‘Companies are traveling again’: Local businesses see a jump in demand, but report says recovery is slow
For months, the predictions about the sluggish return of business travel have been sobering, so it came as a pleasant surprise to local agency Aer Travel to see the steady stream of booking requests it’s been getting from corporate clients.
Gil Saidy, president of Aer Travel, has been in the business of arranging corporate travel for nearly 40 years, and in the past few months his firm has seen the volume of companies booking trips double.
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“Our companies are traveling again,” Saidy said, even if it’s not at 100 percent yet. “This city, this biotech world in San Diego is insane, it’s huge. And these companies are all hiring … so you gotta fly in candidates.”
It’s heartening news for San Diego where tourism accounts for one of the county’s largest revenue streams. To be sure, leisure travel by pandemic-weary vacationers has returned with a vengeance, but that hasn’t necessarily been the case for business travelers andeers.
While San Diego tourism officials and a recent national report commissioned by the hotel industry suggest that a full return of the business and group travel section won’t come until 2024, some locals in the industry are encouraged by recent trends they’re seeing.
Bookings for both leisure and meetings-related travel have been rebounding strongly at the Manchester Grand Hyatt, says General Manager Daniel Kuperschmid. At 1,628 rooms, the Hyatt is San Diego County’s single biggest hotel.
As for business travel at the Hyatt, Kuperschmid says that’s returning much more slowly, although at a pace more quickly than he originally expected. It’s possible, he said, that it could reach pre-pandemic levels as soon as 2023.
With summer approaching and some big citywide conventions on tap, like the return of Comic-Con, Kuperschmid expects occupancy at his hotel will be in the mid-80 percent range. The rebound comes as a welcome turn of events, he says.
“In January, we were thinking we’re going to have a great year and then Omicron hit,” he said. “If you had told me then that we’d be having the business levels we have now, I would have told you that you were crazy. There’s no question it’s a surprise.”
Like other hotels, the bayfront 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 far behind. Kuperschmid said he expects that segment of the hotel’s business during the second half of this year to be on a par with 2019 volumes.
“We’ve talked about this pent-up leisure demand, so I think this is now pent-up group demand,” he said. “Businesses and associations are saying we have to get together. I think people are showing up in droves because they want to be in these meetings. It’s almost like revenge group travel — we’re going to be with our compadres.”
Across the tourism industry, US hotel business travel revenue is projected to be down $20 billion this year compared to 2019 according to a report by the American Hotel & Lodging Association and Kalibri Labs.
Business-related trips, which the lodging association defines as including corporate, group, government and other commercial categories of travel, makes up the largest source of revenue in the hotel industry.
The report says that the San Diego market lost about $344 million in business travel revenue, which is a 22 percent drop since 2019. Other Southern California markets saw similar declines — business travel revenues in Anaheim and Los Angeles fell 21 percent and 27 percent, respectively.
“At the start of the pandemic, we lost 20 years of economic gains, in employment and in visitor spending and in tax revenues,” said Kerri Kapich, chief operating officer at the San Diego Tourism Authority. “We went back to pre-9/11 levels in terms of contributions to the regional economy. So we are on our way in terms of improvement but we are still a good 30 percent behind where we should be.”
Across the county, this drop in travel revenue translates to less hotel room tax revenue, which is used to fund an array of city services, from road repairs to police and homeless services.
In the city of San Diego, the transient occupancy tax (TOT) is the city’s third-largest revenue source, said Mayor Todd Gloria during a press conference this week commemorating “National Travel and Tourism Week.”
The city of San Diego alone saw hotel tax revenue reduced from $179 million in fiscal year 2020 to $126 million in fiscal year 2021, according to data from the San Diego Tourism Authority.
This fiscal year, which ends June 30 the city budgeted $181 million in hotel taxes, and it is on pace to exceed that projection, the Tourism Authority says.
The San Diego Convention Center — which reopened in August following a prolonged closure due to the pandemic — generates money for the city from overnight stays for meetings and conferences held at the venue. In the coming fiscal year, the convention center expects to generate $25.2 million in hotel and sales tax revenues for the city of San Diego.
While local hospitality veterans like Saidy at Aer Travel are confident that business travel will continue to pick up, one hurdle facing the industry is big price increases for everything from resort fees added at hotels to rental car charges.
AER Travel works with a variety of industries, including life science, technology and San Diego’s ex-NFL team, the Chargers — despite the move to LA Saidy’s firm has booked their travel for the past 20 years.
Another client is Biocom California, the leading trade organization for the life science industry, and many of its member biotech companies are also based in San Diego.
Joe Panetta, CEO of Biocom California said although the life science industry never pumped the breaks on work during the pandemic, like all industries, there were fewer large, in-person meetings and conventions.
As for day-to-day business travel, he’s seen some bigger life science companies take a more conservative approach to the return to travel. In contrast, smaller companies have been more eager to travel and shake hands with investors, get their name out there and recruit employees.
Panetta has upcoming business trips booked for South Korea and India and he’s looking forward to the 2022 BIO International Convention, which is set for June in San Diego. It 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 slated for 2022, said Maren Dougherty, spokeswoman for the center. Attendance, she said, has been approximately 50 to 85 percent of pre-pandemic levels.
Dougherty added that meeting plansners are reporting that attendees are registering much closer to event dates than in pre-pandemic times.
In a March academic analysis of business travel and meetings in a post-pandemic world, a survey found that “59 percent of adults and 77 percent of business travelers agree that in-person meetings and business travel foster collaboration in a way virtual interactions cannot.”
Carl Winston, founding director of the Payne School of Hospitality & Tourism Management at San Diego State University, was the lead author of the report, which was funded by the American Hotel & Lodging Association.
Winston has been traveling more himself, and he sees the same shift happening with other individual travelers as restrictions have eased and coronavirus cases have gone down.
At the corporate level, businesses are working toward traveling more but there is still a shift in mentality that is coming after two years of virtual work.
Winston said that They examined the benefits of in-person meetings in their analysis, and he believes that corporations will start to prioritize travel again when they realize they’ll lose out on market share opportunities if they stick to primarily working virtually.
“Greed is what kept business travel and group travel down. Greed is going to be what brings it back,” Winston said of the opportunity cost of saving money on travel but losing out on the benefits of in-person interactions.
Lynn Mohrfeld, president and CEO of the California Hotel & Lodging Association, said there are other obstacles that have stymied business and group travel in the state. Events and conventions require months of advanced planning, which has been challenging with the inconsistency of regulations that have changed with the pandemic.
“In California, we’ve got a little hangover from the regulations,” Mohrfeld said of the back and forth openings and closings. “It’s really difficult for business travel and especially the big conferences and conventions, that they need that consistency to come back.”
California is among the top 10 states, including the District of Columbia, that experienced a drop in business travel revenue of more than 30 percent from pre-pandemic levels. The state’s business travel revenue has fallen approximately 34 percent — a $4.4 billion decline from 2019.
An additional challenge to reviving tourism is the strain on the workforce as hotels need more employees. While the hospitality industry is competing with the likes of Amazon for workers, Mohrfeld said the industry is adopting more flexibility and even instant pay to attract more people to tourism jobs.
According to Kelly Cunningham, head of the San Diego Institute for Economic Research, hotel jobs countywide remain at the lowest level since 2003. He said last month that he expects business and convention travel will continue to struggle to recover.