The financial world is ready to finally step away from the office after two years of hazy living and working.
With booster shots in arms and business travel on the rise, summer vacation approvals have been the hot ticket from Wall Street to Silicon Valley.
Increasingly, however, it also looks like the summer of 2022 could be a first and last jaunt before a US recession hits, with the Federal Reserve dramatically raising interest rates and SPX stocks,
and bonds posting a historically poor first half.
“It’s been tough walking away for a very long time,” said Joanna Wald, head of US small- and mid-cap equity research at Schroders, a global investment manager. “If I feel like the whole last year and a half has been like this.”
While Wald’s traveled twice from New York to London, Schroders SHNWF,
headquarters, since the pandemic, it’s an upcoming trip to Colorado that will be his first vacation in a long time. “These trips were really complicated, but it was worth it,” she said.
“This summer I’m staying in the States,” she said of an impending vacation. “I’m going to check in, but hopefully it’ll be a real break.”
Empty offices, fuller hotels
Investment firms large and small have dramatically reduced business travel during the pandemic, and many have maintained flexible plans by requiring staff to return fully to office buildings.
Office buildings were still more than half empty in the first week of July, according to Kastle Systems’ latest 10-city tracker, which put the average occupancy rate at just 43.8%.
The rise of flexible working arrangements has been a grim sign for many big city office building owners, but for hotels there may be some upsides.
“Because office plans are so ubiquitous, it gives people a lot of flexibility,” said Jan Freitag, country manager of hotel market analysis at CoStar Group.
“Working from home. Working from hotels. Now it’s so much more possible with Zoom or Teams,” he said, of the ubiquity of video meetings instead of in-person chats.
While business travel has yet to recover from pre-pandemic levels, group room bookings at upscale hotels in May hit 7.5 million, Freitag said, from a peak of 8.5 million. in May 2019.
“I think it’s encouraging,” he said. “The question is whether things will stop.”
Overcome the ‘poison’
Wall Street may be bruised and battered, but it was a whole different level of upheaval that, for some high-flying tech companies, meant going from unprofitable ideas to unicorns to layoffs in a rapid cycle.
“The peak was in March 2022,” said Eugene Zhang, founding partner and CEO of startup venture capital firm TSVC in Silicon Valley. “Too much money was poured into it and twisted a lot of things,” he said via video chat.
“There was so much poison. The thinking was so bad,” he said. “I would sum it up now as a much, much healthier environment.”
Zhang’s TSVC specializes in investing in technology-focused startups, including Zoom ZM,
Carta and others. Although he doesn’t plan to take off during the summer months, he has his first holiday in two years with his family booked for Spain in September.
“Right now, we’re in this transition or unknown period,” he said, noting that interest rates were skyrocketing and soaring prices were eating away at people’s spending abilities. “The economy will definitely suffer,” he said. “Take a vacation, but everyone has to deal with a new reality.”
Lily: The sum is also increasing: Hemingway enthusiasts and other tourists in Spain encounter a significantly higher rate of inflation than in the United States.
For Boston-based portfolio manager Jack Janasiewicz, this summer will also be the first big since the pandemic from a vacation and business perspective.
Natixis Investment Managers Solutions senior portfolio strategist, like Zhang, spoke of a transition period. With many clients still working on a hybrid model, this often means the option of a video chat, a somewhat awkward meeting in a client’s kitchen, or going to a cafe.
“It’s definitely a change this year from pre-pandemic,” he said, of the old days when people mostly met in their offices.
According to him, inflation could still be contained without the American economy turning into a shipwreck, even if “the risks of recession increase”.
When the next one hits, however, the financial world may be better equipped than in the past, with travel and entertainment budgets already squeezed, but spending on technology has increased dramatically.
Schroders’ Wald spoke about his company’s adoption of PROTO, a hologram technology that makes co-workers feel like they’re in the same room as you, but also produces a lighter environmental footprint than constant air travel.
“I was surprised at how realistic it looks,” she said, recalling that when Schroders CEO Peter Harrison recently used the technology for a virtual meeting in New York, a client in visit reflexively reached out to shake his hand, then stopped.
Lily: The United States won’t officially be in a recession if GDP falls again – and here’s why