Despite high inflation, a weak economy and recession fears, the hotel industry shows no signs of slowing down.
It’s the exact opposite, with Hilton CEO Chris Nassetta predicts that the hotel chain will “have the biggest summer we’ve ever seen in our 103-year history this summer.”
Some industries have been hit hard like tourism by the Covid-19 pandemic, which has restricted nearly all leisure and business travel plans. But as vaccination rates and relaxed restrictions have spread across the country, tourists have returned. In May, global business and leisure flights top the level 2019 for the first time since the pandemic began.
But while that comes at a cost, given high demand from tourists as well as other inflationary pressures, hotel operators still believe there is room for further price increases.
“Price has gone up for everything, so we’re no different than when you go to a gas pump or grocery store or any other aspect of life; it’s arbitrary,” Nassetta said on CNBC. Squawk on the Street” on Monday.
Nassetta says two things keep demand high: entertainment consumers’ incremental savings of more than $2.5 trillion and a strong corporate balance sheet combined with profitability. “very good”.
“They lost two years both from a leisure standpoint and from a business standpoint with meetings and events not being able to do what they needed to do,” he said. “They have discretionary income available in both segments to do that and they have demand, and that is matching demand.”
Marriott CEO Tony Capuano said that over Memorial Day weekend, the company’s revenue per room availability, a measure of hotel performance, was up about 25% in 2022 compared to 2019. Marriott’s luxury portfolio, which includes hotels such as the JW Marriott, Ritz-Carlton and St Regis, saw a nearly 30% increase in room rates in the first quarter of 2022 compared to 2019.
“I think as long as we’re offering a service, which can be challenged in tough labor markets, we’re going to continue to see really remarkable pricing,” Capuano said on “Closing Bell” ” on Monday. He also noted that while there is “extremely strong exchange rate potential” in places such as leisure destinations and coastal destinations, “in the heart of the country, some urban markets are not coming back.” quick again.”
Another possibility driving demand may come when the Biden administration has has now decreased Requires Covid-19 testing for air travelers from abroad.
While other countries like the UK and Greece have long since lifted their requirements, the US still requires travelers to present proof of a negative Covid-19 test one day before boarding their arrival flight. United States, regardless of their immunization status. It was one of the last countries to still enforce such a rule.
Travel industry executives have argued the restrictions have hurt demand for international travel. Capuano said in a statement to CNBC’s Seema Mody: “Requiring pre-departure checks creates uncertainty for travelers, adding another barrier that could lead them to choose a low-friction destination than”.
“The Biden administration deserves credit for this action that will welcome returning travelers from around the world and accelerate the recovery of the US tourism industry,” said Roger Dow, president of the American Travel Association. said in a statement. “International inbound tourism is vitally important to businesses and workers across the country, who have struggled to undo the losses from this value sector.”
Hyatt President and CEO Mark Hoplamazian said on “Squawk on the Street” on Tuesday that foreign visitors to the US spend more than domestic visitors and that the testing requirements are “creating friction.” .”
But even without travelers who may have halted their trips due to demand, demand is still high. “Very much across the board, all business and leisure segments are tapping on all cylinders,” said Hoplamazian.
Keith Barr, CEO of IHG Hotels & Resorts which owns brands like InterContinental and Holiday Inn, said he expects demand to continue to grow for the rest of the year as travel is more normalized following the pandemic.
That will likely be accompanied by further price increases as inflation and other costs are factored in.
“Demand is very strong… we have pricing power, but in reality, we haven’t even kept pace with inflation,” Barr said on “Closing Bell” on Tuesday. “There is still some pricing power in this business going forward, and demand will continue to come through the summer.”
“Those prices will likely only go up because there will be very little new capacity added in the industry,” Mr. Nassetta said.