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Leisure travel has made a startling comeback, but business travel’s recovery could still be years away – Business Insider

  • Leisure travel is making a strong comeback, but corporate travel is still lagging behind.
  • Combination business and leisure travel is “cushioning the blow,” but won’t save business travel hotels.
  • Patrick Scholes, an analyst at Truist Securities, believes business travel won’t fully recover until 2023.

It seems like everyone in the US is rushing to book their summer “revenge vacation.” But there’s one segment of travel that’s lagging behind: business travel.

Most of us might be laser-focused on leisure vacations right now, but the revival of business travel is crucial for hospitality and travel companies. Before COVID-19, business travelers made up 12% to 15% of trips on larger airlines but generated about 45% of airlines’ revenue.

And while leisure demand has passed complete recovery, business travel is still lagging behind by 60%, Scott Kirby, United Airlines CEO’s, told John Dickerson on CBS’ “Face the Nation.” Similarly Southwest Airlines’ “business travel component” was down 69%  in June, Gary Kelly, Southwest Airlines chairman and CEO, told Bloomberg. Kelly predicts this segment will continue to be down 50% by September, and will then improve afterwards.

In 2022 and 2023, Southwest plans to bring back more flights catered to business customers.

The consensus is that business travel will accelerate in September after Labor Day, Patrick Scholes, an analyst at Truist Securities, told Insider. And 63% of companies plan to bring back business travel within the next one to three months, according to a Global Business Travel Association survey of over 600 companies.

Read more: Lost business class travel is pummeling big airlines. Industry leaders predict when it might return — and how it could change.

“I don’t think anything will be normal on the other side of this, but we expect that business demand is really going to pick up in September as most of these schools are back in,” Kirby said.

Those who are “bullish” are holding out for a September business travel increase that mimics the recent skyrocket of leisure travel, Scholes said. But he believes there will be a “modest acceleration” after the federal holiday, and that the segment will still be down compared to 2019. 

“Some of the more bullish folks in the greater industry think it’ll be a full recovery by the end of next year,” Scholes said. “Some of the more conservative, perhaps not until 2024.”

Both Scholes and Kirby fall somewhere in between: They believe business travel will be back by the end of 2023.

The impact on hotels

Airport pandemic covid travel Illinois

Travelers arrive for flights at O’Hare international Airport on March 16, 2021 in Chicago, Illinois.
Scott Olson/Getty Images

It’s not just airlines: The slow and steady increase in business travel is also impacting hotels.

From June 21 to June 24 (a Monday through Thursday when business travel typically happens) the revenue per available room for generic business travel hotels was down about 45% compared to the same time in 2019. Meanwhile, mid-week stays at economy hotels — like Super 8, which primarily caters to leisure travelers — were up almost 10%.

Luckily, the increasingly blurred line between business and leisure travel has “helped cushion the blow,” Scholes said. But even this won’t “ever fully account for that Wednesday night business travel.”

As a result, “the road to a full recovery for America’s hotels is long and uneven,” Chip Rogers, president and CEO of American Hotel and Lodging Association (AHLA) said in a press release. Like other experts, AHLA predicts business travel won’t fully recover until 2023 or 2024, citing that many conferences, conventions, and in-person events have already been pushed back until 2022.

Business travel recovery depends on factors like persistent COVID-19 concerns, the rise in Zoom , and the newfound work from home comfort that has replaced the time and stress of commuting. However, Scholes doesn’t believe these factors will permanently slice business travel in half, which is what Bill Gates predicted in 2020.

“In my view, that is way off,” Scholes said, predicting that about 5% of business travel customers will be lost in the end.