Covid-19 is costing hotels billions in business travel, and things might not go back to normal until 2024
- A new Bank of America analysis found that business trips produced $334 billion in revenue in 2019 and won't rebound until "late 2023 or in 2024."
- Other experts like travel managers and airline executives don't expect corporate travel to recover for years either.
- One hotelier has essentially written off the potential return of corporate travel, going as far as to modify his hotels to appeal to leisure travelers rather than business travellers.
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The hotel industry brings in $170 billion annually, and half of that comes from just one sector: corporate travel.
However, new Bank of America research shows that business trips disappearing overnight could cost hotels somewhere between $8 billion and $23 billion this year.
Americans went on over 400 million business trips in 2019. Those business trips contributed $334 billion to the entire travel industry's $1.1 trillion in revenue last year, according to Bank of America researchers. Then the coronavirus pandemic hit and left the travel industry reeling.
According to analysts, it could be years before the industry rebounds.
The Bank of America analysis found that 75% of companies expect to be back in the office by mid-2021, and 83% of business travelers expect to travel at some point in 2021. But others — like hoteliers, airline executives, and travel managers — don't believe corporate travel will snap right back to normal.
Industry revenues, Bank of America estimated, won't fully recover until "late 2023 or in 2024," even though the bank also estimated business trips could resume as soon as six months from now. The timeline hinges on the creation of a vaccine.
Judy Emma, senior manager of global travel at Twitter, anticipates corporate travel resuming at some level within the year.
"We started off in March thinking, by September, we'll be back," Emma told Skift recently. "Now we're looking into next year, maybe by the middle of next year." Twitter currently has a global travel ban, and Emma told Skift that the company return to travel depends on a vaccine.
United Airlines CEO Scott Kirby echoed Emma's sentiment. He does not expect air travel to spike until there is a vaccine, and he estimates that corporate travel will not return to pre-pandemic levels until 2024.
"We're anxiously watching, for example, the occupancy rate of New York City skyscrapers," Kirby said during the airline's third quarter earnings call, according to The Points Guy. "When that number starts to go up, I think you're going to see business travel start to rebound because there's a reason to travel."
New York City hotels that see a significant amount of corporate travel revenue seem to fall in line with Kirby's assessment.
For instance, Amar Lalvani, CEO of the parent company behind The Standard boutique hotel chain, told the Financial Times that his Meatpacking District hotel would typically rake in half of its $100 million revenue from business travelers, but "that's not happening now."
Weekdays — which once saw a hotel constantly teeming with suits on business trips — now see an occupancy rate between 10% and 20%. According to the American Hotel and Lodging Association, most hotels need to hit 50% occupancy to break even.
Lalvani said he does not expect corporate travel to rebound "for multiple years."
"When we talk to corporate clients, they think their 2021 budgets are probably going to be 50% what they were," he told FT. In an effort to mitigate those projected losses, he's modifying his hotels to appeal to everyday travelers and ritzy staycationers, rather than to travel managers and businesspeople.
Case in point: The Standard's East Village outfit once had a penthouse events space with sweeping views of Manhattan. Now it's home to Peloton bikes and yoga classes.
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