Public hotel companies are set to report their first-quarter earnings beginning this week, but investors on the call won't be tuning in to hear what's happened this year so far — they're more interested in what's coming next.
"I think we're at one of those interesting quarter earnings times that happens now and then where really the earnings themselves are not going to matter so much," said C. Patrick Scholes, managing director of lodging and equity research at Truist Securities. "Everybody's going to be focused on what companies might or might not say about recent trends and expectations for the rest of the year."
Michael Bellisario, senior hotel research analyst and director at Baird, agreed, adding that "the first quarter doesn't matter."
"The world has changed, and the first-quarter results will be fine," he said. "The slowing in the U.S. really started in March, so the focus that the public market investors have is, 'What does the go-forward look like?'"
Season of uncertainty
"Cryptic euphemisms" should be the free space on your 2025 first-quarter earnings call bingo card, Scholes said. This means unspecific, non-granular statements speaking to the instability of the industry right now. But how exactly hotel executives plan on addressing uncertainty is the big question.
First-quarter results should be in line with what was forecast, Scholes said. Hotel demand has already softened for the past few weeks, but how much business leaders admit that is to be determined. Scholes said the companies will do their best "to not volunteer negative information."
But it might be impossible to avoid the uncertainty of financial market activity and stock market fluctuation taking place after U.S. President Donald Trump announced sweeping global tariffs. Both analysts agreed that travel has already been affected.
"The challenge with hotels is they're going to guide to what they see, and what they see is short term," Bellisario said. "There is softening, and they will communicate that."
There are a few metrics that Scholes said won't provide much clarity for investors. Net unit growth will likely be in line with expectations, and, as a lagging indicator, won't be affected until 2026 or 2027, if ever. Group bookings pace changes also might lag, and for now group demand has only softened — fewer hotel rooms booked versus sweeping cancellations.
"We've heard some anecdotal comments about hesitancy around group bookings and some cancellations," Bellisario added.
In general, investors should expect conservative outlooks and tactful skirting around unknown conditions.
"If [executives] say bookings look good, no one's going to believe it," Bellisario said.
Companies to watch
Hilton, which kicks off U.S. hotel earnings on Tuesday, will "set the tone" for what to expect when it comes to outlook for the rest of the year, Scholes said.
"You know the other big wild card is what, if any, companies give guidance," he said.
Public companies have a few options when it comes to forecasting, Scholes said. They could leave their outlook unchanged, make it more conservative or, like United Airlines did on its call, provide dual-guidance benchmarks to investors.
"Whatever Hilton does, I would suspect other companies are probably going to follow Hilton's lead," he said.
Both Bellisario and Scholes pointed to Hyatt Hotels Corp. as another company to keep an eye out for, since the tender offer for its $2.6 billion Playa Hotels & Resorts acquisition expires Friday at 5 p.m. Eastern Standard Time. Bellisario said an update on that is expected by Monday ahead of its earnings call Thursday.
"They've had two poorly received quarters in a row, so expectations are low," Bellisario said of Hyatt.
Hotel brands and owners, specifically real estate investment trusts, will respond differently to current hospitality trends. According to National Travel and Tourism Office data, overseas visitor arrivals into the U.S. in March dropped 11.6% year over year, Tourism Economics reported earlier this month.
With their larger international presence, brands won't be too affected by this particular travel trend.
"For brands, a big portion of their business is international, and international trends have held up relatively well, so that will be a positive offset. The challenges right now are U.S.," Bellisario said.
Scholes said a key aspect is if international travelers aren't coming into the U.S., where are they going instead?
"REITs will be hurt more so by the international inbound slowing down," he said, "but they might pick up some business of Americans who maybe aren't going internationally because they don't want to. I don't know if Americans at this moment are loved so much in international locations."
Another thing companies might discuss on their first-quarter earnings calls is repurchasing stock, Bellisario said.
"I think you'll continue to hear [CEOs] say, 'Yeah, we think our stock is cheap. We're going to keep selling hotels and buying back shares,'" he said.
Sector breakdown
Since leisure travelers book more in advance than business travelers do, Bellisario said that side of the business hasn't yet seen major changes.
"Business travel — that is what's keeping me up at night," Bellisario said. "That is the light switch that goes from on to off — and it can go from on to off quickly."
Once the pendulum swings toward the direction of companies making cuts to their budgets, travel is on the chopping block.
For leisure travel, only time will tell. Scholes explained that the "wealth effect" has been a reliable travel driver, but the status of that trend is in question.
"One thing that's really powered — not just the travel economy, but the U.S. consumer economy — has been the wealthy consumer has been doing well," Scholes said. "If people feel good about their stock portfolios and 401(k)s and investments in their homes, they've been spending a lot of money.
"Well, I don't think anybody's feeling too good right now about their 401(k)s and investments."