Business Travel Slow To Recover, but Projected To Reach 2019 Levels Next Year

Business Travel Slow To Recover, but Projected To Reach 2019 Levels Next Year

NASHVILLE, Tennessee — Hotel demand from enterprise vacationers, which has been the slowest to bounce again within the US lodge trade’s restoration from the COVID-19 pandemic, will return to peak 2019 ranges by the top of subsequent yr, CoStar’s Director of Hospitality Market Analytics Daryl Cronk tasks.

During a knowledge presentation on the 2022 Hotel Data Conference, Cronk mentioned three elements are contributing to the slower restoration of enterprise journey demand: firm work-from-home insurance policies, executives reevaluating the worth of enterprise journey in opposition to teleconferencing know-how and a broader financial slowdown.

“The American Hotel and Lodging Association … estimated that lodge revenues from enterprise journey will likely be about $20 billion much less this yr than in 2019,” Cronk mentioned. “No matter how sturdy the leisure restoration that we hold listening to about is, regardless of how properly leisure continues to do, we will not think about journey totally recovered after we’re leaving $20 billion on the desk. We want this traveler to come back again.”

There are indicators that the enterprise journey restoration, whereas nonetheless lagging, is gaining steam, he mentioned.

“In a current survey from the Global Business Travel Association … three issues actually stood out to me relating to enterprise journey. One, the overwhelming majority of US firms are touring once more. They’re again out on the highway, perhaps not on the identical frequency or quantity as pre-pandemic, but companies are touring once more,” he mentioned.

“Second, COVID is not crucial issue within the enterprise journey choice. Staffing challenges, and pricing or inflation are actually thought of extra vital elements than COVID on the subject of making enterprise journey selections. And third, conferences this yr will make up a higher share of enterprise journey budgets than earlier than the pandemic.”

Cronk mentioned CoStar’s projection that business-transient demand for lodges will get well by the top of 2023 relies partially on confidence that enterprise executives will once more acknowledge the worth of face-to-face conferences with companions and shoppers. Also, because the US economic system grows, he mentioned, companies will rent extra individuals who will journey.

Business journey is nearly definitely altering.

CoStar and its hospitality analytics agency have historically measured enterprise journey demand by geography and day of the week.

“Most enterprise journey is to an city location … after which in the course of the weekdays, Monday by way of Wednesday, that is your conventional heavy enterprise journey days,” Cronk mentioned.

Year to this point, the occupancy hole to pre-pandemic 2019 ranges is widest each at lodges in city places and in the course of the week.

Hotels in “city places are trending in the appropriate path, but nonetheless had the best shortfall or hole to their 2019. We can drill down even deeper inside city locations and look particularly at central enterprise districts, and once more, we see the identical sample. Any space that is closely reliant on enterprise journey is lagging behind the general restoration,” Cronk mentioned.

While “weekend demand is principally totally recovered — and actually, within the fourth quarter of the final yr weekend demand was above 2019 ranges,” decrease midweek lodge demand does level to enterprise vacationers reserving fewer rooms, he mentioned.

But one other attention-grabbing day-of-week knowledge pattern holds some hope for lodges which are closely reliant on enterprise vacationers.

The conventional shoulder days — Sundays and Thursdays — “have virtually recovered as quickly as weekends, [and] definitely they’ve recovered extra rapidly than weekdays,” Cronk mentioned.

Part of that shoulder-day demand is coming from development in bleisure journey that mixes enterprise and leisure.

The flexibility of distant work, which has additionally been cited as a headwind for enterprise journey, is permitting a few of these vacationers to increase their weekends to 3 or 4 days, he mentioned.

The shift in firm insurance policies away from requiring staff to earn a living from home to permitting distant work may really be serving to enterprise journey demand for lodges.

“Even for those who’re not going into your workplace by selection as a result of remote-work alternatives, you may nonetheless select to journey. So we’re seeing occupancy in these central enterprise districts go up whilst workplace occupancy has plateaued,” Cronk mentioned.

Chase Oeser, regional gross sales supervisor at STR, mentioned in a separate knowledge presentation in the course of the convention that in some weeks in June, Sunday and Thursday lodge occupancy really matched Friday and Saturday occupancy.

“I believe we’ll proceed to see what defines the ‘new enterprise traveler,'” Oeser mentioned. “We’re nonetheless kind of seeing how that performs out. We’ve seen the Sunday p.c share [of occupancy] develop considerably in 2020, particularly within the second quarter.”

Some enterprise journey can also be coming from teams.

Cronk mentioned that whereas knowledge from TripBAM reveals company journey bookings “are nonetheless about one third under 2019 ranges … June group demand [for luxury and upper-upscale hotels] was solely about 5% under June of 2019, actually near pre-pandemic ranges.”

The true take a look at will come from lodge efficiency knowledge in October, “as soon as we get into the autumn when leisure journey goes by way of a seasonal slowdown and we see what’s left and the way a lot of it’s really a restoration in enterprise journey,” he mentioned.

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