The Immediate Future of Essential Business Travel in a Post-Covid World

The economic impact of COVID-19 across industries cannot be overstated, with the hospitality and travel spaces being among the hardest hit. In the immediate wake of the pandemic, more than 40 airlines worldwide ground to a halt, suspending entire fleets. To put an even finer point on the devastation rained down upon the aviation sector in the aftermath of the novel coronavirus, major carriers cancelled in excess of 90% of scheduled flights last year.

Hotels fared no better. In 2020, the industry surpassed 1 billion unsold room nights for the first time ever—this according to STR, which provides premium data benchmarking, analytics, and marketplace insights for global hospitality sectors—and U.S. hotels suffered their worst year on record, with billions of dollars in losses amid the pandemic as business and leisure travel became virtually non-existent.

A Rebound in Business Travel or Recalibration of Expectations?

All that being said, brighter days are ahead, and leisure travel has rebounded with a flourish as states reopened and vaccination rates (and RevPAR) continue to climb. Lagging behind, however, is business travel and the question remains: will it come back to pre-pandemic levels?

The answer is yes, but it may take some time. If anything, COVID-19 proved to businesses and workers alike how much can be accomplished miles away from their offices, clients, customers, and prospects. Indeed, video teleconferencing software programs and platforms like Zoom and Microsoft Teams have made some non-essential travel just that—non-essential. And certain trips that businesspeople may have elected to take in years past may no longer be deemed necessary when a Zoom check-in will suffice.

Yet people are inherently social, meaning that in-person interaction is something that technology cannot entirely replicate, which bodes well for the future of business travel. Also, plenty of hoteliers believe that while some business (more particularly, low value occasions) that once required travel may now be handled by way of video, those non-essential trips will eventually be replaced with other high value activities necessitating face-to-face meetings and, by extension, increased hotel traffic.

To be sure, an ongoing post-COVID disruption in business travel would no doubt impact the bottom lines for hotels, airlines, and others in the travel and hospitality spaces. But the news as we enter Q3 is not all doom and gloom, with business travel expected to resume in the fall and winter of this year as more and more people return to the office and then begin traveling again for meetings and conferences. In fact, hospitality chains like Marriott and Hilton believe travel broadly—which includes business trips more narrowly—will return to 70% to 75% of 2019 levels by the end of the year. The uptick in business trips, and corresponding surge in hotel occupancy, is already being seen in places like China (which reopened sooner than the U.S.), where business travel is 5% above where it was in March 2019.

Without question, domestic business travel is not where those in hospitality want it to be. But the pent-up demand informing leisure travel these days will certainly be echoed in the business segment, which is why CEOs of some of the largest hotel chains remain bullish on a complete business travel recovery by 2024. Of course, this optimism may be tempered somewhat by the emergence of the Delta variant and still-existing indoor mask mandates where in force. That being said, perhaps a more immediate concern for the hospitality industry is the nationwide labor shortage coming out of the pandemic. This has not only created problems in terms of on-site staffing, but also has added to operational costs because of wage increases paid by suppliers looking to attract and retain talent.

The Glass Is Half Full

Clearly, we as a nation are emerging from the pandemic in a robust manner. Exhibit A is the economy, which has entered a period of what some economists have characterized as “supercharged growth” that is expected to stay strong well into 2023.

With economic activity comes the generation of business travel, which is hopeful news for hotels, airlines, and ancillary businesses. Of course, we should not anticipate business travel to meet or exceed pre-pandemic numbers this year or even next, especially given the changed—and ever-changing—behaviors of business travelers in a world colored by Zoom and the like. Even so, it is not a stretch to forecast a fair share of “no vacancy” signs post-COVID and clearer skies for airlines in the very near term.

This blog post is not offered, and should not be relied on, as legal advice. You should consult an attorney for advice in specific situations.