‘Businesses are traveling again’: Local businesses see increased demand, but report says recovery is slow
For months, predictions about the slow return to business travel have been sobering, so it’s a pleasant surprise for local agency Aer Travel to see the steady stream of booking inquiries it’s getting from client companies.
Gil Saidy, chairman of Aer Travel, has been organizing business travel for almost 40 years and in recent months his company has seen the number of companies booking travel double.
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“Our businesses are traveling again,” Saidy said, although not 100% yet. “This city, this biotech world in San Diego is crazy, it’s huge. And these companies are all hiring…so you have to bring in candidates.
This is encouraging news for San Diego, where tourism is one of the county’s largest sources of revenue. Sure, leisure travel for pandemic-weary vacationers has come back strong, but that hasn’t necessarily been the case for business travelers and convention-goers.
While San Diego tourism officials and a recent national report orders from the hospitality industry suggest a full return of the business and group travel section won’t come until 2024, some industry dwellers are encouraged by the recent trends they see.
Leisure travel and meeting bookings have rebounded strongly at the Manchester Grand Hyatt, says general manager Daniel Kuperschmid. With 1,628 rooms, the Hyatt is the largest hotel in San Diego County.
As for business travel to the Hyatt, Kuperschmid says it’s coming back much more slowly, albeit at a faster rate than he originally anticipated. It is possible, he said, that it will reach pre-pandemic levels as early as 2023.
With summer approaching and major city-wide conventions like the return of Comic-Con, Kuperschmid expects his hotel to be around 80% occupancy. The rebound is a welcome turn of events, he says.
“In January we thought we were going to have a great year, then Omicron hit,” he said. “If you had told me then that we would have the activity levels that we have now, I would have told you that you were crazy. There is no doubt that it is a surprise.
Like other hotels, the beachfront property is attracting vacationers at levels comparable to 2019, before the pandemic. And reservations related to meetings within the hotel and at the San Diego Convention Center are not left out. Kuperschmid said it expects this segment of the hotel business in the second half of this year to be on par with 2019 volumes.
“We’ve talked about this pent-up leisure demand, so I think it’s now pent-up group demand,” he said. “Companies and associations say that we have to come together. I think people show up in droves because they want to be in these meetings. It’s almost like a revenge party trip – we’re going to be with our compadres.
According to a report by the American Hotel & Lodging Association and Kalibri Labs, across the tourism industry, business travel revenue at hotels in the United States is expected to decline by $20 billion this year from compared to 2019.
Business travel, which the hospitality association defines as including corporate, group, government and other categories of commercial travel, is the hospitality industry’s largest source of revenue.
The report says the San Diego market has lost approximately $344 million in business travel revenue, down 22% since 2019. Other Southern California markets have seen similar declines – revenue business travel to Anaheim and Los Angeles fell 21% and 27% respectively.
“At the start of the pandemic, we lost 20 years of economic gains, jobs, visitor spending and tax revenue,” said Kerri Kapich, chief operating officer of the San Diego Tourism Authority. “We are back to pre-9/11 levels in terms of contributions to the regional economy. So we’re on the right track in terms of improvement, but we’re still 30% behind where we should be. »
Across the county, this drop in travel revenue translates into lower revenue from hotel room taxes, which are used to fund a range of city services, from road repairs to police and homeless services. shelter.
In the City of San Diego, the Transient Occupancy Tax (TOT) is the city’s third-largest source of revenue, Mayor Todd Gloria said at a press conference. this week commemorating “National Travel and Tourism Week”.
The City of San Diego alone saw hotel tax revenue grow from $179 million in fiscal year 2020 to $126 million in fiscal year 2021, according to data from the San Diego Tourism Authority. .
In this fiscal year, which ends June 30, the city has projected $181 million in hotel taxes, and it is on track to exceed that projection, according to the Tourism Authority.
The San Diego Convention Center — which reopened in August following an extended closure due to the pandemic – generates money for the city through overnight stays for meetings and conferences held at the site. In the coming fiscal year, the convention center expects to generate $25.2 million in hotel revenue and sales taxes for the City of San Diego.
While local hospitality veterans like Saidy at Aer Travel are confident business travel will continue to pick up, One of the hurdles facing the industry is steep price increases for everything from added resort fees at hotels to car rental fees.
AER Travel works with a variety of industries, including life sciences, technology and former San Diego NFL team the Chargers – despite the move to LA, Saidy’s company has booked trips to the over the past 20 years.
Another client is Biocom California, the leading trade organization for the life sciences industry, and many of its member biotechnology companies are also based in San Diego.
Joe Panetta, CEO of Biocom California, said that although the life sciences industry never pumped breaks on the job during the pandemic, like all industries, there were fewer large meetings and conventions in nobody.
When it comes to day-to-day business travel, it has seen some large life sciences companies take a more conservative approach to returning to travel. In contrast, smaller companies have been more eager to travel and shake hands with investors, promote themselves and recruit employees.
Panetta has upcoming business trips to South Korea and India planned and he is looking forward to the BIO 2022 international convention, to be held in June in San Diego. This will be the first in-person gathering for the group in two years.
The San Diego Convention Center has already hosted 40 events this year out of the more than 90 events scheduled for 2022, said Maren Dougherty, center spokesperson. Attendance, she said, has been around 50-85% of pre-pandemic levels.
Dougherty added that meeting planners report that attendees are registering much closer to event dates than in pre-pandemic times.
In an academic March analysis of business travel and meetings in a post-pandemic world, an investigation found that “59% of adults and 77% of business travelers agree that in-person meetings and business travel foster collaboration in ways that virtual interactions cannot.”
Carl Winston, founding director of the Payne School of Hospitality & Tourism Management at San Diego State University, was lead author of the report, which was funded by the American Hotel & Lodging Association.
Winston has traveled more himself, and he sees the same change happening with other individual travelers as restrictions have eased and coronavirus cases have fallen.
At the corporate level, companies are pushing to travel more, but there is always a shift in mindset that happens after two years of virtual work.
Winston said that they looked at the benefits of in-person meetings in their analysis, and he thinks companies will start prioritizing travel again when they realize they’ll lose market share opportunities if they stick to working mostly virtually.
“Greed is what has driven down business travel and group travel. Greed is going to be what will bring it back,” Winston said of the opportunity cost of saving money on travel but losing the benefits of in-person interactions.
Lynn Mohrfeld, president and CEO of the California Hotel & Lodging Association, said there are other barriers that have hampered business and group travel in the state. Events and conventions require months of advanced planning, which has been difficult due to inconsistent regulations that have changed with the pandemic.
“In California, we’ve got a bit of a regulatory hangover,” Mohrfeld said of the two-way openings and closings. “It’s really difficult for business travel and especially large conferences and conventions to need that consistency to come back.”
California is among the top 10 states, including the District of Columbia, that have seen business travel revenue decline more than 30% from pre-pandemic levels. The state’s business travel revenue fell about 34%, down $4.4 billion from 2019.
An additional challenge in reviving tourism is the pressure on the workforce, as hotels need more employees. As the hospitality industry competes with Amazon for workers, Mohrfeld said the industry is embracing more flexibility and even instant pay to attract more people to tourism jobs.
Hotel jobs across the county remain at the lowest level since 2003, according to Kelly Cunningham, director of the San Diego Institute of Economic Research. Business and Congress continue to struggle to recover.