CEOs provide rosy outlook at NYU conference

The hotel leadership community can say without much of a doubt that they have proven many prognosticators wrong. Despite high-profile predictions about the long-term impact of COVID on both leisure and business travel demand, they knew better all along. Group business is raging, revenge leisure travel continues to drive the recovery, strong employment is encouraging consumer spending, and business transient is starting to perk up. Next will be the return on inbound international travel. The CEOs on stage to open the 45^th annual NYU International Hospitality Industry Investment Conference said that it was only a matter of time and as performance remains frothy in the U.S. despite some potential economic challenges, normalization of demand is around the corner. “The world is normalizing,” proclaimed Hilton CEO Chris Nassetta.

“We are getting out of the bizarro world with what the Fed and Central Bank have been doing,” Nassetta said. “We are going to get to a world within the next 12 to 18 months where it is back to fundamentals. By the end of the year, demand patterns will look an awful lot what they looked like pre-COVID.”

Marriott International CEO Tony Capuano declared it’s still boom time, and any questions about the resilience of travel have been answered. “I don’t see any slowdown in the face of economic headwinds,” he added. 

Hyatt Hotels Corp. CEO Mark Hoplamazian added that while rates won’t rise forever fundamentals on both the supply and demand size make a case for further expansion of rates.

Rate just caught up to where it should have been over time, according to IHG’s outgoing CEO Keith Barr, who added that with supply growth muted for the next few years it will further support pricing where it should have been over time. Add operational efficiencies, he said, and it is a great time for this industry because the fundamentals will support growing the business.

Nassetta, Capuano, Hoplamazian, Barr, RLJ Lodging Trust President and CEO Leslie Hale and Accor Chairman and CEO Sebastien Bazin agreed the hotel business likely has more tailwinds now than any other industry. They also believe ongoing inflationary pressure adds staying power to rate premiums and anticipate outbound Chinese travelers will add further winds to their sails in the second half of 2023 as airlift is further restored. To put a cherry on top of the recovery sundae, Bazin said to also watch out for emerging middle-class travelers from India.

Looking at Europe, Bazin said similar demand patterns and rate premiums are in play in markets like London, Paris and Berlin.

AI is going to change the world, but it is going to take five to 10 years. We have to enter the zone thoughtfully and carefully and make sure we have to protect our own information and data.

Chris Nassetta

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It all sounds rosy for now and supply fundamentals netting about 0% to 0.5% growth should sustain it even longer. There was no talk about potential Black Swan events.

If there is a recession with teeth, Hoplamazian said expect to see some segmentation of who stays on the road and where the industry sees relative weakness. He pointed to a recent intention survey that showed those earning more than $100,000 a year likely to spend 10% more than last year on summer travel with that percentage dipping as you move down the income ladder.

Hale added that RLJ is seeing leisure demand normalizing while international business is indeed picking up.

Of course, the topic of artificial intelligence came up during the discussion with Bazin insightfully stating that AI should be used before and after the stay with the human touch dominating during the stay. While AI could remove friction from hotel-guest interactions, Nassetta suggest the industry take its time with AI due to potential privacy and security ramifications. “AI is going to change the world, but it is going to take five to 10 years,” he said. “We have to enter the zone thoughtfully and carefully and make sure we have to protect our own information and data.”

When the discussion turned to the booming extended-stay segment and with Marriott making news earlier that morning with the launch of a midscale extended-stay brand, Nassetta cited limited penetration and said, “there is room for all of us to do well in extended-stay.”

Outside of this segment, Hale said conversions will continue to be the key strategy for growth with new brands coming to the fore giving owners further optionality.

In closing, moderator Sara Eisen of CNBC asked the leaders for a wish list from the U.S. government. They said a faster travel visa application program, easier temporary work visas processes, and an overall more effective immigration policy to create a more competitive work force that will lead to a more competitive U.S. economy.