During second-quarter earnings calls, several executives at hotel companies expressed their opinions about potential tax reform in the U.S.
REPORT FROM THE U.S.—With the limited progress of tax reform efforts, executives at U.S.-based hotel companies seem to have a mix of hope and frustration that tax reform will be enacted at the federal level to benefit their businesses and potentially spur more companies to spend on corporate travel.
That was a recurring theme during second-quarter earnings calls. Here’s a quick collection of remarks from some executives on tax reform and the overall regulatory environment.
Jon Bortz, chairman, president and CEO of Pebblebrook Hotel Trust
“And while earlier in the year, there was optimism about the prospects for much improved economic environment due to the changes in government, we have yet to see any benefits in the travel industry. And of course we haven’t seen any of the material legislation coming out of Washington that many people were hoping and expecting.
"Yes, there seems to have been progress made in the area of deregulation, but that hasn’t translated yet into improving economic activity. In fact, if anything, more recent macroeconomic statistics have shown some minor softening and, at least from our perspective … much of it was prior to the election, indicating a modest amount of annual growth with healthy employment gains.”
Ross Bierkan, president and CEO, RLJ Lodging Trust
“From a macro perspective, key economic indicators remain largely unchanged. Healthy corporate profits and business investment coupled with strong employment and consumer sentiment are creating a positive economic climate. Despite this backdrop, we have yet to see these positive trends fully translate into strong growth for the lodging industry. We believe that we need incremental economic growth and clarity with regards to the new administration’s policies and initiatives in order to give rise to actionable corporate sentiment, which would lead to more robust lodging demand fueled by the business travel.”
Chris Nassetta, president and CEO, Hilton
“I’ve been talking to a lot of our corporate customers actually in the last couple of months, and I would say people are, sort of, cautiously optimistic in the sense that they see the economy as continuing to show decent resiliency, obviously positive growth.
“I think, everybody would like to see a little bit more clarity on public policy on some of the things that they care about the most to unleash a little bit more optimism in the hiring, spending and consequently demand for hotel roomnights. I think probably the single biggest thing that might help change the psychology with our corporate customers is some positive movement in the area of tax reform. I mean, there’s a whole bunch of stuff going on politically right now, and legislatively, all of which can matter; regulatory change certainly could matter. But I think tax reform is probably singly the thing that I hear about most from people, simply because I think people have wanted it a long time. The impact of it would be positive in the sense of driving more free cash flow into people’s businesses, so they’d have more to play with to hire and invest. … Generally as I talk to corporate customers, as we think about the rest of this year, and particularly into next year … they’re sort of cautiously optimistic. I’d say their attitude has been ‘business is pretty good; growth is okay; we’d like it to be better.’”
James Francis, president and CEO, Chesapeake Lodging Trust
“As we continue to manage through 2017, we remain hopeful that our pro-growth political agenda—including fiscal stimulus, deregulation and corporate and personal tax reform—will lead to both macroeconomic and corporate profit growth. Ultimately, these factors are primary drivers of lodging demand. Of course at this time, the outcomes from this agenda remain unclear and appear to be at risk. That said, corporate profits are showing relatively strong growth, which ultimately should drive lodging demand. So in summary, our outlook on the operating environment has not changed from the beginning of the year, but we remain cautiously optimistic.”
Mark Brugger, president and CEO, DiamondRock
“As we look out, there is a more optimistic case to be constructed on the demand side as corporate balance sheets are in excellent shape and corporate investment has increased. If pro-growth policy changes such as corporate tax reform are enacted, it is likely that GDP will accelerate and transit demand along with it. With that said, we have not yet seen signs of improving demand.”