Sabre, a travel technology vendor with a rare view of corporate travel trends, said on Tuesday it’s seeing corporate bookings recover steadily. That news defied a much-cited prediction by Microsoft founder Bill Gates that business travel might remain down by double-digit percentages for years after the pandemic began.
“We’re encouraged,” said Sabre CEO Sean Menke during an earnings call. “The underlying piece of this is that corporations are happy to have their employees back on the road. So, unless there’s a hiccup relative to more covid cases, we’re moving towards recovery.”
Sabre’s report echoed other signals. U.S. carrier Southwest last week reported that its corporate travel revenue in March exceeded March 2019’s level, another sign of a nascent recovery.
Southlake, Texas-based Sabre earns the bulk of its software-processing revenue from helping airlines sell plane tickets through travel management companies and leisure agencies and helping airlines manage their operations. Its services — which also include selling software to hotels — give it a look at business traveler behavior.
Sabre said it saw in the first quarter “strong improvements in both international and corporate travel.”
The wording here is tricky. Between April 1 and April 24, leisure bookings accounted for only a slight majority of the mix, with bookings made by corporate travel management companies only about 7 percentage points less for non-international trips worldwide.
Translation: Corporations are booking domestic trips at rates almost equal to leisure travelers demand through leisure travel agencies such as Expedia, Sabre’s biggest leisure agency client. Normally Sabre would see corporate travel accounting for 50 to 55 percent of the total bookings it processes.
“We’re also happy about what we are seeing in terms of the breadth of the corporate recovery,” Menke said. “From a sector perspective — though still below the total recovery of most other sectors — the financial, consulting and IT sectors, which are historically heavy travelers, ended the first quarter accelerating faster than at any point since the pandemic started.”
Yet the glory days of 2019-level corporate travel are still out of reach.
In the first quarter, corporate travel agency bookings were only two-thirds of the level of the same period pre-pandemic, and that figure only counted non-international trips. International travel was at about 58 percent of 2019 levels, with corporate travel only a small contributor.
In the first quarter, Sabre’s average booking fee was $5.28, up from $4.96. The rise partly reflects a shift in mix toward business travel. Sabre’s corporate booking fee is typically about 30 percent higher than leisure. To be sure, it has to pay out a corresponding similar increase in incentive to travel agencies for corporate bookings.
Sabre Swings to Profit
In the first quarter, Sabre generated $42 million of net income — a measure of profit — $585 million of revenue. It eked out $5 million in adjusted earnings before interest, taxes, depreciation, and amortization.
International corporate travel powers some of Sabre’s highest-margin lines of business, and continued pandemic-related restrictions, such as a U.S. requirement for a covid test on flyers’ returns and a Chinese border lockdown, continue to constrain the return of these activities.
Sabre’s management forecasts it will regain its pre-pandemic level of profitability, which depends on high-margin international business travel, by around 2025.
Investment research firm Oppenheimer’s Jed Kelly wrote in a recent report that Sabre management’s 2025 financial targets of a bookings recovery to 2019 — and the related financial recovery on key business metrics — have to be eyed cautiously. The last two times the management provided medium-term guidance, on March 2018 and May 2016, “guidance was scrapped due to cost overruns.”
Bad Teams Call by Gates?
At the time of Bill Gates’ grim November 2020 forecast about business travel, Skift suggested readers should take his views with “a pinch of salt.”
At the time, Sabre’s Menke was also more optimistic.
“I’ve been through the 9/11-related downturn and the global financial crisis and people said then that business travel wouldn’t recover to full levels, but in fact, it did,” Menke said.
Today, in hindsight, others are less charitable toward Gates.
“Bill Gates was so off and detrimental to our industry with his predictions,” said Charles De Gaspe Beaubien, founder and chief customer officer at meetings software vendor Groupize, via a LinkedIn post.
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