Traveler Jailbreak: Leisure Travel Demand Powers U.S. Lodging Recovery

In the month of May, leisure demand was roughly 120% of its pre-pandemic level, and with an estimated 75% of households planning a vacation this Summer, it appears this trend will continue at least in the short term.

The STR chart below communicates the room revenue story eloquently. By using 2019 as a base of comparison, the RevPar (revenue per available room) recovery trend line is favorable.

The leisure traveler is doing their job, but where is the corporate traveler? Although accurately determining travel purpose is difficult, mid-week demand is a decent proxy, and the occupancy numbers are still very low in most markets.

It stands to reason that if leisure is overperforming and RevPar is down 23%, then we have a corporate demand problem - transient and group.

The big question: When will corporate travel return to pre-pandemic levels?

There seem to be three camps of thought:

• Optimistic- People are social animals, and as we close in on herd immunity, Corporate America will begin to hit the road again after Labor Day 2021. Full demand recovery will be sometime in mid to late 2022.
• Pessimistic- CEOs and CFOs are really enjoying the travel and entertainment expense reduction that occurred during the pandemic. They believe the company can curtail travel and entertainment permanently, capture the cost savings, and by extension, shareholder value. Technology has been remarkably effective in maintaining productivity. The number of trips, the number of travelers per trip, and the level of conference and meeting attendance will all be lower going forward. Corporate travel volume will never return to pre-pandemic levels.
• Tentative- We really don’t know how corporate travel demand will look but expect demand to return in some form, at some point in time. The salesperson will “Zoom” with clients until they lose their first sale to a competitor who met with the customer face-to-face. Revenue-producing projects still need to happen, and training still needs to occur to build skill and culture. Allowing people to live away from corporate headquarters means they will need to stay somewhere when they visit the office. There is potential for corporate travel to be back to pre-pandemic levels in 2023, or worst case, 2024.  

Antidotally, green shoots are sprouting in the form of local small corporate groups and trickles of individual corporate travelers. The large national corporate accounts still seem very tentative or uninterested in releasing their teams for travel at this point but a number of prognosticators think this will start in the Fall.  

We are in wait-and-see mode currently, but the hotel industry is rooting for a corporate traveler jailbreak!