Hotels fear hard winter without the business traveller
Summer bookings surged in leisure locations but city sites continue to struggle
Pent-up demand gave hotels in leisure destinations a late summer boom this year, but it could be a harsh winter for city-based lodgings.
Hotels and holiday cottages in regional destinations such as Cornwall in the UK or the Alps in Europe enjoyed record levels of demand as restrictions on international travel coupled with steep testing costs pushed consumers to book domestic vacations.
Accommodation in northern European countries that traditionally see many people head to the shores of the Mediterranean during the summer have been the biggest beneficiaries of closed borders.
“We have never been in a position where so much is dependent on government regulations and travel restrictions,” said Amar Lalvani, chief executive of The Standard, a group of nine boutique hotels.
The UK sent 16m holidaymakers to Spain and 7.1m to France in 2019, according to Abta, the travel association. When travel restrictions cut confidence in going abroad earlier in the summer, flocks of British tourists opted for staycations instead.
Occupancy at UK hotels reached 71 per cent in August, compared to 63 per cent in Spain and 60 per cent in France, though they remain down on 2019 levels.
City centres dragged down the average occupancy rates this year as workers stayed away and the number of international sightseers remained low.
But now the holidays are over and questions loom as to whether business travel — a staple for hotels during the winter months — will return to fill the books. Companies have been slower than expected to recall workers to offices amid a spread of the more infectious Delta variant.
Hotel companies have reported that several group bookings for the autumn have been pushed into next year.
Robin Rossmann, managing director at the industry data provider STR, described it as “an autumn hangover from a pretty stellar summer for hotels that had any kind of leisure appeal”.
“Generally nobody really knows [if business travel will return], other than there’s nothing on the books at the moment,” he said.
The dual pressures of companies wounded by the pandemic reining in costs and environmental concerns could result in a long term, perhaps permanent, dip in corporate travel.
Both Airbnb and Marriott, the world’s largest hotel group, have signalled that they believe the future lies in a blending of work and leisure trips.
“Zoom may not be helpful for business travel but it’s good for family travel, and longer weekends that blend work and leisure, made possible by part-time remote work, also will be part of the future,” Airbnb said this week.
It noted that in the US, the number of longer weekend trips had increased with three- and four-day weekend bookings in the second quarter of this year up 70 per cent on the same period in 2019.
Francis Davidson, chief executive of Sonder, an apartment-hotel company, said that remote workers “will counterbalance some of the drop in business travel [but] there is no doubt that travel will be different”.
For hotels, there has been a better recovery in daily rates than occupancy. Even in UK city centres such as Liverpool and Manchester, 80 per cent of hotels are selling rooms at rates above 2019 levels, thanks to the boost to domestic demand.
There has also been less group travel and therefore fewer group discounts to quell the rise in prices.
The increase has been less marked in countries such as France and Spain, however, which are much more reliant on inbound demand. Rates in Cornwall during August, for example, increased 66 per cent compared to the same month in 2019. In Spain’s Malaga province, however, they fell 1.1 per cent.
“It’s the northern European markets that have driven that rate recovery,” Rossmann said.
Maintaining those rates will be crucial as hotels face up to spiralling cost pressures: food price inflation, increasing energy bills and the tapering of government support.
Acute staff shortages across the industry have already caused several hotels to cut capacity and reduce food and laundry services.
But developers still believe in the future for hotels.
STR said that the number of hotel projects under way this month in Europe is 13 per cent below the same point in 2019, but increasing as construction opens up.
Rossmann estimated that 2021 and 2022 would be record-breaking years for hotel openings, although some of that can be attributed to projects put on hold during lockdowns.
According to a survey of 50 hotel groups in the UK by the commercial property agency Fleurets, 44 per cent plan to increase capital investment into their hotels this year, while almost a third are planning new acquisitions.