Business Travel Becomes a Top Priority of Gen Z Professionals in 2023: Survey
Amid economic uncertainty, an American Express Canada survey highlights attitudes toward business travel’s return. The younger generation (born late 1990s to mid-2000s), known as Gen Z, leads this revival, with 64% prioritizing business travel in 2023, in contrast to 39% of millennials. Gen Z respondents also plan more work travel in 2023, with 58% indicating they have traveled one to five times for work since January 2022. Domestically, 39% traveled most, and 30% traveled internationally.
For Gen Z, 52% mainly travel to meet clients, but also for knowledge building, meeting potential clients, and team building. Among Millennials, 49% aim to travel for work, while proportions are 42% for Gen X and 29% for Baby Boomers. 75% of Gen Z sees business travel as “extremely” or “very” important. Cost (43%), airport delays (36%), and environmental impact (29%) concern Gen Z regarding business travel choices.
88% of Gen Z is willing to add personal time to business trips, similar to 75% of Millennials and 62% of Gen X.
Travel Cost Increases to Persist but Moderate Through 2024:
According to the 2024 Global Business Travel Forecast released by CWT and the Global Business Travel Association, average costs in various business travel categories are expected to continue rising into the next year. However, the rate of increase is anticipated to slow down towards the end of this year and even further in 2024. This prediction is based on a combination of factors such as rebounding corporate demand, pent-up leisure demand, higher oil and jet fuel costs, and labor shortages. The substantial price hikes seen in 2022 exceeded expectations due to these factors.
For instance, the average global airfare was projected to increase by 48.5% year-over-year for 2022, but it actually rose by 72.2% to $749 by the end of the year. The average daily hotel rate also surpassed expectations, increasing by 29.8 percent year-over-year to $161. However, it’s noted that the coming 18 months are not expected to experience such drastic spikes. Instead, the situation will resemble a large wave crashing, receding, and gradually stabilizing.
Nevertheless, there is still a trend of increasing costs across different travel categories. The forecast suggests that airfares for the entire year of 2023 will likely go up by 2.3%, reaching $766, followed by a more modest 1.8% increase to $780 in 2024. Despite nearing pre-pandemic air travel levels, airlines face challenges in fully restoring capacity due to manufacturing delays and rising fuel and labor costs.
Hotels are also expected to see a 4.3% increase in the global average daily rate (ADR) to $168 this year, followed by a 3.6% increase to $174 in 2024. High occupancy rates and ongoing supply-demand imbalances play a role in these projections. Car rental rates are projected to rise by 6.7% in 2023 and a more moderate 2.1% in 2024, while meeting and event costs are expected to increase as well.
Despite the upward cost trajectory, there is a positive side for buyers. These price increases can reflect a robust economy and buyer confidence. Corporations may have smaller travel programs, but budgets might not necessarily shrink due to the higher costs. Instead, companies may focus on enhancing traveler experiences and supporting sustainability initiatives through their travel investments. Given the significant price increases seen in 2022, it is suggested that using 2019 as a baseline for comparison is no longer appropriate; 2022 should now be considered the new benchmark moving forward.
Labor Costs Kept U.S. Hotel GOPPAR Down in June:
U.S. hotel gross operating profit per available room (GOPPAR) fell year over year for a second consecutive month, according to CoStar’s June 2023 P&L data release. CoStar is a leading provider of online real estate marketplaces, information, and analytics in the property markets.
June 2023 per-available-room metrics (% change from June 2022)
- GOPPAR: US$91.37 (-1.4%)
- TRevPAR: US$237.12 (+4.8%)
- EBITDA PAR: US$66.78 (-5.6%)
- LPAR (Labor Costs): US$75.48 (+13.4%)
“Labor costs continued to rise year over year, growing nearly three times the rate of total revenue,” said Raquel Ortiz, STR’s director of financial performance. “That increase, tied with higher growth in other expense types, caused a profit decline from last June. Despite the year-over-year decline, the GOPPAR level was improved from May, and with cooling inflation, real GOPPAR and TRevPAR were up month over month for the first time since March.”
Thirteen of the Top 25 Markets saw GOPPAR levels below June 2022, with San Francisco showing the lowest index (at 52% of 2022 levels). Las Vegas was the only other market to report a GOPPAR index below 80% (at 68% of 2022 levels).
“Year to date through June, the Top 25 Markets were still $2 behind 2022 in GOPPAR and three percentage points behind the previous year’s GOP margin,” Ortiz said. “These major markets still have some ground to cover as the year progresses.”
About CoStar Group
CoStar Group (NASDAQ: CSGP) is a leading provider of online real estate marketplaces, information, and analytics in the property markets. Founded in 1987, CoStar Group conducts expansive, ongoing research to produce and maintain the largest and most comprehensive database of real estate information. CoStar is the global leader in commercial real estate information, analytics, and news, enabling clients to analyze, interpret and gain unmatched insight on property values, market conditions, and availabilities.