A Tentative Asia-Pac Rebound Starts to Take Shape

After two years with some of the world's strictest entry and travel restrictions during the Covid-19 pandemic, the Asia-Pacific region appears primed for a business travel comeback. But geopolitical events as well as some countries' unclear pandemic strategy have colored that optimism with a cloudy veneer.

Unlike most of North America and Europe, the wave of the omicron variant of Covid-19 in some locations in the Asia-Pacific region still hadn't peaked. Countries including South Korea, Malaysia and Vietnam in mid-March still were seeing record-high daily levels of new Covid-19 cases, several weeks after the wave peaked in the United States.

And while most experts expect the omicron experience in Asia-Pacific generally to follow the pattern the variant established—run through the population with an extremely high caseload that recedes relatively swiftly with comparatively milder outcomes—another factor has roiled travel forecasts for the region. Russia's ongoing invasion of Ukraine triggered sanctions and reciprocal airspace closures throughout Europe, spurring international carriers to cancel some Asia-Pacific service and reroute others away from Russia.

The International Air Transport Association this month suggested the "sanctions and airspace closures are expected to have a negative impact on travel, primarily among neighboring countries," particularly as the cost of fuel rises.

Still, there are plenty of reasons to expect increasing levels of international business travel throughout the Asia-Pacific region in 2022 and beyond. Several countries are beginning to ease travel and entry restrictions or have announced timelines for doing so, and corporates in the region, as in other regions, appear to have a level of pent-up business travel demand. Whether the resulting volume will increase throughout the region or recover first in particular locations remains to be seen, but there is significant variance in this year's edition of BTN's Corporate Travel Index.

 

_{Pricing Disparities}

On the whole, the average total business travel per diem in the region in the fourth quarter of 2021 were very close to its level in the fourth quarter of 2020, only about $2 lower, less than a 1 percent decline. But that consistent average conceals some dramatic changes, particularly in Japan.

The average Q4 2021 business travel per diem in Tokyo, frequently the world's most expensive city in prior editions of the Corporate Travel Index, declined 38.5 percent year over year, and per diems in Osaka-Kobe declined nearly 19 percent. Locations in Australia started to recover, conversely, with Q4 2021 business travel per diems in Melbourne and Sydney up not only 14 percent and 27 percent year over year respectively but also exceeding the pre-pandemic levels of the fourth quarter of 2019.

 

_{2022 Outlook}

Australia in fact appears to be on the vanguard of 2022 corporate travel recovery as well, after the federal government in February lifted nearly two years' worth of entry restrictions and allowing fully vaccinated foreign visitors. It's a move that experts believe will help kickstart demand in the area and could prompt other area governments to similarly lift restrictions.

"Things are quite optimistic in Australia at the moment, because of all of the recent changes in border opening and lessening of restrictions," said Charlene Leiss, president of the Americas for Australia-based global travel management company Flight Centre Travel Group. "We've already seen considerable uptick in the corporate business."

Jamie Pherous, managing director of Australia-based TMC Corporate Travel Management, said "we're all seeing a very, very strong rebound" after Australia lifted restrictions and projected that market would strengthen further.

"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.

"We really see things in Australia rebounding by far, and we've seen that already," Pherous said. "We've seen very strong compound double-digit growth week-on-week in domestic. International will come. I think international, as the impediments drop, that'll be mature."

Unlike Australia, New Zealand has yet to allow quarantine-free entry to would-be business travelers, a situation the TMC executives expressed hope would change now that Australia has dropped restrictions.

"New Zealand is planning to open officially in the fall, but they're hoping for much sooner given the traction we're getting elsewhere around the globe," Leiss said. "But certainly New Zealand is looking like it should follow in the footsteps of the good news in Australia."

New Zealand at press time had announced a step-by-step timeline for easing international entry restrictions, culminating in the planned allowance in October of visitors. Fourth-quarter 2021 Corporate Travel Index per diems in Auckland declined 13.1 percent year over year and 22.8 percent from 2019.

Pherous projected recovery in New Zealand to be "a ways off yet."

"Hopefully, New Zealand opens up and comes to get some common sense about that, because I think the reality is economies that remain closed, two things seem to happen," Pherous said. "They get a lot of disillusion in the population when they see the rest of the world opening up, and commerce loses because they'll get bypassed."

The latter point, Pherous said, should be a key driver of pandemic policy and corporate strategy throughout 2022 as business results vary based on the ability to travel domestically and internationally.

"If you're closed out, you're going to miss winning market share or you're going to lose customers," Pherous said. "And as we all know, supply chain issues right now are a big, global problem. Those that can get on planes and see their supplier and sort it out get in front of the queue of the others that can't. There's a real cost now to those that don't open up when the rest of the global economy has opened up."

China, however, throughout the pandemic has pursued its own stringent mitigation strategies and entry restrictions and hasn't appeared overly sensitive to any market pressure, notably during last month's Winter Olympics in Beijing when the government's zero-Covid approach drew international attention and criticism. Still, Leiss projected even Beijing will not want to be left behind in a swelling international economy.

"We think in order to benefit the local economy and trade and everything else, they'll have to follow suit," Leiss said. "Because the world seems to be opening up and learning to live with this virus, which is moving from pandemic to endemic, and I don't think any country's going to want to be left behind for too long."

_{Pricing Outlook}

Given what appears to be increasing demand for business travel, buyers could well find themselves in an environment in which suppliers are gaining pricing power. Pherous suggested the price hikes buyers can expect will be a function not solely of market conditions.

"I think through Covid, all industries that were impacted are looking at doing business smarter and better," Pherous said. "For suppliers, that goes for yield as well. What we've seen in other markets, yield increases a lot quicker than it ever used to because they're used to better management over the last two years in downtime in managing yield."

The result, he said, are quickly rising prices through all sectors of the business travel market.

"We've seen in markets that are already open that, whether it's hotel rooms or seats in aircraft, rates are actually getting really high very quickly," Pherous said. "If the suppliers are better at managing that, that means they're managing supply and demand, which means U-curves will go up to corporations now. We see a paradigm shift."