We have all been there. The frustrated, tired, business traveler. Wondering – were the logistics confirmed, will check-in be on time, and will there be extra charges for parking or Wifi? Was the trip worth the price?
In our experience, the answer to that question has often been ‘no’. But as we have gotten to know Engine, we’ve learned that it doesn’t have to be that way and, in fact, Engine’s solution can really change the way we all think and do travel. Here are some of our observations.
A significant portion of our economy rests on a large, stable workforce that is always traveling.
A few years ago, corporate travel was drastically halted by the pandemic. Offices closed, the majority of workers were sent home, travel restrictions stalled the economy, and Zoom became a verb. To put this into perspective, the US Travel Association recorded domestic corporate travel dropping from $270 billion in 2019 to $93 billion in 2020.
When we double clicked into the data, we found a few interesting trends. Enterprise travel, defined as companies with over 100 employees, declined by nearly 70% while SMB travel, defined as companies with less than 100 employees, remained surprisingly constant. In hindsight, this made sense. Many industries – healthcare, logistics, construction, among others – were deemed essential and operated ‘business as usual’. In aggregate, this represented over 30% of workers in the US.
There is substantial demand for an easy-to-use, cost effective, enterprise grade solution that can serve the needs of businesses of all shapes and sizes.
Now with pandemic restrictions lifted, companies’ desire to reconnect with their customers in-person, host team events, and attend industry conferences has never been higher. Yet, both business travelers and suppliers have been facing a different challenge – inflation.
Airlines, hotels, and rental car companies have seen their input costs skyrocket, and in turn, passed it onto travelers. Meanwhile, traditional travel management solutions are clunky, require multi-year minimum spend agreements, come with ancillary booking fees, and rely on limited corporate negotiated discounts. And further, the overall costs of such solutions make them applicable to only a fraction of the market, which is known as the managed travel part of the market. Our research indicates that only 25% of business travel is booked via a managed travel partner.
How does the remaining 75% of the market book business travel? They typically go directly to the hotel or travel supplier website to shop for individual deals or packages. Our estimates show that in 2023 this ‘DIY’ portion of the market spent $30 billion on US hotels alone. While the DIY approach is workable, businesses still lack a solution to efficiently manage expenses and preferences, track travel spend, enforce travel policies, and access corporate discounts.
Engine is building a marketplace focused on the road warrior.
In 2019, Elia Wallen founded Engine to simplify the travel booking and management process by providing a platform for travel managers and employees to plan, book, manage and adjust travel itineraries. Engine’s centralized management and reporting helps customers better manage travel while delivering material cost savings through direct partnerships with tens of thousands of hotels in the US. Customers can use Engine without any minimum travel spend and no monthly software costs. Today, Engine is growing rapidly at scale, powering travel for tens of thousands of customers with over $1 billion in annual gross bookings, and we believe this is just the beginning.
Travel suppliers are constantly looking for new pools of demand to drive higher occupancy, which makes Engine’s solution a win-win.
Business travel has multiple dimensions – there are 10 main domestic airlines, three dominant rental car companies (+Uber) and tens of thousands of branded and independent hotels in the US. Specifically, the fragmentation of hotels yields an interesting dynamic – over the past 25 years, the average US hotel occupancy rate has been surprisingly consistent, plus or minus 65%, with the lowest rates during the week.
In fact, Engine’s customer base leans more mid-week, multi-night and recurring jobs in small towns or medium sized cities. For its hotel partners, Engine improves overall occupancy by unlocking this new pool of demand, which makes travel suppliers eager to join the Engine network – several partners we spoke with noted by more than 10%.
Permira’s growth investment into Engine aims to help expand the company’s products and services to more stakeholders in the travel market.
We are delighted to partner with the Engine team to help accelerate their vision. We believe Engine has a differentiated ability to create a streamlined solution for businesses to book group travel given the thousands of direct connections it has with hotel suppliers. We view the success Engine has had with hotels as transferable to airlines and rental cars. Permira’s experience with global travel marketplaces, such as eDreams and Flix, gives us confidence that Engine can expand its services to business customers and advertising solutions to its supply partners.
We’re looking forward to helping shape the evolving future of business travel for companies of all sizes through our partnership.
