As we enter the third year of the COVID-19 pandemic, some sectors of the hotel industry have recovered, and some are still waiting.
Leisure travel recovered much sooner than most people expected, going from surprisingly solid summer travel in 2020 to the summer of pent-up demand in 2021 to the “summer of all summers” in 2022.
Conventional wisdom says that for true travel recovery to occur, the travel and hospitality industry needs to see business travel return to pre-pandemic levels. When will business travel recover?
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.
STR is CoStar’s hospitality analytics firm.
Two-thirds of consumers are less likely to travel for overnight business now and43% are less likely to travel for overnight business when the pandemic is over — which of course is open to each traveler’s interpretation. Additionally, net propensity to travel, which is the difference between those more likely and less likely to travel was down 59% for business travel today and down 31% for business travel post-pandemic. Among business travelers in the U.S., business travel intentions were not quite as pessimistic, although they were still well into negative territory, down 24% net propensity post-pandemic.
The cost savings realized by companies in 2020 with most of their workforce working from home, and the success of using video technology as a substitute for face-to-face meetings are significant reasons for this lack of optimism according to STR research conducted last year. Additionally, increased efforts to limit travel frequency as a sustainability initiative is gaining momentum.
The negative sentiment regarding business travel was echoed elsewhere in our research. Just under one-third of those who traveled for business before the pandemic agreed that the amount of business travel in the future was unlikely to resemble pre-COVID-19 levels. On the positive side, this response improved slightly in this measurement compared to November 2021.
Similar pessimistic business travel sentiment was revealed in February 2022 data from polling firm 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.
A look at data from TRIPBAM shows a silver lining for business travel demand. TRIPBAM tracks corporate bookings — not leisure or group bookings — made by TRIPBAM’s 2,600 customers across 192 countries. It is estimated that this sample of corporate bookings represents between 15% and 20% of all corporate bookings. The trend in corporate bookings since 2019 provides an indication of the pace of business travel recovery.
In the Americas, for most of 2019, TRIPBAM reported a 30-day average of 300,000 to 400,000 bookings per month except for December and into January 2020 when bookings dropped due to the holidays and seasonality. When COVID-19 arrived in the U.S. in March 2020, bookings dropped to essentially zero. Recovery was very slow through 2020 and started to climb in 2021 with back steps in September 2021 and January 2022 due to the delta and omicron variants.
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.
Looking at regions across the globe, booking volume indexed to 2019 for the Americas, Asia-Pacific, Europe, Middle East and Africa and Latin America reveals a similar story. Volume started improving in 2021 across all regions except for periods when the delta and omicron variants slowed things down. 2022 is shaping up strong with an overall market index as of March 30 at 60.29%, indicating the industry is 60% recovered and that this number could continue to rise. The Americas, Asia-Pacific, Europe, Middle East and Africa are all close to this overall index with Latin America showing booking volume at almost 90% of 2019 levels.
The global consulting firm McKinsey confirmed a permanent cut in business travel. A recent New York Times article stated that the company recently decided to reduce its travel by 25% from its pre-pandemic levels.
From a January 2022 article in the LA Times, Southwest Airlines Company’s top executive was not optimistic, commenting that the return of business travel would be slower than expected. American Airlines expects business demand to eventually return but is “hedging its bets.”
Recent Global Business Travel Association research is summarized by this headline: Business Travel Recovery Keeps Gaining Traction. A total of 78% of supplier and travel management company professionals in a February 2022 survey said they feel optimistic about business travel’s path to recovery, which is up from just over half who reported optimism the previous month.
Evidence of the return of business travel is seen in the improving occupancy in central business districts and top 25 markets, areas where the majority of business travel demand occurs. Central business districts have been hit especially hard during the pandemic, and seeing this positive occupancy trajectory in major downtown areas is a sign of optimism for business travel.
With so many varied viewpoints, it is impossible to know what business travel’s return will look like. The one thing that is certain is that it is going to look different from pre-pandemic business travel.
Hotels, business travel management companies, airlines and all industries reliant on business travel will need to recognize that a change is coming. To quote a recent headline “we are never going to back to normal, but we are going back to work” and if work requires face to face meetings, then business travel will be back.
Chris Klauda is senior director of Market Insights at STR.
This article represents an interpretation of data collected by STR, parent company of HNN. Please feel free to contact an editor with any questions or concerns. For more analysis of STR data, visit the data insights blog on STR.com. For information on TRIPBAM, contact [email protected]
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