It has been well publicized that UK-wide hotel performance has bounced back strongly from the impacts of Covid-19. The recovery has been driven by exponential growth in leisure tourism, initially from domestic tourists (pent-up demand and accrued savings) and more recently from international visitors (pent-up demand and favourable exchange rates).

For a number of reasons the recovery of business travel has been more sluggish.

According to the latest GBTA Business Travel Index, spend on global business travel was still about 5% below 2019 in 2023, but is forecast to be 6% higher than 2019 in 2024. The UK figures strongly and is fifth in the global league table, albeit the spend is measured as domestic and outbound international, so does not account for inbound international travel.

As I have highlighted in previous articles, domestic air passenger numbers are still behind 2019 levels (around 20% or more for the large regional airports), indicating a decline in business travel.

Furthermore city centre office occupiers are reducing footprints as post-Covid flexible working patterns persist. This has impacted office take-up, with out of town offices (locations such as science and research parks) generally performing better than city centres.

The sluggish recovery is also borne out by occupancy performance for hotels in the nine main regional city office markets; occupancy has improved greatly and is well above 2022 across the board, but only in Edinburgh and Newcastle was 2023 occupancy above 2019 (most are between two and three percent behind).

Whilst this would suggest the recovery in annual demand is almost there, drilling down into city centre performance paints a slightly different picture. The graph below shows city centre occupancy as an index of the overall market, including surrounding areas that would often incorporate business / science parks and airports, for the nine main regional office locations.

In 2019, all indexes were above 1.00 (that is, higher than average occupancy in the city centre) except Liverpool. Fast forward to 2023 and only Cardiff and Liverpool city centres out-performed the market average, and Liverpool might be explained by the hosting of Eurovision, demonstrating the positive impact of major events on hotel performance.

For five of the nine city centres annual occupancy remained between six and eight percent below 2019.

City Centre Hotel Occupancy as an Index of Overall Market Occupancy 2019, 2022 and 2023:

So what does this all mean for the year ahead?

I believe business travel will continue to grow in 2024, particularly if macro-economic and market conditions improve during the year.

However, rather than the traditional office-to-office travel for internal, and even some external meetings much of which has moved on-line, the growth will be driven by a number of specialized sectors – for example research and development, science parks, advanced manufacturing and creative sectors – where work practices and collaboration require greater face-to-face interaction.

Conferences and meetings remain very important and a large proportion of business travel, but the trend is for less frequent but often larger and more purposeful events.

As cities continue to adapt to the changing nature of work, and companies become more mindful of their carbon footprint, corporate demand in many of the large city centres will probably remain below 2019 in 2024.

The key question is if, and how quickly city centres can adapt to the changing face of business travel, attracting emerging and growth sectors to replace more traditional office occupiers to ensure sustainable year-round hotel demand.

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Andrew Renouf – 07584 186520