As the rest of the economy seems to be slowing, the hotel industry is warming up. In fact, Hilton CEO Chris Nassetta is openly predicting his chain will, “have the biggest summer we’ve ever seen in our 103-year history this summer.”
During the pandemic, hotels suffered mightily. as travel restrictions shut down all business and leisure activity. However once vaccinations spread and lockdowns lifted, hotels appeared to be enjoying a surge of pent-up demand. As of May, leisure and business air travel topped 2019 levels – the first time since the pandemic began.
All of this demand has persisted, even despite inflation affecting even vacation travel. Nassetta said, “The price has gone up for everything, so we’re not different than when you go to a gas pump or the grocery store or any other aspect of life; it’s discretionary.”
Nassetta sees two factors swelling demand today, the $2.5 trillion consumers were banking during the pandemic which they now want to spend, and companies with business travel needs, which themselves are showing strong balance sheets due to having to service their own pent-up demand.
Nassetta said, “They’ve gone two years both from a leisure point of view and a business point of view with meetings and events without being able to do the things that they need to do. They have the availability of discretionary income in both segments to do it and they have the need, and that is being matched with demand.”
Over at the Marriott, CEO Tony Capuano noted that over Memorial Day weekend, hotel performance, measured as revenue available per room, was up 25% over 2019 in 2022. In its luxury labels, such as JW Marriott, Ritz-Carlton, and St. Regis, rates were increased 30% over 2019 levels in 2022.
Capuano said in an interview, “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.” And that pricing potential is expected to rise still higher once the Biden administration lifts COVID testing restrictions on foreign air travelers. It is among the last countries with such a rule
Capuano said, “Requiring pre-departure testing creates uncertainty for travelers, one more hurdle that may lead them to choose a destination with less friction.”
Roger Dow, president of the U.S. Travel Association said, “The Biden administration is to be commended for this action, which will welcome back visitors from around the world and accelerate the recovery of the U.S. travel industry. International inbound travel is vitally important to businesses and workers across the country who have struggled to regain losses from this valuable sector.”
Hyatt president and CEO Mark Hoplamazian has noted that the friction being created by the testing requirements was denying hotels access to foreign travelers, who typically are more extravagant in their spending habits.
Keith Barr, the CEO of IHG Hotels & Resorts only sees demand increasing the farther we get from the pandemic. “The demand is so strong … we’re having the ability to price, but in fact, we haven’t even been keeping pace with inflation,” Barr said Tuesday. “There’s still some pricing power in this business moving forward, and demand will continue to come through the summer.”
