If you’ve been to an airport lately, you’ve seen the impact of pent-up travel demand. Let’s be honest. We’ve been isolated for more than two years and we’ve had enough. Deloitte provided data on this in a May report entitled “Getting Back to Getaways”. Even as the pandemic continues to experience bouts of stops and starts, many leisure travelers have decided the level of risk is acceptable. The Deloitte study found that nearly half of Americans were planning a summer trip that involved stays in hotels or other types of paid accommodation.
More than health concerns, financial worries were cited as the top reasons for staying at home. But those who wanted to travel were willing to spend more (compared to 2019). Deloitte noted that US-based hotels, airlines and destinations would benefit the most as international travel continues to be moderated by wildly different COVID policies and restrictions.
This leisure “revenge travel,” as some in the industry call it, is likely to decline to traditional levels in the coming months, but then business travel and meetings and conventions are expected to rebound. All of this is welcome news for the North Texas economy, which benefits from both the outbound and inbound perspective.
Last April, Dallas-Fort Worth International Airport was named the second-busiest airport in the world by passenger volume, according to Airports Council International. It is one of the few airports in the country that has expanded both flights and destinations in the last two years. The region is also, of course, home to American Airlines – one of the largest in the world – and Southwest Airlines, another top five airline. Regional player and American subsidiary Envoy Air is based here, as are numerous charter companies and hop-on-jet services such as JSX.
What isn’t talked about as much is the vast base of other travel industry companies that call North Texas their home. One of the biggest is Saber, which made about $2 billion in 2021. Almost everything related to travel technology is operated by the Southlake-based company. It started as a collaboration between American and IBM to develop an airline reservation system in the 1960s. Today, Saber’s software and systems are used in airport check-in kiosks, online travel sites, airline and hotel reservation networks, mobile apps, aircraft and crew planning systems and more.
Based in Fort Worth, Virtuoso is one of the largest luxury travel agency associations in the country, with more than 20,000 agencies in 50 countries. The Plaza Premium Group, a Hong Kong-based developer of independent luxury airport lounges, has established its US headquarters at DFW International and opened its first US location there.
Hotel ownership, investment and management is big business in North Texas, too. Omni Hotels & Resorts has 51 luxury properties across the United States, Canada and Mexico with approximately 23,500 rooms and more than 14,000 employees. Plano-based hotel management powerhouse Aimbridge Hospitality was founded in 2003 with eight hotels. Today the portfolio includes 1,500 hotels in all 50 states and 23 countries. The real estate fund Ashford Hospitality and its independently managed management company Remington Hotels are both based in Dallas. The same can be said for hospitality-focused Woodbine Development Group and Gatehouse Capital. The list goes on and on.
“The demand for travel is out of control right now,” said Matthew Upchurch, CEO of Virtuoso. “I compare what happens in the travel industry to the video game Mario Kart, where you go over the arrows on the track and get a little boost. If you take something away from people for two years, like travel, you just increase demand.”
A Perfect Storm for Growth
According to Upchurch, 2019 was a record year for the global travel industry. Spurred on by strong international markets and emerging economies, more than 1.45 billion people traveled this year. To say the pandemic came as a shock to the industry would be an understatement, says Upchurch. “We encountered something that has never happened in our history – not even during the world wars – and that means 100 percent of all countries that are members of the United Nations had some kind of travel restriction,” he says.
Upchurch compares the pandemic to the Great Depression for the travel and tourism industry. In 1933, unemployment reached a record 24.9 percent. In 2020, Upchurch said the pandemic has hit the travel and tourism industry nearly three times harder, with unemployment or furloughing up 70 percent. This may interest you : 8 Strategies to Outperform Competitors to Grow Your Business. “The COVID-19 pandemic was a major turning point,” says Upchurch. “Another major turning point was 9/11. But after 9/11, we saw a huge increase in intergenerational travel, when people said, ‘Life is too short, we better enjoy it.’”
