Business Travel May Never Be the Same
By the Numbers
The business travel industry was worth $1.5 trillion before the pandemic. In 2019, American workers embarked on over 464 million business trips. In 2020, everything changed. Airlines, car rental companies, hotels, and other parts of the business travel ecosystem have suffered severely during the COVID-19 pandemic. As of March, the industry has lost about $518 billion.
People across industries have adapted to doing their jobs without travel. Analysts say that business travel will likely increase eventually, but it may never get back to pre-pandemic levels.
Checking in on Airlines
Airlines saw both business and leisure travel numbers sink when the pandemic set in. Flying for leisure showed glimmers of recovery near the end of May when coronavirus cases were waning. Since then, the number of people booking flights for vacation has dropped again, but this uptick demonstrated that leisure travel will likely be fairly resilient when coronavirus infections go down.
Business travel, on the other hand, has remained at all-time lows during the pandemic. Business travelers account for about 10% of airline passengers for the big carriers like American (AAL), United (UAL), and Delta (DAL). However, business travelers’ spending makes up 55%-75% of revenue for airlines, because they tend to make last-minute changes to their bookings.Plus, they fly in first class and business class.
Hotels and Rental Cars
Business travelers also generate a huge chunk of the hotel industry’s revenue. About 70% of Marriott (MAR) and Hilton’s (HLT) global revenue comes from people staying in their hotels for business. Analysts expect that revenue per available room for hotels will likely take until 2023 or 2024 to return to pre-pandemic levels. It is expected that large hotels in urban areas will be slower to recover than their counterparts in smaller cities.
One bright spot for the business travel industry is the car rental sector. While every sector of the travel industry has been battered by the pandemic, including car rental companies, Enterprise, National, and Alamo, reported that the length of business travel rentals has gone up, which has lifted their revenue. This trend seems to be because business people are renting cars to drive places that they would have flown before the pandemic.
Investors will have their eyes on travel industry stocks to see how they continue to respond to changing conditions. Some may be able pivot and cater to more vacationers than business travelers. Others may have a long wait until companies feel safe sending people on business trips again. Even if a vaccine is discovered or cases go down, business travel will likely remain lower than it was before the pandemic.
Please understand that this information provided is general in nature and shouldn’t be construed as a recommendation or solicitation of any products offered by SoFi’s affiliates and subsidiaries. In addition, this information is by no means meant to provide investment or financial advice, nor is it intended to serve as the basis for any investment decision or recommendation to buy or sell any asset. Keep in mind that investing involves risk, and past performance of an asset never guarantees future results or returns. It’s important for investors to consider their specific financial needs, goals, and risk profile before making an investment decision.
The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. These links are provided for informational purposes and should not be viewed as an endorsement. No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this content.
Communication of SoFi Wealth LLC an SEC Registered Investment Advisor
SoFi isn’t recommending and is not affiliated with the brands or companies displayed. Brands displayed neither endorse or sponsor this article. Third party trademarks and service marks referenced are property of their respective owners.