According to a new report entitled “When Will Convention and Group Demand Come Back?” from CBRE the world’s largest commercial real estate firm, business travel post-COVID-19 will come roaring back. If accurate, this will be good news indeed.
Key Takeaways From The Report
- The return of group and business travel is a major factor in hotels’ recovery. A more remote workforce will demand more in-person connection through business travel and conventions.
- From every $1 invested in business travel, firms realize $12.50 in incremental revenue. The elimination of business travel reduces profits by 17% in the first year.
- Revenue per available room (RevPAR) in dense urban markets remains over 80% below 2019 levels. A key driver of recovery in these markets will be the return of corporate demand, which made up almost 50% of demand for upper tier properties in 2019.
- Given the short-term nature of travel restrictions we expect a relatively quick, and strong, bounce back for the lodging industry, with occupancy reaching pre-COVID-19 levels in 2023 and nominal RevPAR reaching 2019 levels by 2024-2026 for upper tier hotels.
- Safety concerns and corporate travel bans are primarily preventing the industry’s recovery.
The U.S. lodging industry is facing its largest decline in demand in history, but the industry is far from dead. Given the circumstances under which the industry has been challenged, and the solutions on the horizon for those challenges, the lodging industry may be out of the hole in a matter of three years.
Travel, especially the return of business travel, is a major factor in hotels’ recovery. When business travel resumes, we believe it will do so in full force. It may look different and potentially include additional family members such as working spouses or school-aged children completing virtual learning during the traditional workday, but group and business travel has not ended in the U.S.
Although many office-using professions are able to maintain productivity through heavy reliance on telecommunication, economic evidence for in-person interaction will drive post-COVID group hotel demand. From every $1 invested in business travel, firms realized $12.50 in incremental revenue. Additionally, Oxford Economics found that elimination of business travel reduces profits by 17% in the first year.
A more remote workforce will demand more opportunities to connect in person with colleagues, clients, and others in their network, and conferences and conventions are ripe to benefit from the increased demand. The desire for face-to-face communication and other humanistic features of traveling to interact with people will drive a strong recovery for business travel during the post-COVID-19 period.
Business travel post-COVID-19 should be robust and hopefully will return quickly. The financial benefits of getting out there is important to the global economy.