PHOENIX — It’s been the year of normalization for the hotel industry in 2023 as U.S. leisure travel demand has evened out close to pre-pandemic levels and business and group travel continue to climb back. Hotel executives are expecting more of the same in 2024 but acknowledge there are some risks that can throw trends off course.
During the “From the CEO’s Perspective” panel at The Lodging Conference 2023, JLL Hotels & Hospitality Group Americas CEO Kevin Davis said the industry has a pretty good idea of how the two main variables over the past year, inflation and the economy, will play out. There are still concerns with financials, though.
“The challenge is the capital markets are so dislocated and the cost of financing is high. There’s a reconciliation, rationalization that has to happen around asset classes,” he said. “I think that’s what you’re going to see over the course of 2024 ... actually a lot more transaction activity as a result of that.”
There is debt available in the transaction environment, but it’s really expensive, BRE Hotels & Resorts President and CEO Joseph Berger said. Davis said debt markets are “relatively good,” and he expects more competition in the hospitality space.
“Look, nobody likes borrowing at 8%, 9%, 10%. But if you look at where the markets were, say, six months ago, nine months ago, you see credit spreads come from 50 to 100 basis points,” he said. “We’ve seen a lot more liquidity return to the market.”
Outrigger Hospitality President and CEO Jeff Wagoner said whether a recession or an economic slowdown occurs, it isn’t likely to have a large effect on hotel business.
“We are seeing some slowing right now on travel. I think we’re all seeing that in different segments across the business but not in a material way,” he said. “For the most part, there’s been some stabilization in a lot of different segments.
“Now, there’s still room for growth in some of the segments. Leisure has been very strong and continues to be strong, business travel is coming back, group is coming back … travel is coming back for all of us.”
One uncertainty that remains heading into 2024 is international inbound travel. Wagoner said the return of travel from Asian countries such as Japan and China is still largely unknown.
In Hawaii, inbound travel from Japan is at only 40% of pre-pandemic levels despite the country opening up its borders for travel more than a year ago, he said. Russia’s ongoing invasion of Ukraine has also blocked off some key sources of international travel.
“These are massive geo sources for destinations across the globe, and they’re either not open or just trickling back into our industry,” he said.
The openings of these countries to travel is a source of optimism on the inbound demand side, but that also could be adding extra competition, Wagoner said.
“That is what could be somewhat disruptive as we get into 2024. We’re all feeling pretty good about most occupancies [coming] back, but what happens when the entire world is back with the type of travel they had pre-2019?” he said. “It’s still an unknown, but I think that it’s going to be a positive force once we have a more stabilized environment.”
Executive Leadership
Hotel executives have had to not only be flexible and adapt to shifts in demand patterns and business dynamics over the past few years, but they’ve also had to adjust their leadership styles to cultivate and match the expectations of up-and-coming generations.
Berger said younger managers today want to move up the ranks as quickly as possible. Instead of rushing this key developmental phase in their careers, it’s on the executive leaders to hammer home the basics and show them the path up the ladder.
“These younger managers seem to be in such a hurry, but the better you are at your job, the more you understand the real fundamentals of your job, the more promotable you’re going to be,” he said. “It’s incumbent on our younger managers to understand that, and it’s important for us today to really take the time to lay out a roadmap on how you develop through the system and the skills you have to have to move on. I think they’re just asking for more clarity than we were ever used to.”
Another shift in leadership has been toward more empathetic styles than results-driven. Wagoner said if he didn’t lead with empathy toward his employees during the brunt of the pandemic or the wildfires in Maui, he would’ve lost all respect from his team.
“If you weren’t an empathetic leader, you wouldn’t have survived that situation as a leader, you would’ve been run out of town,” he said. “Leadership today is not about my way or the highway; it’s about let’s work together, let’s strategize, let’s collaborate, let’s find solutions as a team.”
Davis said younger generations today are “much more cynical” and appreciate empathy paired with authenticity. Instead of attempting to field questions with answers that might not be accurate, he said it’s better to be upfront when there needs to be more research.
“If you can provide them with a real sense of who you are as a leader, what your strategy is, but also a willingness to admit that you don’t know, I think our employees really appreciate that,” he said.
AAHOA President and CEO Laura Lee Blake said diversity, equity and inclusion efforts have led to more diversity in leadership roles, but the industry still has work to do to ensure that these leaders, especially women, feel empowered in their roles.
“Studies are talking about [how] you can train them and you can put them in leadership roles, but if they do not identify as the leader, then they really struggle,” she said. “Especially if you’re mentoring women … help them determine when they have authority, when they should speak up. Make it every meeting that they’re in, give them an opportunity to present to the group so they get comfortable speaking out and being presenters … make sure they are given authority to make decisions.”
Beyond being there for employees, the panelists said they’ve had to make sure they carve out enough personal time for themselves outside of work. Being an executive for a major hotel company is a huge time commitment that requires attention 365 days a year, so finding that time isn’t always easy.
Greg Juceam, president and CEO of Extended Stay America, said coming up in the industry, he heard stories of executives regretting not spending more time with their families and decided to make sure he was there for his.
“For me personally, I made a commitment that when I had school-age kids that I would only do four things that would be the priority: I would eat, sleep, work and I’d be there for those milestones,” he said.