Business travelers are the demand segment hoteliers are watching most closely as these guests have been the slowest to return during the recovery from the pandemic.
Leisure demand started to come back faster and stronger than hoteliers expected, jumpstarting hotel performance in the spring and summer of 2020. While industry experts predicted business transient guests would be the next segment to return, small social groups came back first, followed by larger conference groups.
The business travel has been complicated by several factors. Here’s a roundup of some of Hotel News Now’s recent coverage of this demand segment and how the industry is adapting.
At the recent Hotel Data Conference, two hotel data experts took different views of the future of business travel. Daryl Cronk, CoStar’s director of hospitality market analytics, said during his data presentation that hotel demand from business travelers should return to peak 2019 levels by the end of 2023. That is based on confidence business executives will again recognize the value of in-person meetings as well as a growing U.S. economy and the jobs that will create.
Jan Freitag, national director for hospitality market analytics at CoStar, has a less optimistic expectation. Because office occupancy remains down significantly in some major U.S. markets, he doesn’t expect there to be much business travel if offices aren’t full.
“If I’m supposed to visit you and you’re in the Park Avenue office of some major law firm but you’re not there, I’m not going to visit you in your kitchen in Hoboken; we’re going to do this on Zoom,” he said. “There is, to me, a clear relationship between the lack of office return and urban [hotel] occupancy.”
Another factor affecting business travel is corporate policy. A panel discussion at the Hotel Data Conference highlighted that many companies are still working with smaller travel budgets, so they need to limit their face-to-face meetings with clients.
“To our own conference this year, our enterprise customers did not send five to seven employees, but one, two or three," said Adrian Emmanuel, senior director of supplier management and strategy for SAP Concur. “I also postponed a meeting as the airfare was three times what we thought it should be [both for refundable and non-refundable tickets], and I could not get it approved."
The business travelers who are back are often exhibiting different travel habits and behavior. Many are wearing less formal business attire, opting for hoodies instead.
"Today’s business traveler tends to have different travel patterns, and cares more about the experiences a hotel offers and the vibe of the neighborhood over pure convenience," said Mitchell Hochberg, president of real estate owner, investor and development firm Lightstone.
Hotel performance is starting to improve in several major U.S. urban markets, including New York and Boston, that traditionally have relied on business travelers.
Executives at several publicly traded hotel brand companies and real estate investment trusts spoke positively during earnings calls about the recovering pace of business transient demand. Hilton President and CEO Chris Nassetta said business transient demand drove up weekday occupancy by 6 percentage points from April to June. In the U.S., business transient revenue per available room passed prior peak levels in June.
Based on demand levels during the first half of 2022, Nassetta said “business transient is going to be on a revenue basis equal to 2019 levels” in the back half of the year.
Corporations and their traveling employees also are placing greater importance on environmental sustainability.
"Sustainability inquiries posed to hotel salespeople are direct quantitative questions like: what is the carbon per room-night measurement in kilograms, what is the water per room-night in liters, what is the energy intensity of the hotel, and what is the waste diversion rate," said Ashley Manley, director of sales at Fairfield by Marriott San Diego North/San Marcos in California. "The best thing a hotel can do is to have collaborative operations and sales teams that educate each other about sustainability measures and how they factor into the sales process."
The blending of leisure travel with business increased during the recovery as more business travelers look to extend their hotel stays to enjoy the attractions in their destination, often bringing along family members. Known as bleisure travelers, this guest segment is generally willing to spend more and stay longer.