R.I. hospitality industry uncertain about rebound of business travel in 2023

EVAN SMITH, CEO and president of Discover Newport. / PBN FILE PHOTO / ELIZABETH GRAHAM
EVAN SMITH, CEO and president of Discover Newport, says that corporate and international travel may be slower to return than their leisure travel counterparts. / PBN FILE PHOTO / ELIZABETH GRAHAM

PROVIDENCE – Stakeholders in Rhode Island’s hospitality sector say corporate travel to the region has largely been left out of this year’s strong rebound from the effects of the COVID-19 pandemic, and they hope to shore up this subsection of economic activity in 2023.

The fundamentals of leisure travel remain strong and the segment should continue to grow in 2023, said Rachel Roginsky, principal of the Boston-based consulting firm Pinnacle Advisory Group. Roginsky presented a forecast at the 19th annual “Economic Outlook Breakfast” sponsored by the Rhode Island Hospitality Association and held at the Crowne Plaza Providence-Warwick Hotel on Sept. 7.

The forecasts on revenue generated in 2023 through corporate events are murky, she said.

“Major areas of concern continue to be [the] unknowns,” she told PBN in an email. “Most critical is how fast corporate travel will return and will it ever reach pre-pandemic levels. Conventions and groups want to meet, but will the pandemic still impact the ability for people to meet in large groups?”

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The decline of corporate and association conferences has hit metropolitan areas such as Providence particularly hard, Roginsky said.

“[Providence] has been much weaker in terms of a recovery due to its reliance on corporate travel,” she said. “The other submarkets [such as Newport and South County] have done exceptionally well, given that they benefit from leisure demand, which has fully recovered from Covid.”

Still, Roginsky predicts “positive growth” overall, but “more modest than [in] 2022.”

Leisure travel demand should continue to drive this growth. According to the Pinnacle report, hotel occupancy in Providence is expected to grow 10% in 2023. In Warwick, where occupancy rates jumped 7.5% between 2021 and 2022, the growth forecast is more modest, at approximately 2%.

“All of this has shown the markets resiliency and people’s desire and need to travel,” she said. “Leisure continues to be robust with very little rate sensitivity. [This is] driving the recovery and allowing for [daily] rate growth. Despite inflation, travel hassles, and recession talk … travel remains very strong.”

While troubling macroeconomic trends can have negative effects on the travel industry across the board, certain regions such as Newport can weather these storms, thanks to their established pedigree as travel hot spots. Roginsky said this will make for uneven growth in the hospitality sector, with cities lagging their coastal counterparts in the march to full recovery.

“Group demand is improving,” she said. “In Providence, the [Rhode Island] convention center has had a very good year, and this has helped the convention group demand. [But] corporate continues to be the slowest to return. There are mixed opinions as to whether or not we will get back to 2019 levels, and if so, by when.”

In popular travel destinations outside Providence, Roginsky said year-to-date data has shown “significant progress” in Newport and South County event bookings in 2022 and expects a full recovery by 2023.

In Newport, Roginsky predicts an occupancy rate of 59% in 2023, up from 57% in 2022. At the same time, her projections show that revenue per available room is expected to edge upward from $185 in 2022 to $187 in 2023.

Evan Smith, CEO of Discover Newport, said leisure travel to Newport and surrounding towns has helped offset sluggish corporate and international travel, which made up about 40% of localized market share before the pandemic and its restrictions. He estimates this portion of economic activity has dropped 60% since 2019.

“Our recovery has been exceeding that of city and metropolitan areas for obvious reasons. People are seeking out open space,” he said. “We are pleased with the recovery we are making. But there are always peaks and valleys.”

Two of these valleys include international and domestic airline travel, a pair of intertwined categories that have been slower to rebound, Smith said.

“Car travel has been the dominant method of travel [to Newport] over the past two years as airlines continue to face a number of different challenges,” he said.

Prior to the shutdowns, Smith said, international travel constituted 15% of visitors to Newport County. “And now we are down to below 3%,” he said.

Smith said Discover Newport plans to direct additional marketing efforts next year toward shoring up corporate and business travel in the region. And while a future where the business portion returns to what it was may be unlikely, recouping most of those losses is possible.

“That is the area that we see the most potential in. As corporations and associations begin to convene again, that is where we hope to continue to make strides and grow market share. It is one of our highest priorities.”

Smith said that some organizations may have grown permanently accustomed to a lighter corporate outing budget, leaning on technologies like Zoom to supplement company gatherings and networking initiatives.

At least some of the “new normal” may be here to stay.

“It’s easier to turn off the lights than it is to turn them back on again,” said Smith. “But we are very optimistic about what 2023 looks like for us.”

Kristen Adamo, president & CEO at Providence Warwick Convention & Visitors Bureau, told Providence Business News that while the number of conventions and corporate meetings remain down 20 percent since 2019, leisure travel to Providence and Warwick has caught up with pre-pandemic activity.

The visitor’s bureau collects data on hotel occupancy and daily room rates and assists in booking both large and small-scale events. Adamo shared data showing year-over-year differences for the month of June between 2019 and 2022. The figures illustrate the bottom falling out of the hotel industry in Providence and Warwick during widespread cancellations in the early stages of the pandemic.

For example, the hotel occupancy rate in June 2019 was 80% and fell to 20% the same month the following year. In 2021, occupancy climbed back to 49% percent and currently stands at 66%. (The percentages for Warwick were 74, 49, 78, and 82%, respectively).

Adamo said activities such as business conventions and association gatherings typically book a year ahead of time, sometimes longer. She agreed that what has failed to return this year specifically is business travel, including individual or group sales trips, corporate training initiatives or professional development and marketing meetings that were first lost to the COVID-19 shutdowns and then to the trend of more organizations pivoting to digital communication tools as a replacement.

“Where we are lacking is corporate travel,” she said. “That is the one piece that is still lagging and continues to be a challenge that Providence has that the rest of the state does not…we have [seen] the rise of Zoom. There are things that we used to do face to face that we are now doing on computers.”

Hotels in cities like Providence and Warwick rely on business travel much more than coastal municipalities.

“Providence sees mostly meetings, conventions and sports,” said Adamo. “And then we layer leisure [travel] on top of that”

Adamo said the data forecasting a decrease in business and convention travel in 2023 may be skewed because of changes in corporate planning. Many companies have been booking smaller blocks of rooms for employees, said Adamo, and doing so in smaller time frames.

“They don’t want to overbook and then have to pay a penalty,” she said. “So, it may be [returning] closer to 100% but they are not booking those rooms like they used to. You no longer have to fly into a meeting with your client”

For example, the bureau is looking to increase marketing of local product development and encouraging the state’s larger employers such as CVS and Hasbro to welcome employees to headquarters more often for sponsored events to fill the gap.

“So here in Providence, we are looking at what more we can do to fill those hotel rooms,” said Adamo.

Christopher Allen is a PBN staff writer. You may reach him at Allen@PBN.com.

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