Travel Gets Back to Business

The S-Network Global Travel Index (TRAVEL) is largely consumer-driven to the extent that performance is more aligned with consumer-based indexes rather than other traveling-related indexes. Weve discussed in previous notes how top constituents include luxury goods retailers (LVMH Moet Hennessy Louis Vuitton SE [MC FP, 4.7% index weight] and Estee Lauder Companies [EL, 3.9% index weight]), credit card companies (American Express [AXP, 4.5% index weight]), and other consumer discretionary companies (Walt Disney Co [DIS, 4.4% index weight]). But recently, as consumer strength has started to become more uncertain, business travel has also emerged as a green shoot, as employees get burnt out from virtual meetings and also look to blend both business and leisure. This note discusses three factors supporting the recovery in business travel.

Virtual meetings, especially for large conferences and events involving, likely wont replace in-person meetings but instead, act as a supplement.

Over the past couple of years, leisure travel has driven both airline and hotel demand, while business travel remained suppressed. Many analysts and investors believed that business travel would not return to pre-pandemic levels because of the popularity of video conferencing (e.g., Zoom or Microsoft Teams). But recently, weve seen that this may not be the case. After what was almost two years of video meetings, employees realized that meeting online cannot completely replace all aspects of in-person meetings. While video meetings are still highly used for day-to-day work and connecting teams in different geographies (Zoom reports that enterprise customers grew 18% y/y in its most recent F2Q23 earnings report), they cannot truly replace large-scale conferences and events. However, video meetings may still be able to supplement some large-scale events as technology allows for more metaverse-type features like avatars and augmented reality.