Understanding the Changing Dynamics of Business Travel

Dorothy Dowling, Managing Director, Horwath HTL, HSMAI Foundation Strategic Advisor

Breffni Noone, Associate Professor, The Pennsylvania State University, HSMAI Foundation Board Member, Revenue Optimization Advisory Board Member

Last month, HSMAI hosted its first Commercial Futures Forum, Understanding the Changing Dynamics of Business Travel, in San Antonio TX. Industry experts shared insights on the evolving business travel landscape and outlined opportunities to capture a greater share of the business travel market. Here are some of the key takeaways:

1. Business Travel Recovery

2024 forecast: Expected value of business travel in 2024 is $1.48 trillion in 2024, up over 6% from 2019 (GBTA). U.S. business travel is expected to be $472 billion (+13.4% vs. 2019; WTTC)

Regional breakdown: APAC leads with the largest share of global business travel, followed by North America and Europe.

Group travel recovery: Group travel has rebounded to 2019 levels in terms of value and RFP volume, with an 8% growth over 2023.

Meeting planner expectations: Meeting planners expect to spend more in 2025, with a preference for face-to-face meetings (60% F2F, 20% virtual and 20% hybrid)

2. Market segment opportunities

SME market: Small and medium-sized accounts are at 130% of 2019 levels, indicating substantial growth. The competition for capturing SME business is intense, with various players like Expedia, Booking.com, and brand.com platforms vying for this segment. Because SMEs often lack the resources and expertise of larger corporations, partnerships with technology providers and intermediaries are central to reaching and servicing the SME market effectively. Hotel companies need to develop more comprehensive and user-friendly platforms that can handle the diverse requirements of SME travelers, from booking to expense management. Hotels also need to consider developing specific strategies and offerings to cater to the unique needs of SMEs.

Workforce travel: This segment includes workforce crews (e.g., construction, transportation and logistics), with a market size of $23 billion (global annual spend). Workforce travel primarily occurs in tertiary markets, where hotels are less likely to be at full capacity, making this segment valuable for driving volume. There is also a growing importance of loyalty programs among workforce travelers. 95% of workforce travelers are members of at least one loyalty program, with 65% being members of two to three programs. This indicates a significant opportunity for hotels to engage with this segment through loyalty initiatives.

3. Corporate Travel Trends

Travel managers are pulling double duty: 90% of travel managers are involved in sourcing hotels and venues for their meetings and events program, in addition to sourcing hotels and venues for employee travel.

Fresh blood: 65% of organizations sending group RFPs through Cvent are new, with a significant portion of planners being Millennials and Gen Z. These younger planners are optimistic and eager to spend on travel.

Pricing model preferences: Hotels are pushing for non-last room availability (NLRA) and dynamic agreements, but corporate travel managers need to see clear value in these arrangements. The RFP cycle is also being rethought, with some companies considering longer-term agreements.

Focus on costs: Corporate travel managers are focusing on demand-side savings by nudging employees to make better travel decisions.

Booking platforms: There is a shift in how corporate travel bookings are sourced, with some coming through OTAs rather than traditional TMCs. Other types of companies are also offering alternative ways to capture corporate travel demand (e.g., partnerships with financial services). There is also a rise of bookings through platforms like Agoda, which can obscure the true nature of corporate bookings. This trend poses challenges for tracking, managing, and capturing corporate travel effectively.

Blended travel: There has been a significant increase in blended travel, with a 4X increase year-to-date in travelers adding personal days to business trips (vs. 2023). Companies are formalizing travel policies to accommodate blended travel, specifying when and how employees can add personal days to business trips. This includes functionalities like split payments and extending stays within the business travel booking experience. Innovations like AI-driven booking tools, direct folio billing, continuous rate monitoring, and small meeting technology are emerging as key differentiators.

Sustainability: Companies are increasingly mandating stays at sustainable properties. Properties need to actively engage in sustainability programs, and measure and report their sustainability efforts.

Customization: Companies are increasingly looking for customization and unique preferences in their travel programs. The ability to meet these customization needs is critical, especially with the shift in generations. Properties need to think about collaborating with clients to enable them to curate their experience. For example, tools like AI-generated 3D event designers are being used to allow planners to design their own events within set parameters, enhancing collaboration and customization.

4. Loyalty Programs

Credit card competition: Credit card companies are innovating in the loyalty space, posing a potential challenge to traditional hotel loyalty programs.

Loyalty evolution: Loyalty programs need to evolve to meet the changing expectations of travelers, particularly younger generations. This includes offering more personalized rewards and experiences that go beyond traditional points-based systems.

On-property execution: Loyalty programs have to be effectively executed on-property. This involves recognizing and rewarding loyal customers in meaningful ways, whether through simple gestures or more significant experiences.

Speed to market: There is an increasing need for speed in leveraging digital opportunities to reward customers quickly and build strong customer profiles. Instant gratification and timely rewards are becoming essential in customer engagement.

Nimbleness and personal touch: Independent brands have the advantage of being more nimble and able to offer personalized touches that larger brands might struggle with. This can include unique loyalty programs tailored to individual properties, and/or operationalizing loyalty in ways that highlight their unique attributes and create memorable experiences for guests.

5. Retailing:

Retailing attracts more bookings and revenue: A case study from Sabre demonstrates the power of a modern retailing platform. A midscale chain with 21 properties had 10 of those properties use SynXis Retailing. The remaining 11 did not. The properties using SynXis Retailing saw a 2.7% increase in YTD (i.e., Jan. to Sept. 2024) net bookings, while properties not using SynXis Retailing saw a 6.9% decrease, a 9.6-point difference. The properties using SynXis Retailing also saw a 3.9% increase in YTD net revenue, while properties not using SynXis Retailing saw a 5.6% decrease, a 9.5-point difference.

Retailing accelerates TREVPAR growth: A luxury property using Sabre’s retailing platform earned $670K in ancillary revenue YTD (Jan. to Sept. 2024), and a TRevPAR lift of 12% (i.e., % total revenue increase from retailing above “traditional” RevPAR calculated as ancillary revenue divided by non-ancillary revenue).

Operational challenges: While the previous examples demonstrate the potential of retailing to drive direct bookings and improve TRevPAR performance, there are challenges in operationalizing new technologies and ensuring that systems (e.g., CRSs) can support innovations like day-use bookings and attribute-based pricing. New connectivity solutions facilitate connectivity between traditional CRSs to power these solutions and allow hoteliers to sell a full book of experiences to their guests.

The recovery of business travel, significant growth in blended travel, and the opportunities associated with SMEs, workforce and group travel, present new opportunities for capturing share of the business travel market. The increasing importance of sustainability and customization highlight the need for hoteliers to adapt and innovate. The evolution of loyalty programs and the integration of advanced retailing technologies are crucial for enhancing customer engagement and driving revenue. The development and application of AI-powered tools will be key to success: facilitating the development of booking tools to provide personalized recommendations and streamline the booking process, enabling management of blended travel by supporting functionalities like split payments and extending stays within the business travel booking experience, and enhancing operational efficiency.