In the United States, demand is being fueled by a seismic shift in demographics, Upchurch says. When the last baby boomers turn 60 in 2024, around 80 percent of the generation is expected to live another 20 to 25 years. “We’ve always had 80-year-olds, but we’ve never had as many 80-year-olds as we’re about to have,” he says. Add to this the willingness of Millennials and Gen Z to prioritize experience over material goods, and you create the perfect growth storm within the industry. “We’re going to have six generations of people all traveling at the same time, which is unprecedented on the scale that we’re about to see,” says Upchurch.
Another strong trend is bleisure, a mix of business and leisure travel. It started gaining popularity in the mid-2010s, especially among millennials, but now everyone is catching on. “With the rise of people able to work from home, the traditional lines between leisure and business travel are blurring,” said Kurt Alexander, president of Omni Hotels & Resorts stating that professionals add a few days before or after their business trips for fun.
“While traditional business travel is improving, it’s still down about 40 percent compared to 2019,” he says. “Leisure travel, some of which is driven by business travelers, is generally exceeding pre-COVID levels.” Before the pandemic, business and group travel made up more than half of Omni’s business. This year, that number has dropped to about 45 percent, Alexander says.
A look at major travel-related companies that call DFW home:
Airlines
American Airlines
Headquarters: Fort Worth Fleet: 915 aircraft Employees: 120,000 Managing Director: Robert Isom
Southwest Airlines
Headquarters: Dallas Fleet: 735 aircraft Employees: 55,000 CEO: Bob Jordan Read also : Mayor Bowser Announces Record $1.1 Billion Small Business Spending in FY21 | mayormb.
Envoy Air
Headquarters: Irving Fleet: 185 aircraft Employees: 18,000 CEO: Pedro Fábregas On the same subject : Toxic culture and ‘race to the bottom’: Pilots open up about why air travel is in chaos.
Hospitality
Omni Hotels & Resorts
Headquarters: DallasPortfolio: Owns approximately 50 luxury hotels and resorts totaling 22,000 rooms President: Kurt Alexander
Aimbridge Hospitality
Headquarters: PlanoPortfolio: Manages 1,500+ propertiesPresident and CEO: Michael J. Deitemeyer
Travel Tech
Sabre Corp.
Headquarters: SouthlakeBusiness: Travel software and technology giant that essentially powers the industryChairman and CEO: Sean Menke
Dallas-based Woodbine Development Corp. sees similar trends. “Bleisure isn’t something that’s limited to DINCs (dual income, no kids); We see families doing it, too,” said Dupree Scovell, the firm’s managing partner and chief investment officer.
About 50 years old, Woodbine specializes in hospitality and mixed-use projects across the United States. The hospitality portfolio ranges from major brands and independent hotels to full-service and select-service properties. According to Scovell, demand across the portfolio in recent months has been 90 percent — or more — compared to 2019. “This trend appears to be industry-wide,” he says. “Gateway markets are the few exceptions that still lag further behind 2019 occupancy, in part due to the slower return of international travel.”
Nominal average daily rates (ADRs) have set records this year, Scovell says, particularly at resorts in drive-to-destination markets. “That’s important because it’s currently outpacing inflation-related cost increases,” he says. “This proves once again that hospitality assets offer an excellent hedge against inflation through daily revaluation.”
Dallas as a Destination
North Texas tourism is also recovering. In 2019, Dallas hotel revenue grew to $2.4 billion. In 2020, that number was halved. “Dallas grew from total hotel occupancy overnight into single digits in the 1970s,” said Craig Davis, CEO of VisitDallas. “Some hotels have lost over 90 percent of their employees. It’s been a slow climb as we hit about 30 percent occupancy for quite a while before really showing signs of life again.” And what about 2021? According to VisitDallas year-end figures, Dallas hotels generated nearly $2 billion in revenue.
According to Davis, the region’s recovery was helped in part by being perceived as an “open” city among its peers. As the rest of the country remained under COVID-19 restrictions in late 2020 and into 2021, Texas was among the first states to lift mask mandates and openly allow travel again. Davis says Dallas has risen from #5 in its peer group to #1 for meeting destinations during the pandemic, according to CVENT — the City and Visitors Bureau’s gold standard for measurements. Dallas tourism continues to outperform destinations like Chicago, Phoenix, Houston and New Orleans in a number of metrics VisitDallas tracks, with few signs of slowing.
