The Covid Pandemic Didn't Kill Conventions After All
The Covid Pandemic Didn't Kill Conventions After All
The early days of Covid in 2020 brought a cascade of cancellations of big-name business conventions including the Mobile World Congress in Barcelona, the North American International Auto Show in Detroit and the South by Southwest technology and music gathering in Austin, Texas. The expectation was that such events might be rethought permanently or draw significantly fewer attendees in the future after the world became accustomed to virtual conferences and former road warriors realized they didn’t need to spend quite so much of their lives inside airports. Indeed, for a long while, the idea of sitting in a hotel ballroom with several hundred relative strangers and shaking dozens of hands was unthinkable. But as offices reopen and Covid protocols ease, large group hotel bookings have actually bounced back faster than one-off business travel, Peter Strebel, chairman of Omni Hotels & Resorts, said in an interview.
Revenues from group bookings — defined as a block of 10 or more rooms per night for corporate, business association or social purposes — are at 90% of 2019 levels in April and May across Omni’s properties, Strebel said. Customers are locking in large numbers of rooms on shorter notice than they would normally give, a reflection of how quickly attitudes toward Covid have shifted. Strebel expects to match or exceed pre-pandemic levels on group travel in these months when all is said and done. Traditional one-off business travel, meanwhile, is still about 40% below what it was pre-Covid at Omni.
This feels counterintuitive, but it makes sense to anyone who has had to deal with mass Zoom calls during the pandemic. It’s much easier to replace a one-on-one meeting with a customer or a colleague with a video call; when 10 or 15 people are tuning in, much less 100 or 200, the odds of someone running into a technology complication are high and people tend to talk over one another. Plus, there’s no easy way to replicate the networking opportunities or organic discussions from large group gatherings in a virtual format. With many companies moving to hybrid office arrangements or allowing workers to work from home permanently, there has been increased interest in getting employees together again in a group setting as a way to preserve the corporate culture, Strebel said. He cited the example of a corporate gathering held recently at Omni’s Parker House hotel in Boston. In 2019, the last time this annual meeting was held, fewer than 250 people attended; this year there were 450. Organizers are also spending more to make events enjoyable, including by springing for fancier food and beverage options, he said.
This trend is echoed across the hotel industry. Demand for meeting space cooled in January as the omicron variant caused a spike in Covid cases, but the recovery was stronger than expected in March and could accelerate in the second quarter, hospitality industry data tracker Knowland said separately this week. The group expects meeting activity in Tampa and Phoenix to fully recover by the end of this year, while other cities including Nashville should bounce back to 80% of pre-pandemic levels or better. “The Hyatt Regency Orlando is looking at some sellout nights over these couple of weeks and [there’s] a ton of group activity in the city of Orlando,” Hyatt Hotels Corp. Chief Financial Officer Joan Bottarini said at a conference in early March. “Are you going to go to San Francisco for a night? Maybe not. But are you going to gather your team together so you can be together and have that cultural integration that so many are seeking now as we emerge and return to the road? The shift between those two actually could be quite interesting to watch.”
The rosier outlook for group bookings adds to evidence that business travel will recover from the pandemic slump, even if the nature of the trips looks a bit different. In recent months, as much as 55% of the trips booked through American Airlines Group Inc. are a blend of business and leisure, up from about a quarter before the pandemic, as people take advantage of work-from-anywhere flexibility to extend their trips.
The recovery in business travel has been led thus far by small and medium companies that are less likely to have restrictions on travel and have more to lose by not visiting customers in person. But even that dynamic is changing as large corporate customers start sending workers out on the road again. At Delta Air Lines Inc., domestic corporate ticket sales recovered to 70% of 2019 levels at the end of the first quarter, and surveys conduced by the airline indicate 90% of corporate accounts expect travel volumes to increase in the current period. Corporate bookings at American Airlines are the highest they’ve been since the start of the pandemic. Transatlantic business demand is already exceeding 2019 levels at United Airlines Holdings Inc., Chief Executive Officer Scott Kirby told Bloomberg TV. The contribution from business travel to the airline’s revenue per available seat mile is on track to fully recover “soon,” Chief Commercial Officer Andrew Nocella said this week on the United’s earnings call.
“As we exit the summer, we will rely on more business traffic, and we have a high degree of confidence that’s just going to be perfectly fine and we’re going to continue to accelerate,” Nocella said. “It’s nice to see after all the debates about how much would come back and when it would come back that we are approaching 100% from a revenue recovery. And we have a long way to go because the offices have not fully returned yet. Everybody is still not in their office. So we think there is actually more upside there than maybe a lot of people thought just a few months ago.”
The extent to which inflation disrupts current travel demand remains a big question mark. But as of now, it appears airline and hotel executives were right to be optimistic about the human appetite for face-to-face interactions.