While the past year has been the most challenging on record for the hotel industry, the CEOs of the top global hotel brands agree the table is set for a comeback that might come more quickly than outside observers would expect.
Speaking during an online panel as part of the NYU International Hospitality Industry Investment Conference, Hilton President and CEO Chris Nassetta cautioned young hoteliers to "keep the faith."
"The golden age of travel will return," he said. "It's a very big industry. It will become once again one of the fastest-growing industries in the world. There's immense and diverse opportunity, and there's huge opportunity to have positive impact on the world in this industry. None of that's changed. We just had a rough year."
The Recovery
CEOs on the panel agreed that 2023 remains the most likely year for hotel performance metrics to return to pre-pandemic levels, although leisure demand has come roaring back amid the rollout of COVID-19 vaccinations as travelers grow more comfortable.
David Kong, president and CEO of BWH Hotel Group, said he expects his company to beat that 2023 projection "because we're very strong in the leisure segment."
"There's been such pent-up demand, and we just witnessed the unleashing of that powerful pent-up demand over Memorial Day weekend," he said. "We had an all-time high in [revenue per available room]. So that's very encouraging."
But while optimism reigns, the pandemic is still not a thing of the past, cautioned Marriott International CEO Tony Capuano.
"We have real time visibility into booking data, and when you see a spike in infections in a given market, or you see consumer confidence shaken a bit by the popping up of a particular variant, you see almost immediately the impact on the business," he said. "So we continue to be cautiously optimistic. But I think we also have to be vigilant because we're not out of the woods yet in terms of the pandemic."
Sébastien Bazin, chairman and CEO of Accor, said a lack of visibility into future performance also remains a large challenge for the industry.
"Fifty percent of my bookings have less than four days' notice," he said. "And I can't tell you how much it will vary from one week to another."
He noted the travel environment remains difficult and disjointed across Europe, but he's hopeful for a strong rebound after the continent largely reopens to U.S. travelers and for travel within European Union nations.
"I'm just waiting for those for trips between Amsterdam to Greece and from Paris to Madrid to happen," he said. "We just need them so much."
Keith Barr, CEO of IHG Hotels & Resorts, said his company and others can look to China for a good idea of how performance will rebound.
"What gives me confidence is markets like China, and I think collectively we're all back pretty close to normal in China, especially in tier-two to tier-four cities," he said. "The ones that are impaired slightly are the tier-ones like Shanghai, Beijing and Hong Kong, because they require a lot more international travel. As borders reopen, as air travel comes back up, the long-term fundamentals will drive this industry."
While much of the rebound has be predicated on the return of leisure demand, panelists said business and group demand is closer to being unleashed than some expect.
"People are going to be a lot more like they were in 2019 before they know it," Barr said.
"We have all this debate about what's going to happen with group and what's going to happen with all these big conventions and events, and I said to my team today, it's going to come back," he said. "We're right now planning our conference in Las Vegas. That's 5,500 people there for four days. Our owners want it, because people want to have those connections and want to get together, too. So I really do believe we're just in a transitionary period, and as vaccines go up, consumer behavior will shift back to what it was previously."
Labor: From a Challenge to a Crisis
The CEOs on the panel agreed a surge in hotel demand is inevitable this summer, but many were unsure whether they could source the labor needed to meet that demand. Amid a labor shortage, hiring has also become more expensive.
"Wages have already gone up tremendously, and I expect that to continue," Kong said. "When we talked about labor challenges last year before the pandemic, it was a challenge. Right now, it is a crisis — a tremendous crisis not just for our industry but for many, many other industries."
Labor shortages are exacerbated by diminishing opinions of careers in the hotel industry, at least in part tied to the volatility created by the pandemic and employees having options in other industries.
"You have the likes of Amazon building up big plants and the economy powering up a lot of industries that are expanding," Kong said. "That bodes well for the business segment, but it also takes jobs away from the hotel industry."
Nassetta noted that roughly a quarter of displaced hotel workers have found employment in other industries, but hotels are also facing a workforce that is reluctant to return due to various practical issues. While many don't feel safe returning as the pandemic lingers and issues like child care remain unresolved, he said expanded unemployment benefits have disincentivized many from returning to the workforce. He said that is slated to change with many states cutting back on unemployment.
"If you want to get the real economy to take back over, in my opinion, you've got to let it take back over," he said. "You've got to get the government out of the business of employing everybody, and you've got to get the real economy moving again. We're a very big part of the real economy and a very big part of real employment."