There was a risk that the extent of the sector’s reliance on corporate travel was “not fully appreciated by investors”, according to a study by Credit Suisse.
The bank warned that weak occupancy over the 2020/21 winter “may drive a derating of the sector”.
Credit Suisse has estimated that 20% to 25% of the sector’s revenue was driven by international corporate travel, where it saw 2021 international corporate travel 65% below 2019 levels given restrictions remaining in place before a vaccine was available.
From 2022 onwards, it expected an “incomplete recovery” as while its research indicated 65% to 80% of corporate travel was to directly drive revenue, the remaining 20% to 35% for internal meetings was expected to be in part replaced by digital alternatives as travel budgets were rebuilt.
Hotel brands’ demand, it said, was primarily driven by corporate travellers: across the hotel sector, it saw average reliance on corporate travellers at 60%, depending on the portfolio of brands and regional positioning
The report’s author, Leo Carrington, said: “We expect to see strength in mainstream brands at the expense of upscale and luxury brands as both corporate and leisure guests trade down due to the significant economic impact of the Covid-19 pandemic. We believe that the economy and mainstream brands on average attract more corporate customers, with a significant customer base being travelling tradespeople, sales teams and professional service workers with limited ability to replace travel with video calls.”
In a recovery that saw corporates rebalancing their travel spend downwards, Credit Suisse said it would expect to see some trading down of brands into the mainstream segment. This trend would be likely to favour Whitbread over IHG and Accor. IHG, it said, appeared slightly better positioned than Accor; however, Accor’s mainstream portfolio was skewed to a lower price point, while the group estimated almost 60% of IHG’s mainstream exposure was the North America Holiday Inn and HIE business.