The long road to recovery in the business travel sector just got shorter. According to the Global Business Travel Association, there are some encouraging signs that business travel is returning to pre-coronavirus spending levels faster than expected. Business travel was effectively halted during the Covid-19 pandemic, with many predicting slow growth to revive sales and a landscape that would be permanently changed. Now the organization predicts that global spending on business travel will surpass 2019’s spending level of $1.4 trillion by 2024, up from its previous forecast of 2026. Spending is expected to grow to $1.8 trillion by 2027. The GBTA values the resilience of the global economy as a key factor in the recovery. Additionally, corporate decision makers are more optimistic about business travel than employees, which is a positive sign because they set policy, a recent Morning Consult survey found. About 28% of those making business travel decisions and 32% of those responsible for business travel budgets say their workplace will increase business travel in the coming year, Morning Consult finds. That’s compared to 15% of all working adults who said the same. After previous employee polls pointed to a prolonged recovery, the company compiled a demographic of business travel decision makers, including those responsible for budgets, for its latest survey. They were among 2,435 working U.S. adults surveyed between August 12 and 13, 2023. Lindsey Roeschke, a travel and hospitality analyst at Morning Consult, said she was surprised by the results. “I thought we’d see a higher level of negativity among the people on the inside, like, ‘Yeah, you employees might think you’re going somewhere, but I look at the budgets, and you really are.’ doesn’t seem likely,” she said. “What we actually found was the exact opposite. …So I think this bodes well for the recovery going forward.” Who benefits? Business travelers spend much more per capita than leisure travelers, so a recovery will have huge implications for the travel industry, Roeschke said. That’s clearly visible for airlines, she noted. “There will be people returning to that category and buy premium seats,” she said. Those travelers also tend to spend more on things like amenities, checked bags, food and beverages, she added. At a meeting with senior executives in the airline industry, Deutsche Bank- analyst Michael Linenberg said he was encouraged by comments on business travel demand and believes a 5% increase in revenue from September 2019 appears “very achievable” (which would imply 15% better revenues), a growing number of companies are demanding that their employees will return to the office this fall, which we believe will spur additional business travel,” he wrote in a September 8 note. In addition, there will be a return to corporate earnings growth, with the S&P 500’s gains in the quarter December is expected to rise 8%, he added. Business travel has historically accounted for about 20% to 25% of major airlines’ volume, but has declined by one to three percentage points, Linenberg told CNBC. However, there are new segments that the industry has not previously focused on, such as the ability to travel while working remotely and the combination of business and leisure travel, he said. “Where the airlines may have seen a permanent reduction in the percentage of purely business travel, this is now being offset by some of these segments that didn’t really exist to the extent that they do now,” he said. Overall, Linenberg is bullish on American Airlines, Delta Air Lines and United Airlines for their healthy cash flow generation, strong margins, earnings growth and diversified revenue streams. He sees the recent pullback as an opportunity to buy. American Airlines and Delta both recently lowered their third-quarter guidance after higher costs hit profits. Meanwhile, the hotel industry has seen about 10% of business traffic eaten up by online meetings and has been hit by layoffs at major technology and financial companies, says Truist analyst Patrick Scholes. However, the company’s data checks on U.S. hotels show strong growth in corporate group bookings, as well as a moderate acceleration in small- and medium-sized business travel growth, he said. This is also the time of year when group travel becomes a larger part of the revenue mix, he added. In this environment, Scholes likes real estate investment trust Ryman Hospitality Properties, which owns several major convention hotels and The Grand Ole Opry. The company gets about 80% of its revenue from groups and conferences, he said. There is also minimal new competition as developers shy away from building group hotels, he added. RHP YTD berg Ryman Hospitality Properties year to date Another name on his list is Hyatt Hotels, which gets about 30% of its revenue from group and convention consumers, Scholes said. “Over the next six to nine months, the group will be the biggest driver of RevPAR growth, and these two companies … are best positioned for that,” he said, referring to key hotel revenue per available room. Of course, the recovery of business travel can also shift if there are changes in the economic climate. “Much of this will depend on how the economy continues to develop,” said Morning Consult’s Roeschke. – CNBC’s Michael Bloom contributed reporting.
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