Hotel and Air Travel - Business Market.

Part
01
of two
Part
01

Global Hotel Business Revenue

After an extensive search through industry reports along with attempts to triangulate, we could not find information on what percentage of global hotel revenue is from business (corporate) travel. However, it is highly likely that the required data is hidden behind a paywall. Below are some helpful findings.

THE GLOBAL BUSINESS TRAVEL MARKET IN 2017

  • According to Allied Market Research's report, the global business travel market was worth $1.30 trillion in 2017. The food and lodging segment contributed about half of the market share.
  • The report by Allied Market Research analyses the business travel market by service — transportation, food & lodging, business activity; industry — government, corporate; and traveler — group, and solo.
  • The corporate industry segment had the largest market share in 2017, returning about 64.61% of the total revenue.
  • The global business travel market is projected to reach $1.66 trillion by 2023, with a CAGR of 4.1% from 2017 to 2023. The food and lodging segment dominates the global business travel market and is expected to record the fastest CAGR of 4.7% from 2017 to 2023.

MILLENNIALS AND GEN Z PREFERENCES

  • More than one-third (36%) of Millennial and Gen Z employees surveyed in the TripActions' 2018 State of Business Travel Report said they book Airbnb-type accommodations, along with boutique hotels, as part of "fulfilling their desire for unique travel experiences."

CATERING TO SMALL AND MEDIUM-SIZE ENTERPRISES (SMEs)

  • Hotels are targeting SMEs. Hyatt Hotels Corp., under its new Hyatt Leverage corporate travel program, is offering small businesses savings of up to 15% off the lowest available room rate when booking participating Hyatt properties.

LOYALTY PROGRAMS AND BUSINESS TRAVEL

  • The TripActions 2018 State of Business Travel Report found that 21% of business travelers don't belong to any hotel loyalty program, and are less interested in loyalty programs in general.
  • The Global Business Travel Association's (GBTA) research found that business travelers consider three hotels before booking, and 82% say loyalty programs matter when making that decision. 90% are motivated by rewards points and perks when selecting a hotel, and 81% believe that being a loyalty member attracts better service.

BOOKING HOTELS BY BUSINESS TRAVELERS

  • According to a July 2018 report from Amex GBT and German research firm, GfK, 40% of nearly 750 US-based business travelers admitted to booking outside their companies' travel policies. Most (84-86%) did so to be closer to the meeting or event venue, to stay in a safer or more convenient location, to be in the same hotel as their client, and even to save the company money.
  • 33% of business travelers book rooms from the hotel's website, while 27% use an online travel agency.
  • Personalized guest experience is important to 84% of business travelers. 80% is the average comfort level with hotels using shared information to offer a personalized guest experience.
  • 28% of millennial business travelers book hotels directly on a hotel's website. 10% book hotels through an online travel agency like Expedia, 7% book with a third-party reseller like Kayak, and 14% book with a travel agent.

RESEARCH STRATEGY

We started by looking at the global business travel industry, searching for pre-compiled information on the percentage of global hotel revenue from business (corporate) travel. We found a report on global business travel. As per this report, the global business travel market has two industry segments — corporate and government. While this report was locked behind a paywall, we found a news source about the report, which stated that the global business travel industry was worth $1.30 trillion in 2017 — this being the market capitalization. We also found that the corporate industry segment contributed about 64.61% of the total revenue in 2017. Now, we found that market capitalization and revenue do not refer to the same thing, and we cannot use one to calculate the other.

We also found that the food and lodging segment contributed about half of the market share of the global business travel market. The other two segments are travel and leisure. We can assume that "food and lodging" refers to hotels. However, since the total revenue of the global business travel market wasn't available, we could not triangulate the information required. We did try to find other sources where the total revenue of the global business travel market might be available, but we did not find it. We did, however, find helpful information about the global business travel market and hotels which we have included above. It is highly likely that the required information is behind a paywall.

Next, we decided to try to find the information by looking at the global hotel industry. We hoped to identify how much global hotel industry revenue came from business (corporate) travel, and then triangulate the information by calculating the percentage. We found reports like the Global Travel Forecast and "2018 Travel and Hospitality Industry Outlook — Deloitte," which contained some information on how technology is shaping the global business travel market and how 2018 is forecast to be a robust year for corporate travel spending — it is expected to surge 6.1%, its highest rate of growth since 2011. We also found that the global hotel industry revenue was $570.18 billion in 2017. Once again, since the revenue of hotels from business (corporate) travel wasn't available, we could not triangulate the percentage required. However, this information might be available behind a paywall.

