CAN THE RETURN OF THE BUSINESS TRAVELER SAVE THE HOTEL INDUSTRY?
By Russ Rivard, U.S. Hotel Appraisals
Despite the continued rebound in leisure demand, the return of business travel will be the key to a full industry recovery. Although leisure travel surged in 2021, the limited return of in-person conferences has resulted in less-than-stellar financial and relational impacts on businesses. It is the handshake deals made by meeting in person that can really benefit corporations. Andrea Stokes, practice lead for hospitality, J.D. Power, reports, “Nearly half of survey respondents indicated that conferences, conventions, and trade shows are critical to developing relationships with customers, suppliers, or others. Nearly one in four respondents indicated these events are critical to closing sales.” (1)
Conventions and lodging activity are significant driving forces behind any local economy, and as cities around the country focus on recovering from weak post-COVID balance sheets, a return to business travel would be an imperative element toward that goal. This is a very lofty goal, according to the American Hotel & Lodging Association. Despite vacation travel returning to pre-pandemic levels this year, business travel will be much slower to return. “A new report from the American Hotel & Lodging Association and Kalibri Labs projects that U.S. hotel business travel revenue will be 23% below pre-pandemic levels in 2022 and end the year down more than $20B compared to 2019,” writes Jack Rogers of GlobeSt.com. (2)
So, a big question that remains is, will business travel ever return to the pre-COVID levels? Many believe that the answer is no. Because of the accrued cost savings from the success of video technology and employees working from home, many businesses will continue to emphasize fewer face-to-face meetings. According to STR, CoStar’s hospitality analytics firm, many plan to travel less than they did pre-pandemic. Chris Klauda from STR reports, “Results from a February 2022 STR survey of just under 500 global business travelers indicates that some business travel will return, but not to its pre-pandemic levels. When respondents were asked to think about their likelihood to travel for business both now and when the pandemic is over, the results were more negative than positive. More planned to travel less for business compared with their pre-pandemic levels.” (3)
Will this preference to work from home and utilize tele-conferencing become the new normal? It depends on who you ask. As businesses continue to embrace video technology, employees who have relied on programs such as Teams, Zoom, and Facetime have become comfortable with tele-conferencing and are thus planning to take fewer business trips. Even more damaging to the industry, some employees who used to take work trips now plan never to return to the road, according to a poll from February 2022 by Morning Consult. “Approximately 42% of frequent pre-pandemic business travelers said they would never return to the road. Most striking was that this increased from 39% when asked four months earlier in October 2021,” Klauda writes. (3)
However, not all polling results are bad news. TRIPBAM, a company that tracks corporate bookings, reports an improvement in corporate bookings, especially since the low of March 2020, which suggests optimism. According to Klauda, “Since February 2022, there has been a steady increase in 30-day average bookings. If this pace persists, 30-day average bookings could hit 300,000 by May 2022, and if this trajectory continues, the booking pace could reach 400,000 by the fall.” (3)
The following chart shows the 30-day average bookings over time as compiled by TRIPBAM and published by CoStar. (3)
Despite the varied projections and forecasting of the return of the business traveler, what is abundantly clear is the importance of business travel to the health of the travel industry. What is also apparent is the fact that many still desire to “shake the hand,” or complete business transactions in person rather than through a video meeting or tele-conference. Time will tell which avenue will end up being the most popular.