Can business travel bounce back to boost the hard hit hotel sector?
Travel restrictions are gradually lifting but attitudes to business trips have changed significantly
After many months of video calls replacing in-person meetings, business travellers are slowly getting back on the road.
With corporate travel typically accounting for around a fifth of all visits to London and a quarter to Milan, according to the MasterCard Destinations Index, the impact of travel restrictions on Europe’s business hotels has been seismic. Business travel spending in Europe fell 58 percent during 2020 to $140 billion, according to the Global Business Travel Association.
“While smaller-than-usual crowds of summer tourists will provide some relief in the short-term, hotels are hoping the autumn will mark the start of a longer-term recovery,” says Jessica Jahns, head of EMEA hotels & hospitality research at JLL.
“The signs are looking more optimistic as restrictions loosen and vaccine rollouts gather pace.”
Germany, for example, recently allowed visitors from the UK again.
After voicing concern for business travel prospects earlier this year, Lufthansa's chief executive, Carsten Spohr, is now expecting a less drastic slump of around 10 percent in business trips after the pandemic.
First movers
For now, it’s domestic flights and bookings leading the corporate travel recovery with hotels in France now at 80 percent of 2019 levels and Spain and Nordics at about 50 percent, according to AmEx GBT data.
“The road back will be a winding one, with some business sectors and industries back on the move before others,” says Ross Petar, head of EMEA hotel valuations at JLL.
Sectors such as pharmaceuticals and manufacturing still have to travel, according to research by McKinsey, while Marriott is seeing strong demand for corporate travel within the energy sector, especially in Russia where bookings are heading closer to 2019 levels.
“Those professionals who need to travel for important in-person, sales or client meetings are at the front of the queue right now,” Petar says.
In the meantime, some urban hotels are looking to attract business travellers from closer to home with work from hotel packages. Accor’s brands are offering bedrooms as makeshift offices while the likes of CitizenM and London’s Point A Hotels are offering monthly subscriptions for overnight stays and access to workspaces.
An unclear path ahead
The extent of a longer-term recovery, of course, depends on the coming autumn and winter months.
“The only way is up now – but a return to pre-pandemic business travel levels is unlikely for some time – or perhaps ever,” says Jahns.
In 2019, a record 5.1 million passengers arrived at London City Airport, before falling 82 percent in 2020. Frankfurt and Milan Linate also fell, by 73 percent and 67 percent respectively.
The rise of hybrid working, the evolution of video conferencing software and the growing corporate focus on sustainability have also challenged long-established norms around business travel.
Microsoft is being urged to limit its corporate travel to 2020 levels for good, while hybrid conferences and events are becoming increasingly common and sophisticated. Cluster meetings, whereby international companies set regional points for people to gather and link the groups up virtually, are also taking off.
Travel tech firm Troop calculated that moving a 300-person event to a cluster format cut costs by 84 percent and reduced carbon emissions by 73 percent, as well as decreasing travel time by 72 percent.
The future state of play in corporate travel nevertheless remains divisive. On the one hand, United Airlines chief executive Scott Kirby predicts that losing a business deal via a video call will soon have professionals back on the move while on the other, Bill Gates believes that more half of business travel will disappear.
“When you compare where we are now to pre-pandemic, some pretty long-lasting changes have already reshaped the way professionals interact across borders,” says Petar. “We expect that those that do pack their bags for a work trip will travel less, but for a longer duration.”
Such a move could potentially be significant for serviced apartments. “It’s early to say, but they may stand to benefit from being able to provide a home-from-home set up addressing the additional privacy and cleanliness concerns many travellers have,” says Jahns.
“In the meantime, hotels face an anxious wait to see how 2021 plays out and how they’ll need to adapt in 2022.”
About JLL
For over 200 years, JLL (NYSE: JLL), a leading global commercial real estate and investment management company, has helped clients buy, build, occupy, manage and invest in a variety of commercial, industrial, hotel, residential and retail properties. A Fortune 500® company with annual revenue of $20.8 billion and operations in over 80 countries around the world, our more than 111,000 employees bring the power of a global platform combined with local expertise. Driven by our purpose to shape the future of real estate for a better world, we help our clients, people and communities SEE A BRIGHTER WAYSM. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit jll.com.
