In 2020 hotel business travel sector went through a very tough year with huge financial losses due to Covid-19 pandemic. Data shows that 2021 will also end with extensive financial losses for hotel business travel sector. The above conclusion comes from a recent report from the American Hotel & Lodging Association (AHLA). According to predictions, demand for business travel is not going to return to 2019 levels until 2023, while the hotel industry is projected to end 2021 down more than $59 billion in business travel revenue compared to 2019.
During pre-pandemic period the hotel industry’s 5.3 million guest rooms generated $168 billion in annual room revenue. This sum does not include the additional tens of billions generated by meeting rooms and other relevant revenue sources. In 2020, hotel room revenue fell by nearly 50% across the U.S. to just $84.6 billion. Room revenue is anticipated to increase by only $25.9 billion as we are close to the end of 2021, still 34% below 2019 levels. In 2022, room revenue is projected to rebound a bit further, hitting an estimated $144 billion, but still well below 2019 numbers.
The third quarter in 2023 is expected to be the first quarter in which business travel demand is above the corresponding quarter in 2019, with room rate recovery lagging behind demand, according to AHLA report. Of course, employers will play an important role in helping to revive business travel. When AHLA conducted this national survey during 2021, nearly 9 in 10 business travelers (87%) said their employer had put at least some restrictions on employee travel. More specifically, 37% of the respondents said their employer has completely halted all business travel, 34% said their employer has reduced business travel for all employees and 16% said their employer has reduced business travel for some employees. At the same time 13% said business travel is continuing at the same rate.
Among business travelers whose employer has halted or reduced business travel, 21% expected it to resume to pre-pandemic levels in the first half of 2021, 26% in Q3, 16% in Q4, and 29% sometime after 2021. Another 7% do not expect business travel to ever resume to pre-pandemic levels.
As far as room revenue is concerned, predictions refer to the need of taking 15 quarters to recover, which is Q1 2024. By comparison, after the last recession it took nine quarters for revenue to recover. Lower-tier hotels and those in coastal, mountain, and other outdoors areas are expected to outperform the market overall.
A major factor for the recovery of the hotel business sector is the increase of the vaccine distribution in the country. This is clear from the survey since 34% of Americans answered that they are comfortable staying in a hotel right now, while nearly half (48%) said their comfort is tied to vaccination in some way. More specifically, 20% will feel comfortable staying in a hotel again when a majority of Americans have received a COVID-19 vaccine and 17% will feel comfortable when they are personally vaccinated.
Moreover, at the post-pandemic era the overall cleanness and safety protocols is the second most important factor which is most likely to influence Americans stay in a hotel. The first major factor still remains the price.
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