Despite high inflation, slowing economy and fears of a slowdown, the hotel industry is not showing any slowdown.
It’s the exact opposite, with Hilton CEO Chris Nassetta predicted that the hotel chain “will have the biggest summer ever in our 103-year history this summer.”
Few industries were hit as hard as travel by the Covid-19 pandemic, which curtailed almost all leisure and business travel plans. But as vaccination rates and loosening restrictions spread across the country, travelers are back. In May, global leisure and business flights top 2019 levels For the first time since the pandemic began.
But while this has come with a cost, driven by higher levels of demand from fellow travelers as well as other inflationary pressures, hotel operators still believe there is room for further increases in prices.
“The price has gone up for everything, so we’re no different when you go to the gas pump or the grocery store or any other aspect of life; it’s discretionary,” Nassetta told CNBC’s “Squawk on Monday.” Street” said. ,
Nassetta said two things were keeping demand high: more than $2.5 trillion in leisure consumer incremental savings, and strong corporate balance sheets paired with “very good” profitability.
“They’ve gone two years from a leisure standpoint and from a business standpoint with the meetings and events that they need to do,” he said. “They have the availability of discretionary income in both segments to do that and they need it, and it’s being matched with demand.”
Marriott CEO Tony Capuano said the company’s revenue per available room over Memorial Day weekend, which measures hotel performance, was up about 25% in 2022 compared to 2019. Marriott’s luxury portfolio, which includes hotels such as the JW Marriott, the Ritz-Carlton and St. .Regis, those hotels saw rates increase by about 30% in the first quarter of 2022 compared to 2019.
“I think as long as we’re delivering on service, which can be challenged in markets where labor is difficult, we continue to see really remarkable pricing,” Capuano said on “Closing Bell” on Monday. . He noted that while places such as vacation spots and coastal destinations had “extremely strong rate potential”, “the middle of the country, some urban markets have not returned as quickly.”
Another potential boost in demand could come as the Biden administration dropped now COVID-19 testing requirements for air travelers arriving from abroad.
While other countries, such as the United Kingdom and Greece, have long lifted their requirements, the US still requires passengers, regardless of their vaccination status, to test a negative COVID-19 the day before boarding a US-bound flight. Proof of test needs to be submitted. It was one of the last countries to still implement such a rule.
Travel industry executives had argued that the ban was impacting demand for international travel. “The requirement for testing prior to departure creates uncertainty for passengers, another obstacle that could lead them to choose a destination with less friction,” Capuano said in a statement to CNBC’s Seema Modi.
“The Biden administration is to be commended for this action, which will welcome visitors from around the world and accelerate the recovery of the American travel industry,” US Travel Association President Roger Dow said in a statement. “International inbound travel is extremely important to businesses and workers across the country who have struggled to recoup losses from this valuable sector.”
Hayato President and CEO Mark Hoplamazian said on “Squawk on the Street” Tuesday that foreign travelers to the US spend a lot more than domestic travelers, and the testing requirements were “creating friction.”
But even without passengers, who may have halted their journeys out of necessity, demand remains high. “Pretty much across the board, all commercial segments and leisure are firing on all cylinders,” Hoplemazian said.
Keith Barr, CEO IHG Hotels & Resorts The company, which owns brands such as Intercontinental and Holiday Inn, said it expects demand to continue rising for the rest of the year as travel becomes more common after the pandemic.
Inflation and other costs are more likely to come along with further price hikes as factors.
“Demand is so strong … we have price potential, but really, we’re not even keeping pace with inflation,” Barr said Tuesday at “Closing Bell.” “There’s still some pricing power going forward in this business, and demand will continue through the summer.”
Those prices will likely only increase because “there is very little incremental new capacity coming into the industry,” Nassetta said. “The laws of supply and demand, the laws of economics, are alive and well,” he said.
