The hotel industry has rebounded from the depths of the Covid-19 pandemic, but data and industry experts say it’s still missing a vital part of its business: corporate travelers.
U.S. hotel occupancy returned to pre-pandemic levels this summer, with a 69.6 percent occupancy rate in July, the highest rate since August 2019, according to a report from the hotel data and analytics company STR.
Some cities, including Miami and Virginia Beach, are even outperforming their occupancy and average daily rates from 2019.
But experts say the gains have been powered largely by vacationers and leisure travel. Business travel remains almost entirely absent, a trend that has experts concerned heading into winter.
“People mistakenly believe that Americans going on vacations supports the hotel industry, and while it does to a certain level, more than half of our revenue is derived from business travel,” said Chip Rogers, President and CEO of the American Hotel and Lodging Association.
“Business travelers use hotels, go to restaurants and retail, engage in sports entertainment and get the economic systems firing on all cylinders,” Lou Carrier, president of the Distinctive Hospitality Group, said. “You may have a leisure traveler engine firing on two or three cylinders, but a business traveler engine is firing on eight.”
The industry grew through 2019 but hit a wall in 2020, as the pandemic cratered demand for travel.
Travel finally began to return in spring 2021, but this was almost entirely driven by the leisure segment.
“We began to see in April the return of leisure travel because of the significant pent-up demand of people not taking vacations and not being able to see loved ones over the last year and a half,” Rogers said.
Leisure travel remained steady into the summer as more Americans received Covid vaccinations and found ways to spend the money they saved during the pandemic.
“Two shots, plus two weeks, plus $2 trillion in excess savings gets you healthy leisure demand, and that’s exactly what we see in markets like Miami and Tampa,” said Jan Freitag, senior vice president of lodging insights at STR.
For some hotel markets, including San Francisco and Washington, D.C., the lack of business travel has caused huge reductions in occupancy rates, average daily rates, and revenues per available room — three metrics used to study the industry.
“Our hotels in the Boston market have suffered,” Carrier said. “We were one of the top markets in the United States pre-Covid. We’re now in the bottom five.”
Some forecasts expect business travel to lag for years. A July report from the U.S. Travel Association predicted business travel spending wouldn’t reach pre-pandemic levels until 2024.
Rogers said the return will be slow. “By the end of the year, we think 2021 is only going to be at about 30 percent of what 2019 was for business travel.”