Ryan Mann, partner at McKinsey & Company and leader of the company’s Hospitality and Lodging sector in North America, recently spoke with LODGING regarding emerging themes in business travel and their relevance to hoteliers. The trends are based on research he presented at HSMAI’s Commercial Futures Forum in October 2024 and subsequently published in a December 2024 article on mckinsey.com.
1. The Return of Business Travel and Meetings
According to the World Travel & Tourism Council, the 2024 value pool expectation for U.S. business travel was $472 billion, which is 13.4 percent ahead of 2019. Studies indicate meetings will increasingly drive business travel: 66 percent of meeting planners expecting meeting spend to grow in the future (2025 Global Meetings and Events Forecast, American Express Global Business Travel), and 81 percent of the 1,200 business leaders recently surveyed by Calendly said that holding more meetings would help them in some way. However, the increased spend “doesn’t necessarily mean more groups or larger groups,” said Mann. “Companies are investing more per attendee, so while the total number of events has actually gone down a bit, they’re spending more for each meeting and trying to create more meaningful experiences that justify the investment. So, we’re seeing higher spending on specialized F&B experiences, higher spending on team-building activities, better audiovisual setups, etc. Hotels that are offering really unique local experiences and meeting spaces that are more inspiring than just a big ballroom are the ones that we’re seeing capture a disproportionate share of that increased spend.”
2. Beyond the Business Agenda
Mann noted that business travelers are increasingly extending their stays at destinations to accommodate leisure activities, including off-site exploration. Since the objective of the travel is business, this trend isn’t quite the same as bleisure travel, which is travel for a dual purpose. However, “it certainly ties into the theme of bleisure,” said Mann. “It’s slightly different in that they’re infusing a leisure mindset into their business travel, but it is still pervasive and meaningful.” Hotel salespeople do well to capitalize on the trend. “The sales teams that are doing the best in this environment are offering extended-stay rates for weekend additions to business trips,” he observed. “They’re creating specific packages that are designed for leisure and even developing marketing to get not just that corporate traveler, but their entire family excited about the trip. Some properties are actually partnering with local tourism boards and creating curated destination guides for business travelers.”
3. Direct Folio Billing
Managed business travel is “in the midst of a digital transformation,” says Mann, and among the advances is direct folio billing, where hotels charge corporations directly for the business travelers’ purchases. The advantages include real-time control and visibility over hotel spending for corporate travel managers and reduced administrative costs to handle individual expense reports. Thus, hotel properties and chains that offer direct folio billing can differentiate themselves. However, there can be “significant technical and operational barriers” when it comes to implementing the process,” Mann points out. “Legacy property management systems [PMSs] often lack the capability to integrate with corporate payment systems. And many franchise owners don’t want to take on the responsibility of navigating PCI [payment card industry] compliance requirements. Some properties also have challenges with their merchant agreements, so they just don’t support sophisticated virtual payment solutions. So, direct folio billing is out there, but it’s complicated to implement.”
4. Continuous Rate Monitoring
Corporate travel managers are increasingly using continuous rate monitoring tools, which automatically scan and compare public room rates to the negotiated rate to ensure that the company’s employees are receiving the negotiated rate. “The negotiated rate isn’t 100 percent of the time what the company ends up paying, and the reason for that is rate availability issues. For example, in some cases, travelers will book just off the curve that you might expect, especially when they book last minute, and that throws the rate integrity for a loop,” Mann explained. “When these tools detect that the negotiated rates are being closed out, for example, they can automatically rebook a reservation at a lower rate or reposition the traveler for different property. This technology has changed the partnership dynamic between hotels and corporate clients, because it provides an unprecedented level of transparency into rate availability patterns. So, the hotel has to be much more cautious about the rates they’re offering … a particular hotelier might lose out on the business if they’re not adhering to the negotiation.”
5. Small-Meeting Surge
With the increase in remote workforces, small meetings (nine to 20 people) have been proliferating to fulfill teams’ need and desire to convene in person. The small-meetings trend has led to the development of products specifically for contracting and billing these events, but integrating them with corporate travel management systems can be challenging as those systems are built around single-room bookings, Mann noted. Adding to the challenge, “the big hotel chains often manage group revenue in a separate system from transient revenue, which makes it really hard to provide real-time availability and pricing for small groups through your standard channels,” Mann said. “On top of that, hotels often have different sales and revenue management structures for transient and group business, which leads to situations where corporate clients can’t easily combine their spending power across both segments.” He maintained that “The underlying problem is actually not technological; it’s more organizational. Hoteliers should fundamentally rethink how they segment and manage corporate business and small meetings in particular. I think that combining it all together can solve a lot of the problems that we’re seeing in booking small meetings.”
