IHG highlights encouraging signs of corporate travel return

Insight Comment The bounce back in corporate travel is certainly remarkable and would justify some of the industry’s early optimism. The case against is that levels are likely to fluctuate over the coming months and years and may take some time to settle into a new normal. Only then will we be able to judge the willingness for businesses to get their staff back on the road.

Hotel companies have been talking about the return of leisure travel throughout much of 2021 but a resurgence in corporate travel has been much harder to identify.

However, in its third quarter trading update, IHG said in the Americas region it had “continued to see more group activity and corporate bookings in recent months” and that “during September, there was sequential weekly improvement in demand, with particular strength from construction, logistics and technology business customers.”

Analysts at AB Bernstein pointed out that “US corporate demand was down just 12% vs 2019 on a room night basis, showing how quickly the recovery can come there once economies reopen.”

This doesn’t mean that things are necessarily going to return to normal. The shakeup of corporate travel could take years to be fully realised as companies wrestle with budgets as well as health and safety concerns. Still, IHG CEO Keith Barr saw plenty of reasons to be optimistic.

"Trading continued to improve significantly in the third quarter. RevPAR recovered closer towards pre-pandemic levels as more and more guests returned to our hotels around the world. Domestic leisure demand was particularly strong in a number of markets over the summer, where occupancy and rate climbed back to 2019 levels,” he said.

“Discretionary business travel, group bookings and international trips have also shown increasingly encouraging signs, on top of continuing good levels of essential business demand.”

Since the vaccine rollout gathered pace at the start of the year, some hotel executives have expressed optimism at the return of corporate travel bookings, with Hilton’s Chris Nassetta being one of the most positive. 

Not everyone is as enthusiastic. Speaking at the International Hospitality Investment Forum in Berlin earlier this year Accor CEO Sébastien Bazin wondered if a chunk of international business travel might be lost forever because of the pandemic. He said, however, the upside for the hotel industry might be that people can and do decide to work from anywhere.

IHG’s Latest Figures

In a glimpse of how much things have improved, IHG said that in its Americas region, RevPAR or revenue per available room, a key hotel industry metric, was down only 10% versus 2019. In the EMEAA region, basically the rest of the world minus China, the performance wasn’t as good with RevPAR down 43% versus 2019.

“While we remain vigilant to fluctuating Covid restrictions in different markets, the pace of returning demand is very encouraging as travel increasingly re-opens in every region. The strength of our brands, platforms and scale gives us confidence in IHG's future prospects and of both exceeding prior levels of profitability and delivering industry-leading net system size growth in the coming years,” Barr said.

In the update IHG said it had identified another $25 million in temporary cost savings for the year.