A day of reckoning may be coming for business-focused hotels: Travel Weekly
Frank Belzer is a board member for Visit Florida and chair of its marketing committee. He is a former senior vice president, marketing, for Universal Parks and Resorts where was responsible for managing relationships with the trade globally.
Common wisdom holds that business travel’s return will lag behind leisure (and, thanks to videoconferencing, may never come back to full strength), but little analysis has been done on how this may have a knock-on effect for leisure travel.
If fewer people are traveling for business, what does that mean for hotels that have historically focused on the business travelers? Leisure rates are typically more modest, and families have different needs when they stay in hotels. This suggests that hotels may have to lower rates at the same time they will have to spend capital to retrofit a property to accommodate a different clientele.
This potential combination of lower revenues and additional expense is a horribly unattractive proposal for owners but a trap into which many business-focused properties may fall.
There are additional expenses. Marketing and branding collateral will have to be adjusted or scrapped for a repositioning. Websites must be updated.
Finally, business travelers, and especially corporate groups and convention attendees fill so many rooms that they create “compression”; the reduction in supply allows prices to rise for the remaining inventory, which is especially important in off-peak periods. But if prices stay low, they’re not only competing with their usual competitive set but with properties that are typically a category or two below them. Good for consumers, bad for hotel owners and management companies.
Hospitality is just one segment that is likely to be affected. Airlines and ground transportation companies may have a similar downhill slide. One shift leads to another, and then another.
Anytime you have more players competing for a shrinking pool of travelers, something must give. In the past, travel and tourism has successfully adjusted to new entrants: new brands, new distribution channels. There was often a learning curve to accommodate new business models, and legacy brands evolved and learned to compete. Change was less disruptive when travel was growing.
But this is different; we may be looking at a structural change to the travel ecosystem never before encountered, with a whole segment of traveler dropping off precipitously. There may be a battle royale as leisure properties find new competition from properties that formerly focused on business and business hotels struggle to go head to head with established leisure brands.
Not all business-focused providers will try to supplement losses by chasing leisure travelers. Some might go in entirely new directions that become apparent as we recognize which societal changes stick post-pandemic and which fade away. And, some will simply go out of business. Whatever happens, be prepared to see some major changes in the hospitality landscape.