was close behind with a 46.2 percent increase in hotel rates compared with 2019 in the fourth quarter.

Saudi Arabia also is likely to see a boom in business travel as the kingdom only in the past few years has begun pushing for tourism. There are some "massive construction projects" ongoing in the kingdom related to that initiative, and Saudi Arabia also is offering incentives for movie production, according to Kelly.

Overall, BCD Travel has seen hotel occupancy in the Middle East "tracking close to pre-pandemic levels," Advito VP and global hotel practice lead Laura Kusto said.

FCM has been seeing an increase in inquiries on meetings and incentive trips in the region and "are open to the options where "they are the most flexible and accommodating," particularly in Egypt, Turkey and Tunisia, Kelly added.

Throughout the pandemic, even when there was little travel into and throughout the region, the momentum of integrating travel programs in the region was one thing that has never ebbed, according to Kelly. "In terms of [requests for proposals] we've been invited to and implementations across the region, that's been nonstop," he said.