After talking with corporate clients, Amar Lalvani has concluded that business travel will not return to pre-pandemic levels “for multiple years.”
Lalvani, CEO of Standard International, which owns two Standard hotels in New York City, says the Standard High Line inn’s weekday business trade – the core of its business – has fallen to a typical occupancy rate of 10 to 20 percent.
American Airlines’ business travel bookings are down at least 95 percent, CEO Robert Issom told investors earlier this month. In the past, business travelers accounted for about one of every ten passengers but contributed as much as 75 percent of an airlines’ profit because they traveled so often.
More than 90 percent of companies have restricted international travel and 70 percent have suspended domestic travel, according to a September survey by the Global Business Travel Association.
Corporations’ 2021 budgets “are probably going to be 50 percent of what they were,” Lalvani notes, leaving little money for unessential travel.
Business travel may face a permanent 25-percent reduction in volume, according to Citigroup analysts, many of whom report becoming more pessimistic in recent weeks about the travel industry’s recovery.
Business travel could “languish for a decade,” Gary Kelly, Southwest Airlines’ CEO said earlier this month; Ed Bastain, CEO of Delta Airlines, said in July he no longer expects business passenger volume ever to return to 2019 levels.
“When I talk with other CFOs, they say, ‘I don’t know that my travel budget will ever snap back to where it was,’” said Jeffrey Campbell, CFO at American Express, which reports transactions at about 85 percent below pre-pandemic volumes.
Some hotels are adapting by marketing their rooms as refuges for home-workers who need a quiet space away from kids and televisions to hold a video conference or bear down on a project.
Others are offering “commuter rates” for office workers who need to stay in the city center past the last train or to be fresh and ready for an early morning meeting.
Those discounted rates, however, are unlikely to give hotels the profit margin they require in an industry where 50-percent occupancy is typically needed to break even.
TREND FORECAST: The hospitality and tourism sectors will continue to decline with more bankruptcies and greater consolidations. Beyond travel, as the “Greatest Depression” worsens and more companies go out of business, fewer companies will control larger shares of market sectors.
As with the “Great Depression,” there will calls for anti-trust legislation. Indeed, it may be a platform of the anti-tax/anti-vax movement.