Davis is closely monitoring the business travel recovery. “Business travelers don’t travel like they used to, and Dallas has always been a business city,” he says. “People don’t visit their customers nearly as often. Businesses may love to see the savings when people don’t have to travel as much, but what happens when the script changes and it starts to hit the bottom line? Doing business through Zoom is cost-effective in the short term, but you’ll hop on a plane to visit a client every time you think you might lose business.”
Industry analysts expect business travel to begin this fall and continue through 2023. Davis says the construction of the new Dallas Convention Center will help the city attract more meetings and events. Although the current capacity of approximately 725,000 square feet of exhibition space may sound like a lot, parts of the building were constructed in the 1950’s and the last renovation was in 2009. will have a total area of 2.5 million square feet. Davis says the North American Spine Society, which will open in 2029, has already committed to hosting its 2031 conference in Dallas.
Top Hotel Market
Another positive indicator is the hotel development in the region. According to VisitDallas, there are more than 30,000 hotel rooms in the city and 78,000 throughout the region. And Dallas continues to make strides in hotel construction in the country, with nearly 20,000 more rooms in the pipeline, according to Lodging Econometrics magazine.
Omni, which has four existing hotels and about 2,500 rooms in North Texas, is working on new projects including the 500-room Omni PGA Frisco Resort, which is slated to open in 2023. “DFW’s central location and the infrastructure of our airports make it the perfect destination for organizations from across the country to bring people together for meetings and events,” says Alexander. “DFW is a dynamic market that in many ways is 21st Century NYC. People, organizations and capital from all over the country want to be here and benefit from the network effect. The addition of a world-class resort in North Dallas will be a significant shift for this market and as a destination.”
Emerging hotel developers include independent luxury companies such as Auberge Resorts (which is entering DFW with a project in the Knox neighborhood), Dream Hotel Group (which will anchor the new Firefly Park in Frisco), Pendry Hotels and Proper Hotels & residences. “Customers who can afford it want travel experiences that inspire them more than traditional hotel options,” says Scovell.
Penn Collins, CEO of Gatehouse Capital, says that he and his team are “keeping a close eye on the persistence of the trends we have seen over the past three turbulent years amidst a highly dynamic economic landscape such as we are finding in 2022 “. Founded in 1997, the Dallas-based company is known for developing technically advanced luxury properties such as the W Hotel & Residences in Dallas (and Hollywood, San Diego and Silicon Valley).
“The past three years have demonstrated our resilience in the extended stay, drive-to-resort and medical hospitality markets — an area in which we are very active,” says Collins. “The afterglow of these respective gigs during COVID has made projects in these areas the most desirable, and we’re betting that preference will remain for a while. With a wealth gap seemingly exacerbated by the pandemic, once amenities and services were allowed to resume, luxury hotels also had a surprisingly high cap.”
Despite the “painful intersection” of rising construction costs and interest rates, Collins hopes that stabilizing the supply chain and labor pool will mitigate the additional interest costs for new projects. “With new supply low and demand exceptionally returning at unprecedented rates, hotel underwriting in 2023 should be able to tip its proverbial hat on an outstanding performance that, among many hotel markets and sectors, provides a reliable benchmark for the industry will set. ”
Scovell shares concerns about rising interest rates. He also believes projects “that don’t have a business to get funded” will still find investors because there’s so much non-traditional capital available. However, he is encouraged by the increasing momentum of gateway markets, the increase in international travel and the opportunities offered by group travel, including gatherings, for workers who are now working remotely across the country. “We believe our hotels will continue to recover into 2022, driven by increasing demand for group and corporate travel,” says Scovell. “We remain optimistic in the hotel business. Hotels have outperformed inflation in each of the last nine recessions.”
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Authors
Brandon J. Call
Brandon J. Call is the Editor-in-Chief of D CEO magazine. An award-winning business and data journalist, Call was previously…
Christine Perez
Christine is the editor of D CEO magazine and its online platforms. She is a national award-winning business journalist who…
