Domestic business tourism also suffered, dropping by 56 percent (63 percent decrease overall in 2020). As a result, the global business travel industry has lost billions in client revenue, creating an overcrowded marketplace among business travel agencies. To survive the pandemic, some firms will need to consider mergers and acquisitions (M&A) to consolidate competition, drive revenue, and develop operational efficiency, according to GlobalData, a leading data and analytics company.
The reduction in traveller demand has resulted in an overcrowded marketplace where business travel agencies are fighting for survival. These companies now have some tough decisions regarding their futures, and consolidation may be the most sustainable option for survival. We may see some small and medium size Enterprises (SMEs) merge to give themselves more purchasing power in the industry. Alternatively, some major players could start to merge to reduce overheads and increase sales and revenue.
Craig Bradley, associate rravel tourism analyst, 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.