Hotel Developers Are Confident Business Travelers Are Coming Back
But a recession could change that, if United Airlines' experience is any indicator.
The Silicon Valley Bank collapse caused a short-lived drop in business travel, according to United Airlines CEO Scott Kirby, but today the airline is still seeing strong demand.
The blip lasted about two weeks, “but now appears to have recovered,” he said during the company’s recent earnings call.
Meanwhile, the US hotel development pipeline is ready for this visitor segment, which has lagged the return of leisure travelers since the pandemic, according to a new report from STR, with luxury hotels being well represented.
This indicates confidence in the future of business travel, according to STR.
“Upper upscale saw the slowest recovery, but a steady climb in performance and the business travel indicators have supported developer confidence in the segment,” Isaac Collazo, STR’s VP, analytics, said in prepared remarks.
The more than 23,000 upper upscale rooms in construction represent 3.4% of the segment’s existing supply. According to STR’s report, that is well above the long-term growth average (+2%) in the US.
The overall number of US rooms in construction fell slightly in March, snapping a three-month “plus” run. The March numbers align with patterns in previous years, STR reported.
Upscale is the next-most active property type, followed by Upper Midscale, Upper Upscale, Midscale and Economy.
Collazo added that luxury shows the highest projected growth against existing supply, matching the rate gains experienced in the segment over the last few years.
“Select-service (upper midscale + upscale) continues to grow as well, which is no surprise given how well the market segment has regained demand. The upper tier of select service also caters to the business traveler,” he said.
Business travel might slump if there is another economic shock or bad recession, at least if United Airlines CEO Scott Kirby’s comments to investors following its Q1 earnings call is any guide.
Right now the airline is still seeing strong demand, he said, but “it is clear that the macro risks are higher today than they were even a few months ago.”