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Business travel remains on standby

Following COVID-19 restriction easing, many owners and investors are left to wonder what’s next for group and business hotels.

As COVID-19-related travel restrictions eased over the past year, the leisure segment of the hospitality industry took off, and 2022 performance in many resort and leisure markets was the strongest in recent history. The same cannot be said for the majority of hotels that depend on conventions and business travel, leading many owners and investors to wonder what’s next for these assets.

The near term for large group/business hotels isn’t pretty: after earlier forecasts trended bullish for recovery by the end of 2024, the Global Business Travel Association now forecasts that business travel won’t return to pre-pandemic levels until 2026.1 It was widely reported that major employers such as Google and Microsoft, for example, had begun tightening budgets by late summer, limiting employee travel to “business critical.” In early fall, Alphabet and Google CEO Sundar Pichai told a restive employee audience that by limiting such expenses,"... [W]e are being a bit more responsible through one of the toughest macroeconomic conditions underway in the past decade.” 2

Coupling continued lags in performance with increasing financing costs and significant pending debt maturities, some market participants believe there will be a number of bankruptcies and foreclosures before the segment normalizes. 3

Owners that are facing maturing debt and significantly higher refinancing costs may be forced to sell at a discount to pre-pandemic valuations. In addition, the level of buyer interest and competition that propelled values in resort and leisure markets throughout the last 24 months is notably absent. Some of our clients tell us they are worried about making outsized bets—e.g., large $100+ million investments that require significant financing, often for large urban and convention center hotels —and are more inclined to consider smaller, $30 million to $40 million deals that are typically in so-called select-service and leisure travel markets. Owners of distressed properties that are not forced to sell or are unable to—for instance, those in core urban markets where costly, highly leveraged acquisitions are less likely to come along to rescue them—will have to continue to hold their assets until the segment rebounds.

There is one bright spot in the business travel hospitality segment: so-called middle-market assets with fewer amenities and lower rates that cater to non-white-collar business. Thanks to the federal Infrastructure Investment and Jobs Act, which earmarked $550 billion through 2026 in infrastructure projects, owners are envisioning solid bookings over the next year and beyond as construction crews fan out across the country.

As infrastructure funds rolled out in 2022, one beneficiary, Wyndham Hotels, reported consecutive quarters of double-digit growth over 2019, according to President and CEO Geoff Ballotti, with 70 percent of its business travel attributed to infrastructure business. According to Ballotti, these are “the companies being contracted to repair our nation’s highways and bridges and ports. And it’s those companies that book these blue-collar workers into economy midscale lodging that is just so attractive for our brands and for our hotel owners... So, significant tailwinds for our team.” 4

Many of the assets that stand to benefit from this new type of business travel tend to be the smaller, suburban, select-service assets so favored by investors who can underwrite and complete deals with limited leverage. We expect competition for deals in this space to be strong throughout 2023 and 2024.


  1. “Global Business Travel Spending is Coming Back but Recent Headwinds Push Anticipated Full Recovery into 2025 and 2026,” GBTA, Aug. 15, 2022.
  2. “Google CEO Pichai tells employees not to ‘equate fun with money’ in heated all-hands meeting,” Sept. 23, 2022
  3. “U.S. Bankruptcy Tracker: Hotel Filings Rise Amid Virus Spike,”, Jan. 19, 2021
  4. “Hotel Executives Bullish on Business, Group Demand in 2023,”, Nov. 14, 2022

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Elliot Newton
Advisory Managing Director, Financial Due Diligence, KPMG

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