November 09, 2022

Recovery of Business Travel Inconsistent Across US

While group travel demand is showing clear signs of recovery, hoteliers across the U.S. are less positive about the health of business travel. As business from corporate accounts typically slows down in the fourth quarter, many hoteliers are now looking to the first quarter of 2023 for an improved mix of sales.

The recovery of hotel room demand from business travelers — or business transient demand — is a "different animal" than that of group demand, said Mark George, senior vice president of sales and marketing at West Palm Beach, Florida-based hotel management company Island Hospitality.

"We'd love to say that it's going to come back, that there's a boom," he said. Instead, he described it as "up and down."

"You go to The Triangle area [in North Carolina] — that office space is empty. You go to Silicon Valley, there's some emptiness there. But then you go to Dallas, and they're starting to fill back up," he said.

The fourth quarter isn't a good indicator of the health of business transient, he said, but he expects by the middle of first quarter 2023, the industry will have a better idea of what recovery will look like.

"We've had conversations with the brands, with large accounts [and] everybody is very optimistic that [business travel] is going to return," he said. "We're budgeting for high-single to double-digit increases over 2019 as far as the corporate account pricing is concerned."

Hannah Huse, vice president of sales and marketing at investment, development and management company Twenty Four Seven Hotels, said some corporate accounts are still being cautious about sending employees on trips. Looming rate increases by the Federal Reserve are also a cause for concern, she added.

"We'll continue to see gradual improvement in our mix of sales, but not without a proactive approach at educating our customers on the differences of travel and the why behind our pricing," she said.

That proactive approach includes leveraging partnerships with the brands, especially for Twenty Four Seven Hotels' global accounts, to better understand differentiators within each market. At the local level, it's important to also view sales leaders as educators and to research to understand market trends and other variables influencing pricing, she said.

In terms of corporate travel, Huse said most of the major brands had rollover pricing from 2019, and this is the first year her team is having to negotiate and readdress business travel since the onset of the COVID-19 pandemic.

Trisha Grisko, vice president of sales and marketing at hospitality management company Sandpiper Hospitality, said business travel is still ramping up at hotels across her company's portfolio.

"We still see a good share of the blue-collar, gray-collar travelers. Those white-collar business transient folks are still ... behind 15%-20% year over year," she said.

Sandpiper's portfolio is largely comprised of extended-stay hotel types, meaning her team focuses on building a healthy demand mix of "the vertical market that's going to stay long term."

"That's how we're always able to maximize our transient rates; we build with that extended-stay occupancy. It shrinks our availability and leaves us the opportunity to really yield some great transient rates," she said. "In some of our more transient hotels, we just keep a really keen awareness on the trends, on what our competition is pricing at and we stay as competitive as we can."

Today's economy, she said, is giving her team a fresh perspective on capitalizing on average daily rate.

From Atlanta-based Hospitality Ventures Management Group's perspective, business travel recovery isn't quite mirroring the boom in group travel.

"Unfortunately, I don't feel as excited about business travel," said Kim Brooks-Martin, corporate director of sales strategy and development at HVMG. "Business travel has been impacted tremendously and it has been slow to recover."

The uncertainty is partly rooted in companies placing less value on one-on-one interactions, she said.

"Individual travel has been largely based on the obligatory customer visit, and there's not as much of that in person," she said. "People are not as passionate about getting on the road as they were."

Positive Sentiments From Third-Quarter Earnings Results

Executives at publicly traded hotel brand companies and real estate investment trusts have shared positive outlooks on business travel in third-quarter earnings results.

Hotel News Now's Bryan Wroten reported that Hersha Hospitality Trust achieved increased business transient demand in October, with record revenue per available room growth of roughly 8% in comparison to pre-pandemic levels, driven by 20% average daily rate growth.

Similarly, Pebblebrook Hotel Trust Chairman, President and CEO Jon Bortz said during a call with analysts and investors that improving business travel trends in the third quarter are now expanding into more corporate group bookings, leads and site visits, Wroten reports.

“We’re closely monitoring overall business and leisure consumer behavior and have not seen any pullback in demand for future booking pace or room rates other than the normal seasonal slowdown later in the quarter,” Bortz said during the call presenting third-quarter results.

Copyright 2022 CoStar Group. All rights reserved. From By Dana Miller, Hotel News Now.

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