Business travel

Business travel rebounds, hotelier confidence rises

Large-scale business travel still cannot match its performance in 2019.

Business travel is finally returning for the nation’s largest hotel operators, and this resurgence, combined with the increase in leisure travel, gives these operators enough confidence to rapidly expand their portfolios through acquisitions and developments.

Leisure travel started its return earlier as people eager to get back to their pre-pandemic plans, but business travel has been slower to return, hampered by an uneven push back to the office and the nature of conference planning, which requires long lead times.

But the latest financial statements from major hotel operators indicate that the tide is starting to turn.

At Hilton Worldwide, for example, business and group travel came back strong in the second quarter of 2022, according to the company’s latest earnings call, held last week.

“Growth was driven by continued strength in leisure demand at the start of the summer travel season, as well as a stronger-than-expected recovery in business travel and group travel,” said Kevin Jacobs, Hilton’s Chief Financial Officer and President of Global Development, on the call. according to a company transcript.

Specifically for Hilton, weekday revenue per available room, or RevPAR, reached 95% of its 2019 level in the second quarter of this year. Weekday figures are considered a good barometer of business travel as they are less likely to reflect leisure travel.

Similarly, Wyndham Hotels & Resorts said its business bookings grew 10% year-to-date, a figure the company expects to continue to improve due to the Biden administration infrastructure billwhich will inject millions into projects across the country.

“Our brands are gaining their share on weekends compared to 2019, but they’re gaining more indexes on weekdays,” Wyndham President and CEO Geoffrey Ballotti said on his company’s call. according to a company transcript. “There is so much good news coming in daily from our global sales offices, which are primarily focused on all companies that contract first for public works projects.”

Expected projects such as airport expansions in the Midwest and associated overnight stays needed by workers are a tailwind for Wyndham heading into the fall, Ballotti said.

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Hotel brands build and buy new inventory.

However, business travel relies heavily on corporate accounts, which Marriott International executives say have yet to return to pre-pandemic levels.

“When you think about transient business demand, small and medium-sized businesses, they’re back,” Marriott CEO Anthony Capuano said, according to a Looking for an Alpha Transcript of his company’s call. “They are back above 2019 volume levels. Large enterprise customers are not quite back yet. But even there, we continue to see steady improvement, though not necessarily as fast as we would like.

Marriott said small and medium businesses accounted for 60% to 65% of its transient business demand, higher than before the pandemic.

Pebblebrook Hotel Trust expressed similar optimism about business travel, which is growing faster than expected.

“Recovery demand in our city markets, including transient businesses, in-house groups and citywide convention demand, strengthened significantly in the second quarter,” said President and CEO. of Pebblebrook management, according to BusinessWire. transcript of his company’s call. “These trends continue into the third quarter as fare growth hits new highs and we see the return of historical patterns of strong weekday demand from business travel that continues to recover.”

However, Bortz went on to say that business and international travel remain below 2019 levels, tempering the general optimism seen in the second quarter financials. But weak spots in the reports are mild and often countered by positive news in other areas.

Pebblebrook, for example, noted a 5% drop in its same-property RevPAR from its 2019 performance, but its average daily rate beat 2019 by 18.7%.

Marriott’s 68% occupancy rate for its international properties in the second quarter represents a 16.7% increase from 2021, but a 7.1% decrease from 2019.

And, with economic challenges looming in the form of high gas prices, inflation and a potential recession, as well as ongoing health and safety issues in some parts of the world, the future is not still unclear for the hospitality industry.

“Now the reality is, once again, we’re in an uncertain world,” Hilton Chairman and CEO Christopher Nassetta said on the conference call. “Booking windows are short, so our visibility is certainly limited on transient business.”

But the overall improvement in numbers and outlook has motivated these companies to expand their portfolios, both through acquisition and development, with hundreds of thousands of new rooms expected in the coming months.

Pebblebrook, for example, acquired resort properties in Florida and Rhode Island and completed a $28 million redevelopment on a San Francisco property. In total, the company completed $42.4 million in capital improvements in the first six months of 2022.

And Marriott had 203,300 rooms in its development pipeline in the second quarter while Wyndham increased its pipeline by 9% to a record 208,000 rooms.

Hilton also broke a record for its development queue, with 413,000 rooms under construction, about half of which are under construction. He also opened a luxury hotel named after its founder, the Conrad Los Angeles, and resort properties in destinations including the Maldives and Mexico.