Travel is back to business | Tech US News


The S-Network Global Travel Index (TRAVEL) is largely consumer-driven in that performance is more closely aligned with consumer-based indices than with other travel-related indices. In previous notes we discussed how the main constituents include luxury goods retailer (LVMH Moet Hennessy Louis Vuitton SE [MC FP, 4.7% index weight] and Estee Lauder Companies [EL, 3.9% index weight]), credit card companies (American Express [AXP, 4.5% index weight]), and other consumer discretionary companies (Walt Disney Co [DIS, 4.4% index weight]). But recently, as the strength of consumers began to become more uncertain, business travel has also emerged as a green shoot, as employees burn off virtual meetings and also seek to combine business and leisure. This note looks at three factors supporting the recovery of business travel.

Travel is back to business

Travel is back to business

Virtual meetings, especially for large conferences and events that involve them, will probably not replace face-to-face meetings, but will act as a complement.

Over the past two years, leisure travel has driven demand for both airlines and hotels, while business travel has remained suppressed. Many analysts and investors believed that business travel would not return to pre-pandemic levels due to the popularity of video conferencing (eg Zoom or Microsoft Teams). But recently, we have seen that this may not be the case. After nearly two years of video meetings, employees have realized that online meetings cannot completely replace all aspects of face-to-face meetings. While video meetings are still widely used for day-to-day work and to connect teams in different geographies (Zoom reports business customers grew 18% year-over-year in its most recent F2Q23 earnings report), they cannot truly replace large-scale conferences and events. However, video meetings can still complement some large-scale events as the technology allows for more “metaverse”-like features like avatars and augmented reality.

Combining business and leisure travel may lead to booking additional nights for hotels and other accommodation companies.

Both Marriott (MAR, index weight 4.6%) and Hilton (HLT, index weight 4.6%) reported a significant recovery in business travel, which includes group travel (for conferences and large meetings) and transient business trips (day to day). business travel day). Before the pandemic, Marriott’s demand was driven by about 60% business travel and 40% leisure. Those percentages changed during the pandemic and are now back to roughly 53% business and 47% leisure as of 2Q22 (3Q22 earnings will be reported Nov. 3 after market close). For Hilton, business transient RevPAR (revenue per available room) reached 2019 levels, with large corporates seeing the greatest acceleration. The rise of remote work has led to the growth of combined business and leisure travel, where an employee can fly for a few days on business and then add a few more days for vacation. While some believe this could hurt leisure activity, this could help boost profits as business travel is often booked in shorter windows at higher fares and customers are less price sensitive when it comes to business than of leisure Customers who add a couple of days of hotel stay can add these dates at a later date than they would normally do when booking their own holiday.

Remote work remains very popular while traveling, so the trend of “nomadic workers” working in Airbnbs while exploring different cities could continue.

Like the mix of business and leisure, the continued popularity of remote work after the pandemic has allowed some employees to work from almost anywhere. Many employees, especially younger workers, can book extended stays in different cities and spend days working and nights exploring. Airbnb ( ABNB , index weight 4.5%) reported in its latest 3Q22 earnings report that long-term stays (28 days or more) are currently 20% of gross nights booked in the quarter. Of the total gross nights booked, 45% were for stays of at least seven nights.

Bottom line:

Most of the comeback story behind this sector has been driven by consumers and their desire to go on holiday. And while consumer strength remains a big factor, commercial flights have also begun to re-emerge in recent quarters as employees burn out from virtual meetings and also look to combine business and leisure.

The S-Network Global Travel Index (TRAVEL) is the underlying index for the ALPS Global Travel Beneficiaries ETF (JRNY).

Related research:

Consumers driving despite higher costs
Netflix proves that streaming companies are still worth watching
Theme Times: Travel is heating up this summer
Strong demand from airlines gives wings to the travel industry


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