CEOs of the hotel industry’s largest brands said they don’t expect an immediate turnaround, but believe everything that made them optimistic in 2019 should eventually return.
REPORT FROM THE U.S.—Leaders of the top global hotel companies said they believe the industry could return to a “golden age of travel” once the dust settles from the current crisis, which snapped record highs to unprecedented lows in a matter of weeks.
Speaking during the “Virtual CEOs Check-in Panel,” hosted by the NYU Jonathan M. Tisch Center for Hospitality at a time when the 42nd annual NYU International Hospitality Industry Investment Conference was originally slated to take place, executives said they remain optimistic for the long term.
“Up until about 90 days ago, I heard every member of this panel utter repeatedly that we’re in a golden age of travel, and we all believed that,” said Chris Nassetta, president and CEO of Hilton. “It’s hard to feel good about that now for all the reasons that have been articulated, but when we wake up in two to three years … I think we will be in a golden age of travel again, because people’s desire to move and congregate is unstoppable.”
Sébastien Bazin, chairman and CEO of AccorHotels, said for the industry to bounce back, leaders must recognize they face a situation with many unknowns and fewer answers, and be remarkably communicative with their people.
“We talk as much as we can to many employees, whether they’re furloughed or not,” he said. “We tell them the first priority is health, second is family, and work comes third. You need to be present but humble.”
Arne Sorenson, president and CEO of Marriott International, said the ongoing crisis has been difficult but enlightening for the industry.
“We had to ask, ‘Are there tools sufficient to respond to this crisis?’ and there were not,” he said. “We as an industry don’t have the tools to carry to the community from a date when business disappears to an unknown future when resources come back.”
David Kong, president and CEO of Best Western Hotels & Resorts, said he was heartened by the industrywide response to the crisis and the efforts of companies to take care of people.
Programs such as the American Hotel & Lodging Association’s Stay Safe initiative “demonstrate the industry players care about the health and well being of customers and clearly demonstrates we’re all in this together,” he said. “This industry is comprised of people who care about people and are optimistic while recognizing the challenge ahead.”
Keith Barr, CEO of InterContinental Hotels Group, called the crisis “humbling” for the industry and his company.
“When you come off, for all of us, a record year with so many tailwinds to the one thing you can’t prepare for, you have to learn quickly for the business,” he said.
Mark Hoplamazian, president and CEO of Hyatt Hotels Corporation, said the message to Hyatt employees has been that taking care of themselves should be their first priority, which isn’t necessarily the first reaction of many in hospitality.
“It’s like the analogy of the oxygen mask on an airplane,” he said. “You have to put on yours before assisting others. That’s been a huge lesson for us, because we’re all responsible for huge communities of people.”
Hoplamazian also addressed the turmoil around the country related to protests and police brutality, noting the anger “surrounding George Floyd’s death is really raw and important for us to recognize.”
Looking to a recovery
The consensus among executives was a recovery will take two to three years, during which the industry will change but also remain the same in key ways.
“When you wake up in three years, the business will look a lot like it did three to four months ago,” Nassetta said. “Between here and there, things are going to look different and are going to evolve. We’re all going to have to work with our teams to find the pockets of demand that are going to exist. Today that’s more leisure and local business transient.”
Hoplamazian said drive-to leisure is leading early days of a demand comeback, but the definition of “drive-to” seems to be expanding with people willing to drive farther.
“In Florida, demand has been strong, and it’s all leisure-driven, drawing from multiple states,” he said. “In excess of 90% of arrivals came from people driving. People are prepared to drive some distance to get out and have a different kind of experience.”
Sorenson said the U.S. could be poised for strong domestic travel demand, noting the country, along with China, historically has the strongest domestic numbers.
“The American traveler and consumer is ready to bust out and do something different, maybe dangerously so in some respects, but Europe is inherently more complicated,” he said.
Bazin disagreed, noting his company has started marketing to loyalty members to get back on the road as the European Union clarifies reopening and travel rules. That will depend on countries within Europe opening borders to one another, he said, and the biggest remaining question mark is the U.K.
“The notable exception is disagreement between Boris Johnson and the EU,” he said, noting he believes it’s “unlikely” the U.K. will join Europe’s push to reopen on 15 June.
He also said the continent is poised for strong leisure demand due to its culture of train travel, which supplements drive-to business.
Flight to brands
Bazin predicted the current situation will be a death knell for smaller hotel brand operators and is likely to push more independent and smaller brand hotels to companies like his.
“I’d say 10% to 15% to 20% of those brands around us disappear,” he said. “I’m not glad about it, but scale matters more than ever, and we’re going to be the beneficiaries of that scale.”
In a question-and-answer session following the panel, Hoplamazian and Nassetta said their companies have had strong owner demand for conversions, a lot of which has come from independent hotels looking for the demand-generating power of brands.
“I feel confident we’ll be doing more conversions over the next couple of years, but whether that approaches great recession levels (of as much as 40% of growth coming from conversions), I don’t know,” he said. “I doubt it, but we’re doing more because owners want to come into the system to take advantage of our ability to deliver commercial performance they otherwise wouldn’t get.”
*Editor’s note: Hotel News Now is a division of STR, a CoStar Group company. Chris Nassetta serves on CoStar Group’s Board of Directors.