Predicting the return of corporate travel would be a cinch if foretelling the future was foolproof. No one, however, has that extraordinary prescience and even if they did, the future is, at best, murky.
The continuing popularity of work-from-home arrangements, the COVID-19 induced reluctance of both individuals and companies to get back out on the road, and issues throughout the travel supply chain are all converging to create a less-than-hospitable environment for individual business travelers.
“Before you get corporate travel back, you have to get people back to the office,” said Daniel Lesser, President and CEO of LW Hospitality Advisors. “It’s going to be a bit of a slog, at least until Labor Day.”
Among the short-term problems, he continued, is airline flight capacity. “A lot of it will have to do with air lift. Carriers are being careful about yield management,” he said.
However, Lesser added, “The summer is going to be phenomenal [for leisure travel] but the rubber will hit the road after in terms of group and corporate business.”
Shifting Business
LWHA’s COO and Principal Evan Weiss sees an even more dramatic delay on the horizon. “At the beginning, I thought the recovery would come first with leisure business, then leisure group, corporate transient and then corporate group,” he said. “But there’s been a paradigm shift. Companies now can cut back their travel by, for example, having two in-person board meetings and two on Zoom.”
He continued, “After leisure, which is certainly back, we’re thinking corporate groups will be next to come back, and then corporate transient business.”
That creates problems for hoteliers. In the U.S., the corporate average room rate in February 2020—the last full month before the coronavirus squeezed the life out of most of the global hotel industry—was $175.15. A year later, it stood at $111.03, down 35.6% year-over-year, according to HotStats data.
In Europe, in February 2021, the corporate rate was €77.30, down 35.2% YOY.
Meanwhile, in China, corporate travel didn’t have the dramatic swoon seen in other parts of the world. Its lowest point was in April 2020, when the corporate rate hit $65.65, a 24.8% YOY decline. As of April 2021, the $73.03 corporate rate was up 11.2% on the year prior, but still 16% lower than April 2019.
The absence of corporate travel is equally disadvantageous since road warriors are typically higher-spending guests than their leisure counterparts. “Corporate folk pay at the last minute, then they book the Ritz-Carlton, and they’re often the ones who drink the most. If you lose that, it’s problematic,” Weiss said.
But Chris Green, CEO of third-party management company Chesapeake Hospitality, has a rosier outlook on the return of corporate, framing it in the context of the domino effect. “Once a big player like Bank of America or Deloitte says ‘As long as you’re vaccinated and feel comfortable, you can travel,’ then it’s off to the races,” he said. “I believe companies will say ‘If you’re in a client-facing role, you have to get out there.’”
Still, some timid travelers could remain skittish if they don’t feel safe and comfortable back at a hotel, Green noted, meaning properties must get the word out on the extraordinary efforts being taken to keep COVID-19 at bay.
To do so, Chesapeake is “asking key questions about traveler confidence and experience and then using responses in sales and marketing presentations,” said Green. The company also is encouraging guests to share their experiences on travel-review sites.
“We’re cleaner, safer and more sanitized than we’ve ever been,” Green said. “That needs to be the front-facing message because companies must feel certain that the hotels where they’re putting travelers are good citizens.”
Persian
