U.S. hotel pipeline showed increasing confidence in business travel with upper upscale hotels, the category of hotels usually associated with business travel, being well represented in the development pipeline, according to STR.

Despite posting the slowest recovery, upper upscale hotels saw a steady uptick in performance and the business travel indicators have supported developer confidence in the segment, STR said.

“The more than 23,000 upper upscale rooms in construction right now represent 3.4% of the segment’s existing supply. That is well above the long-term growth average (+2%) in the U.S.”, said Isaac Collazo, STR’s VP, analytics.

U.S. hotel pipeline in March 2023 (compared to March 2022):

• In construction: 154,284 rooms (-0.5%)
• Final planning: 239,995 rooms (+34.6%)
• Planning: 232,517 rooms (-21.6%)

After three consecutive month-over-month rises, the total number of rooms in construction in the U.S. saw a marginal slip in March, which aligns with trends observed in the previous years. Among the chain scale segments, luxury showed the highest number of rooms as a percentage of the current supply.

1. Luxury (5.2%, 7,136 rooms)
2. Upscale (4.1%, 36,089 rooms)
3. Upper-midscale (3.7%, 43,470 rooms)
4. Upper upscale (3.4%, 23,564 rooms)
5. Midscale (2.1%, 10,363 rooms)
6. Economy (1%, 6,302 rooms)

Though shortest in terms of room count, luxury showed the highest estimated growth against existing supply, which matches the rate gains experienced in the sector in the last few years.

“Select-service (upper midscale + upscale) continues to grow as well, which is no surprise given how well the segment of the market has regained demand. The upper tier of select service also caters to the business traveler,” Collazo said.

Business travel has been witnessing a gradual return, with corporate travel spending in the U.S. and Europe expected to exceed half of 2019 levels in the first half of this year and rise to two-thirds by the year-end, the latest study by Deloitte has revealed.

A full recovery is expected by late 2024 or early 2025.

International trips will represent a significant portion of recovery this year, with the international share of travel costs for U.S. companies projected to increase from 21% in 2022 to 33% in 2023.

Corporate travel spending in the U.S. and Europe is projected to surge 57% of pre-pandemic levels in the first half of the year and increase 71% by the end of the year.

Live events will constitute a significant portion of corporate travel, rising from fifth to first place as a driver of higher spending in 2023. More than half of travel managers in the U.S. and Europe expect industry events to enhance travel growth this year.

The primary reason stated for international trips involves connecting with clients and prospects. The main drivers in the U.S. are to engage with worldwide industry colleagues at conferences and to build client ties.

About 51% of the respondents said employees’ expectations of luxury services, like first or business-class airfares and upscale hotels, along with the need for last-minute (45%) or flexible bookings (52%), were pushing costs higher.

Deloitte’s study was based on a survey of 334 U.S.-based and European executives with travel budget oversight, fielded between February 7 and 23.