NEW YORK — The U.S. travel landscape is approaching a more level, balanced field than it has in the years since the start of the COVID-19 pandemic, and hoteliers are determined to keep industry performance on a steady track, despite obstacles in the form of inflation and a possible economic recession.
One bright spot from the past few months has been returning volumes of business transient and group travel demand across the country. Executives from major hotel companies at the 44th annual New York University International Hospitality Industry Investment Conference said they’ve been pleasantly surprised to see business transient demand ticking up after long being the laggard.
But while STR, CoStar’s hospitality analytics firm, revised its 2022 forecast favorably, calling for average daily rate to hit $145 in 2022, a significant boost from the past forecast, a few clouds still hang over the otherwise sunny outlook for the U.S. hotel industry.
Inflation and the possibility of a recession remain question marks for hoteliers, and many speakers on the stage during Day One of the conference debated just how much of an impact both will continue to have on people’s willingness to travel, interest rates for hotel financing and whether these economic conditions will create a short-term pause in the breakneck speed of rising ADR and nonstop leisure travel.
Another significant shift — executives' decreasing worries over COVID-19 and any potential new variants. While speakers recognize that new wrenches may be tossed into the recovery, the overwhelming business sentiment is that the country is living with COVID now.
Photos of the Day
Data Point of the Day
STR forecasts 2023 will mark an all-time high for daily room demand in the United States and will continue to grow in 2024. This shows the industry reaching and surpassing prior room-demand peak in four years.
Quotes of the Day
“There’s still plenty of capital out there. It’s still pretty cheap money. It was free money, and now you have to pay for it, but that’s OK! You’re still seeing massive inflows of capital, especially on the private side. My view has always been that there’s no better place to be in a recession than hospitality, because it’s going to improve every day as the market gets better and you reprice every day. And don’t forget what I call the cultural anthropology side of this business — people are going to travel. Do you see some movement down, from luxury to midscale, if the economy doesn’t do as well? Maybe, but it’s still going to be a strong recovery for us.”
— Michael Lipson, CEO & chairman of the board, Access Point Financial
Editors' Takeaways
Here’s one silver lining of the global COVID-19 pandemic: After getting through the worst of the downturn, U.S. hoteliers seem convinced any other setback pales in comparison. Questions swirl around whether the U.S. is technically in a recession right now, but hotel executives on the general-session stage at the NYU Hospitality Industry Investment Conference on Monday said, and I quote, “so what?" and "who cares?"
So a few months of slower growth and rising interest rates aren’t scaring investors away from hotels. The so-called "wall of capital" sounds like the mythical money tree growing in the backyard if you listen to some investors — transactions are happening, from private equity, foreign investors and high-net-worth individuals — and there's still money to be had, even if it's a little more expensive right now.
There's no doubt U.S. hoteliers know how to structure deals in this environment now. But here's what they're not great at communicating about — ESG. Environmental, social and governance topics, along with diversity, equity and inclusion topics, came up on many panels. Unfortunately, these are arenas where it seems like the majority of U.S. hoteliers need to dig into deeper and define these terms for their companies before they can make an impact.
—Stephanie Ricca, editorial director
@HNN_Steph
It's no longer "cautious optimism," from what I've gathered during Day One of the NYU conference, as hoteliers are thoroughly bullish.
Accor's CEO of North and Central America Heather McCrory said during a panel that people have been "dipping into the relationship bucket" for the past two years, and now they just want to replenish it by traveling in groups or meeting colleagues.
"Like others, I haven't been this quite optimistic before — this time I feel much stronger about it because I feel, kind of like leisure, there's pent-up need on the corporate side," she said.
Perhaps something to keep an eye on now is what's being done across industries to allow for employees to get back into the swing of travel. McCrory noted there currently are things being done, such as companies raising per diem rates.
Noble Investment Group CEO Mit Shah said both group business on the books and the pace of transient demand will continue to lead to a year that's "wildly ahead of expectations."
Absent the war in Ukraine and other global economic factors, "this summer is lining up to to be the greatest on record," he added.
These are only a few soundbites of just how buoyant the mood has been on Day One. All I can say is: This is a night and day difference to years' past, and hoteliers should be proud of how far they've come.
— Dana Miller, senior reporter
@HNN_Dana
Throughout the first day of the conference, some hoteliers kept using the phrase "the R-word," as if they were afraid that by saying "recession" out loud, they would speak it into existence. That makes sense given what recessions have done to the industry in past years and the fact that the industry is currently working its way out of the pandemic.
At the same time, there were others who had no problem saying the word "recession," even going so far as to say, as my colleague noted earlier, that they didn’t think whatever recession is coming is likely to have a significant impact on the hotel industry. It’s strange to see the two opposing schools of thought here.
It was interesting to hear from those in the second camp. We heard that the hospitality industry is a good place to be during a recession because of how frequently hoteliers can price their rooms to reflect the situation. The industry survived and is recovering from a pandemic that quickly halted nearly all travel demand, but that demand came back faster than anyone expected, showing how much people want to get out of their houses.
The optimism was certainly encouraging, and, should we see any kind of recession, let’s hope they’re right.
— Bryan Wroten, senior reporter
@HNN_Bryan