Since the previous two strategies had given us reports and research papers, we decided to look for news sources about the global hotel revenue from business (corporate) travel. We found information on how global business travel and hotel bookings are experiencing a slowdown in 2019 and how political unrest is contributing to this slowdown. However, we could not find any information on global hotel revenue from business (corporate) travel, and we could not find any information which would help us triangulate the information required.

Finally, since we already had found that global hotel industry revenue was $570.18 billion in 2017, we decided to find out what percentage of the revenue of specific hotel chains comes from business travelers. We hoped to find an average across multiple hotel chains and then add the average to triangulate the information. We looked at the annual reports and press releases by Wyndham Worldwide, Marriott International, Hilton Worldwide, Best Western Hotels, InterContinental Hotels Group, among others and found total revenue figures and other information. However, we did not find the exact revenue or percentage of revenue that comes from business travelers for these hotel chains. So this strategy also was a dead end.

Part
02
of two
Part
02

Global Airline Revenue from Business Travel

Business travelers represent a calculated 40% of the total revenues of the global airline industry. Global profit margins for airlines in 2019 are around 3.2%, of which business travelers represent a calculated 1.28%. The calculations for the brief can be found in the research methodology section. Below, the topic is discussed in more detail.

Business Travelers Revenue

  • Two-thirds of the passenger revenue in the global airline industry are from business travelers. This represents a calculated 40% of the total revenue for the global airline industry.
  • In some airline businesses this revenue can be as high as 75% for each flight.
  • Business travelers represent a calculated 1.28% of the total profit margin of the global airline industry. Profit margins in the global airline industry are expected to be an estimated 3.2% in 2019.

Additional Information

  • In 2019, costs are expected to increase by 7.2% in the global airline market. Revenue growth is expected to be around 6.5%.
  • According to a global survey completed on business travelers globally, business goals are more significant than policy compliance. It was discovered that once corporate goals were met, many business travelers personalized their travel arrangements.
  • In the same survey, most corporate travel managers (CTMs) and travelers preferred the complete package of a single price and full-service model.
  • While digital-savvy business travelers preferred technology for checking travel information, check-in and hotels, they still preferred human interaction for issues such as changing plans and problems solving.
  • Business travelers rank safety, security and personal involvement in their well-being as the most important requirements when traveling.
  • Loyalty programs remain a priority for two-thirds of global business travelers surveyed.
  • For 2018, ancillary revenues, such as frequent flier miles, a la carte services, and hotel bookings were around $92.9 billion in the global airline industry.

Research Methodology

Investopedia provided the necessary percentages which could be employed in the calculation of the brief’s requirements. An online calculator was used to perform the calculations.

Calculations

  • According to Investopedia, business passengers on average account for double the profit of non-business passengers. This represents two-thirds of the total profit. Using an imaginary profit of $100, two-thirds represents $66.67 or 66.67% of the passenger profit.
  • Investopedia states that 60% of total revenue is passenger revenue including business travelers. The total expected profit for the airline industry for 2019 is $28 billion. The 60% = a calculated $16.8 billion of the $28 billion, of which a calculated 66.67% represents business travelers’ profit. That is 66.67% of a calculated $16.8 billion = $11.2 billion (rounded down).
  • The calculated $11.2 billion representing business profit was converted to a percentage of the total profits of $28 billion. Business-class passengers represent a calculated 40% of the total profit of global airline profit.
  • According to the International Air Transport Association (IATA), the net profit margin for global airlines in 2019 will be around 3.2%. From the previous calculation, business travelers represent a calculated 40% of global airlines profit. Employing an online calculator, 40% of 3.2% is 1.28%. Business travelers represent a calculated 1.28% of the profit margin.
Sources
Sources

From Part 02
Quotes
  • "Airlines receive only about 60% of their revenue from passengers directly (the other 40% comes from selling frequent-flier miles to credit card companies). "
  • "Out of that 60% of passenger consumer revenue, the big money comes from business travelers – as opposed to those flying for leisure or personal reasons – in percentages that far outweigh their numbers. Business travelers account for 12% percent of airlines' passengers, but they are typically twice as profitable."
  • "In fact, on some flights, business passengers represent 75% of an airline's profits."
Quotes
  • "As a result, net margins are expected to be squeezed to 3.2% (from 3.7% in 2018). Profit per passenger will similarly decline to $6.12 (from $6.85 in 2018)."
Quotes
  • "Business goals come before policy compliance: Virtually all respondents, from both the CTMs and business traveler respondent groups, agreed that achieving corporate goals was the primary factor in all travel planning decisions."
  • "The importance of the “complete package” for flight selection: Low-cost carriers may be growing in popularity with some segments of travelers"
  • "Caring about sharing: “Sharing economy” tools, such as ridesharing via Uber or Lyft, and to a lesser extent, alternative lodging via Airbnb, continue to gain acceptance in the corporate travel space. "