The recovery of business travel has been inconsistent across the U.S., and now new hurdles arise as companies are tightening travel budgets amid a slowing economy, the New York Times reports.
An October survey by Tourism Economics, U.S. Travel Association and J.D. Power notes "the economic outlook has weakened and now includes expectations of a mild recession next year. Some firms will respond to weaker conditions by reducing business travel and this will temper the recovery."
In the study, "86% of corporate executives report their organization has sustainable corporate travel policies in place," and 47% have policies in place that encourage employees to minimize transportation.
Corporate travel managers in recent weeks began banning non-essential business travel and increasing the number of executives needed to approve of business travel, according to the New York Times.
Henry Harteveldt, a travel industry analyst for Atmosphere Research, told the news outlet he now predicts that corporate travel will "soften slightly for the rest of the year and probably remain tepid into the first quarter of 2023."
Hotel and real estate investment trust executives, however, have been bullish on business and group demand for hotel rooms in 2023.
Pat Pacious, president and CEO of Choice Hotels International, said during the company's third-quarter earnings call that positive trends are expected to continue with an increase in business travel bookings, particularly from sectors such as healthcare, technology and professional services.
“Looking ahead, our optimism is further reinforced by the strengthening of our business transient and group travel segments. In the third quarter, we drove sequential quarter-over-quarter increases in our business travel bookings. In addition to continued robust leisure travel, the business travel component of our guest mix continues to approach historical levels and accounted for approximately 30% of stays in the third quarter," he said during the call.
Tom Baltimore, chairman and CEO of Park Hotels & Resorts, also said he expects positive momentum for the business travel recovery to continue into the fourth quarter.
At the 2022 Lodging Conference, IHG Hotels & Resorts' Chief Development Officer for the Americas Julienne Smith said hoteliers need to figure out what the new normal is for business travel.
"Business transient is just different. It's not that sort of workhorse Monday through Thursday, like it was pretty tried-and-true before the pandemic. It's just going to shift and be different. We're gonna have to figure out what the new normal is. But people are traveling to meet with people. ... You do things via Zoom until you lose your first deal because the other guy went and met in person. There's a lot more of that happening and ... that's transcending across industries, not just hospitality," she said.
At the 2022 Lodging Conference, Chip Ohlsson, executive vice president and chief development officer for Wyndham Hotels & Resorts, said demand from business travelers was starting to pick up at the company's hotels.
"When I hear that business travel is not coming back, I'll tell you that's absolutely 100% true right up until somebody loses the first deal. When a company loses their first deal out there, they're going to turn to their operations team and say, 'Get back out on the road and go meet with people.' And that's what we're starting to see for the first time."
CoStar’s Director of Hospitality Market Analytics Daryl Cronk at the 2022 Hotel Data Conference projected hotel demand from business travelers will return to peak 2019 levels by the end of 2023. That projection is based in part on confidence that business executives will realize the value of face-to-face meetings with partners and clients.
Speakers during a panel at the 2022 Hotel Data Conference did admit, though, that chief financial officers will be under pressure to cut travel budgets and reduce hotel overnights to attend in-person client meetings or events.
Cesar Wurm, vice president of commercial and revenue management at IHG Hotels & Resorts, said during a panel at the Lodging Conference that each hotel must create its own unique strategy as leisure travel diminishes and group and business travel take its place.
"There's not a one-size-fits-all [solution], and what might work for one asset, one location, one type of hotel might not work for another," he said. "But it's really important that at each hotel you have your optimal mix, and you have to know that with whatever data is available to you."
Sarah Williams, chief revenue officer for InterMountain Management, added that the hotel industry has a unique chance to continue driving rate, particularly for corporate travel.
"Right now, we're focusing on the business traveler," she said. "We haven't had a chance to negotiate with them for three years over the course of the pandemic."