NEW YORK CITY — CEOs of six major hotel corporations gathered at the NYU International Hospitality Investment Forum at the New York Marriott Marquis earlier this week to discuss the shape of the industry five years after the devastation of COVID and in the face of a volatile economy.
Marriott President and CEO Anthony Capuano said that demand “feels good,” although he acknowledged that the company does not have the “crazy pricing power” they had in the early days of the recovery. “We're seeing good [revenue per available room] growth,” he told the attendees. “It's a combination of both occupancy and average rate, which is really encouraging.” Solid growth activity suggests “that the owner and franchise community fundamentally believe, long term, in the strength and the fundamentals of the industry,” he added.
Cautious Guidance
Hyatt Hotels Corp. President and CEO Mark Hoplamazian acknowledged that many of the largest publicly owned hotel companies had lowered their forward-looking guidance in their Q1 earnings reports last month. “Uncertainty creates caution,” he told the crowd. “Caution creates—sometimes—[slower] growth. Or maybe it goes negative.”
At the same time, he said the industry is seeing “a massive divergence [both] by chain scale by price point.” While luxury hotels are reporting steady and solid growth, chains farther down the chain scale are under more pressure. “That's really why you [heard] caution in the first-quarter conference calls—because everyone has been to this party before.”
Hilton President and CEO Christopher Nassetta agreed, noting the swift changes in the industry that can leave hoteliers and their guests alike feeling unsure of where they stand. “The earth is shifting under your feet,” he said. “What do you do? You get more conservative.” This shift, he noted, is in response to customers who are reluctant to book travel and events far in advance. “That makes it awfully hard to forecast with confidence.” Indeed, on the same day the panel was held, CoStar and Tourism Economics downgraded growth projections for the remainder of the year, with STR President Amanda Hite noting consumer confidence as a headwind against demand.
But while people may be more conservative in their spending, IHG Hotels & Resorts CEO Elie Maalouf noted that the prioritization of travel has become “universal, across all countries, all segments.” For a strong segment of the population, he continued, travel and its related experiences are worth more than buying a car or a home much less a pair of shoes or purse. “That's a secular trend that isn't changing.”
Investing in Travel
Inbound international travel, however, has declined in recent months, and Wyndham Hotels & Resorts President and CEO Geoff Ballotti noted the impact this could have on domestic hotels. To that end, he said that he and other leaders have sent letters to Congress urging support for Brand USA, the country’s destination-marketing organization that promotes inbound tourism.
In late April, the U.S. Department of Commerce reportedly fired five board members from the public-private organization, suggesting that attracting international visitors was not a priority. (Accor President & CEO Sébastien Bazin, the only non-American on the panel, said that he spends less than 5 percent of his time focusing on government policy, and would rather focus on Accor’s employees, owners and guests.)
Capuano noted the economic impact of the travel and tourism sectors, particularly in terms of job creation. “A decade ago, the U.S. enjoyed a $20 billion international travel surplus,” he said. “Today, it's a $50 billion deficit. And you would expect that would get a stronger reaction than it's gotten to date.”
Nassetta argued that given the current climate in Washington, D.C., “there's not enough oxygen” for all issues affecting the interconnected travel and hospitality industries. “I do believe that when we get through this summer and we get to the fall, there's a very good likelihood that there's going to be more oxygen.”