July 26, 2023

Trend Watchers Say Business Travel, Events a Must for Companies

Each travel segment is trending in the right direction in what has been, so far, the first fully normalized year since the pandemic started.

During the “Traveler Trends: Emerging Insights and Opportunities for Growth” panel at HSMAI’s 2023 Revenue Optimization Conference Americas, ALHI-Associated Luxury Hotels International President and CEO Mike Dominguez said that group travel is “roaring back,” due in part to associations traveling more.

“What we’ve seen most importantly, and I think this is a great caveat, is it’s been the associations that have been sitting on the sidelines that are now coming back and coming back strong,” he said.

Not only are these associations planning travel for the current year, but they are also focusing on the future. Companies are focused on getting their teams together, no matter the cost, since there haven't been many opportunities to do that in previous years, Dominguez said.

“The reason we have not seen much of a slip on the group side right now … this is the first time that we’ve had a downward projection of economic conditions where travel, meetings and events, they’re not seen as discretionary,” he said. “That has a lot to do with the pandemic when you talk about companies struggling with productivity, getting employees on board, a lot of new employees. ... There is a need to bring people together.”

Dominguez said the hotel industry is in a “bifurcated recovery,” meaning that the industry cannot be discussed as a whole but rather segment by segment. Group travel, for example, has a lot of compression due to meetings scheduled during the start of the pandemic being pushed back, a large number of meetings being scheduled now and a general lack of supply.

There isn’t much relief from this compression on the horizon for planners, he said. Three in 10 planners have yet to produce events rescheduled during the pandemic, and supply isn’t growing at a pace that can keep up with the demand.

Planners have to be able to balance both short-term and long-term bookings to accommodate compression, Dominguez said. This means making future decisions that aren’t necessarily shaped by the current demand structure, as it’s sure to change 12 to 18 months down the line.

Return of Business Travel

The return of business travel is historically slower than leisure following a downturn, but the shift to remote work and the lack of a return to offices posed an even steeper challenge to bouncing back from the depths of the COVID-19 pandemic, Global Business Travel Association CEO Suzanne Neufang said.

Business travel has never hit a deeper valley than in 2020, when it was down 54% year over year, she said. GBTA has a positive future outlook on the segment moving forward, though, projecting it will end 2023 at 80% of pre-pandemic levels after ending 2022 at 65%.

A full recovery to pre-pandemic levels is projected to happen in mid-2026, Neufang said. In a survey GBTA conducted, U.S. companies are traveling at 77% of the level they were in 2019 and spending 68% as much on these trips.

The No. 1 reason for business travel today is sales, and the No. 2 reason is to meet with other colleagues, a facet of the segment that remains strong despite the shift in office culture, she said.

“The war for talent doesn't happen just by sitting at your office at your desk, in your living room; it happens by being out and about and building culture and maintaining culture,” she said.

Since the start of the pandemic, the Asia-Pacific region has dominated in business travel spending, Neufang said, adding that it accounts for 50% of all travel spending in the segment.

Leisure Leads the Way

Nine out of 10 American travelers have plans for leisure travel over the next six months, Longwoods International President and CEO Amir Eylon said, citing his company’s American Traveler Sentiment and Travel USA studies.

“It’s been very steady throughout the year,” Eylon said. “Despite all the toxic recession [talk] and so forth, the demand is still high.”

Leisure travel patterns are starting to normalize, he said. The top reasons for leisure travel this year are to visit friends or family, shopping and going to a beach or resort.

Still, hoteliers must not forget about COVID-19, Eylon said. About 30% of American travelers are changing travel plans due to the virus. Of those changing their plans, 19% are choosing to stay in the U.S., 15% are choosing to drive instead of fly, and 14% are reducing their travel in general.

Since COVID-19 is still on the minds of some travelers, hotels should keep their health standards up, he said.

“Keep your cleanliness programs in there wherever you can. Make sure that housekeeping is easily accessible,” Eylon said. “Since the pandemic, cleanliness has now become equated as a safety factor, so it’s so important for you not to give up on messaging cleanliness.”

Another trend to follow is the economy’s effect on travel, Eylon said. High inflation and the threat of a potential recession have clouded the industry for several months, but not enough to slow down travel.

Instead of slashing rates, hotels should put an emphasis on promotions that bring in guests while retaining the same price point, he said. Only 5% of respondents said they’re going to cancel trips altogether due to inflation.

“The traveler has been conditioned to higher prices, so don’t so much focus on the discount, focus on the value,” he said. “Everything costs more; they’re good with that. They’re not canceling their trips, they’re just reallocating their spend.”

Another focus should be on improving service levels, he said. About 61% of travelers are expecting the same service levels as pre-pandemic, despite staffing shortages across the industry.

Travelers will break brand loyalty if they aren’t getting the service they expect, so hotels need to figure out how to make up for staffing challenges with technologies such as mobile keys and robotic vacuums.

“We know your realities, we know the workforce challenges exist, but the leisure traveler is telling us time and time again: 'We don’t want to hear it anymore,'” he said.

Copyright 2023 CoStar Group. All rights reserved. From https://www.costar.com. By Trevor Simpson, Hotel News Now.

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