Morgan Stanley Research reports global corporate travel managers expect a 27% shift to virtual meetings in 2022, reducing to 19% in 2023, supporting its view of a continued slow path to recovery for corporate travel and suggesting some lingering COVID impact, especially considering recent spikes in Delta variant cases.
The top three reasons cited for replacing corporate travel volume with virtual meetings were 1) more efficient use of employees’ time, 2) cost reduction, and 3) virus concerns. When asked for reasons compelling their firms to replace corporate travel with virtual meetings, 74% of respondents said more efficient use of employees’ time, 72% cost reduction and 59% virus concerns. Though Morgan Stanley was initially surprised by the expected greater shift to virtual from its latest two surveys given that they were conducted after proven vaccine efficacy and rollout, these results suggest that virtual meetings are likely working effectively and companies have begun to appreciate the time and money they can save by cutting travel.
Morgan Stanley conducted an online survey of 138 corporate travel managers between June 30-July 12, who represent more than US$8 billion of typical annual travel spend. The majority of respondents (65%) expect to shift >20% of travel volume to virtual meetings in 2022; 41% expect to shift >20% in 2023, with another 25% expecting to shift 10% to 20%. Given that corporate travel is approximately two-thirds of hotel revenue, the 27%/19% expected shift to virtual suggests an 18%/13% potential revenue drop relative to pre-COVID levels in 2022/long-term. There is still uncertainty about how prevalent virtual meetings will be, but less so than prior surveys: 12% were unsure on 2022 versus 16% in Morgan Stanley’s March 2021 survey; 23% in its October 2020 survey; 41% in its July 2020 survey; and 18% were unsure on 2023.
The research also revealed that 2022 travel budgets are expected to be ~17.5% below 2019 versus ~15.5% in its prior survey, and hotel budgets ~19% below 2019 versus ~18% below in its prior survey. The hotel spend results are relatively in line with its RevPAR forecasts, as Morgan Stanley expect 2022 U.S. RevPAR to be 14% below 2019 and 2022 Europe RevPAR 20% below.
Morgan Stanley also suggests that RevPAR growth will decelerate as summer leisure travel fades and the world moves toward the more corporate-driven Fall/Winter months. Travel managers report expecting 2H21 budgets to still be 39% below 2019 levels versus 57% in 1H21, likely less of an improvement than some hope. The survey also suggested that travel managers expect to cut hotel room volumes by ~18% in 2022 versus 2019, but room rates to be only ~1% lower in 2022 versus 2019, suggesting lack of demand as opposed to lower pricing.
Morgan Stanley is raising its near-term RevPAR forecasts given recent outperformance, but leaves its long-term estimates unchanged to reflect consistent survey results. It is now forecasting 3Q21 RevPAR to be just 12% below 3Q19 (versus 18% prior). However, it is concerned that 4Q21, which is more reliant on corporate business, and forecasts U.S. RevPAR to be 22% below 4Q19 (versus 24% before) and 2022 to still be 14% below 2019. The RevPAR recovery in Europe continues to lag the U.S., with declines of 83%/76%/67% versus 2019 for April/May/June, driven by a slower vaccine roll-out, shifting government regulations around intra-Europe travel, and a greater proportion of international travel.
Fully, 6% of respondents expect to return to pre-COVID travel levels by YE21, 36% in 2022, 20% in 2023, 16% in 2024 or later, and 23% never expect to return to pre-COVID travel levels. The majority of respondents are more optimistic than Morgan Stanley’s forecasts, as it has both U.S. and Europe RevPAR recovering back to 2019 levels only in 2025, longer than the 44/62 months it took post-9/11 and the financial crisis given the larger RevPAR decline and greater shift to virtual this time around.
Post-COVID, 8% of corporate travel managers expect to use alternative accommodations more, 22% expect to use them about the same, and 8% expect to use them less frequently (62% didn’t use alternative accommodations in the first place). These net results were relatively similar to its March 2021 results, which found that 15% of corporate travel managers expect to use alt accommodations more, 28% expect to use them about the same, and 15% expect to use them less. However, they are significantly less constructive for hotels than the July 2020 survey results, which found that 7% of corporate travel managers expect to use alternative accommodations more, 27% expect to use them about the same, and 24% expect to use them less frequently.
Results of the survey were based on 67% of corporate travel managers headquartered in the U.S., 19% in Europe, and 14% in Asia/Other, and their travel budgets are allocated relatively similarly. In general, corporate travel generates around two-thirds of hotel industry revenue.