‘Bill Gates got it dead wrong’

Hilton CEO Chris Nassetta gave the longer-term perspective stating that the hotel industry is set up for at least a 10- to 20-year run. “We spend too much time on quarter-to-quarter results as we are all in this for the long haul," he said. “People want to see the world and experience things. Everyone has greater mobility, there is better infrastructure and people have more flexibility in their work lives. The undercurrent of the hotel industry is as good as any in terms of size, scale and growth rate.”

An estimated 1,500 people are gathering at the New York Marriott Marquis for the NYU International Hospitality Industry Investment Conference this week, where, yes, the consensus suggests deal pace remains slow, driven by expensive debt, a gap in the bid-ask spread and unfavorable cap rates.

On the performance side, STR significantly downgraded its U.S. forecast with gains in ADR and RevPAR reduced 1.0 percentage points and 2.1 ppts, respectively. Occupancy for the year is now expected to decline with 2025 growth kept in place. But downward adjustments for 2025 were once again made to ADR (-0.8 ppts) and RevPAR (-0.9 ppts). STR’s Amanda Hite said the luxury segment should see 2% RevPAR decline for the remainder of the year with a change in the business mix leading to a moderating rate growth. There will also be pressure on midscale and economy segments, she added.

Nonetheless, participants on stage were mostly upbeat and perhaps waiting for geopolitical uncertainty to sort itself out as the post-COVID “new normal” continues to take hold.

The Morgan Stanley economist who led off the program said the U.S economy is slowing, but not falling off a cliff by any means. Bigger picture, she was optimistic.

The segment with potentially the most upside potential near term is upper upscale, benefitting from improved group demand.

CEOs upbeat

When the CEOs took to the stage in the afternoon the tone was overall positive as they suggested price resiliency and pace was picking up, especially for group business, even in an election year when group business traditionally tends to slow down. “That’s not what’s happening right now,” Hoplamazian said.

“Group is the strongest performing segment,” added Marriott International CEO Tony Capuano. “Demand for group is extraordinary.”

Nassetta was quick to remind the audience that, for better or worse, constrained supply growth has and will continue to aid performance. “It’s very hard to get things financed, it is much more expensive to build and there is 1% supply growth versus 2% to 3% traditionally. And that is not going to change for a number of years,” he said.

By geography, the best opportunities for growth, according to Nassetta, can be found in Asia Pacific and the Middle East, adding that Hilton is putting new bets in the lifestyle sector where it announced expectations to add 700 hotels over the next four years.

Nassetta continued by saying that the biggest global story is growth in the midmarket as that is the segment in which emerging middle classes around the world can afford to buy. “We will wake up in 20 to 30 years and the bulge bracket will be in the middle,” he said.

While Capuano admitted Marriott is a bit late to the midmarket party, they will play catch-up. That said, a good 10% to 20% of Marriott’s growth will come from luxury, he added, because it generates the highest fees.

IHG Hotels & Resorts Elie Maalouf referenced an increasing interest in office conversions when the building plate can support it. He said there may be even more such opportunities in Europe.

Accor Chairman Sebastien Bazin said to bet on the countries where there is strong political leadership such as India and Saudi Arabia.

So, perhaps it should not come as a surprise when the CEOs said, almost to a man (no women), their biggest headaches surround political uncertainty and its accompanying divisiveness.

“But there is only so much you can do about that and remember the work that we do contributes to a lot of good,” Nassetta closed. “I sleep at night knowing we are doing our best to contribute to the cause for the greater good.”