NEW YORK — With work and life patterns changing and the effect that has on travel, IHG Hotels & Resorts’ Elie Maalouf said he believes the hotel industry’s rate recovery is sustainable.
While room rates have increased, they haven’t risen at the pace of inflation, and overall travel demand continues to be strong across all segments, Maalouf, CEO of the Americas at IHG, said in a video interview at the NYU International Hospitality Investment Conference.
Leisure demand for hotels has been booming since about the second half of 2020, and now it’s in full bloom, he said. Business travel for groups and meetings is coming back as well, he said, noting that IHG's own Americas conference drew 5,000 attendees in Las Vegas.
“The place was full, not just our conference, but also the entire city was full,” he said.
Still, many corporate travelers haven’t taken trips to see their customers or to meet in large groups, he said. IHG has held numerous conferences around the U.S. in recent weeks that it could not hold over the past few years, and many other corporations in the U.S. are doing the same.
“We said last year that we thought that [the second and third quarter] of this year could have record demand in the Americas, in the United States in particular, and I think the data industry is supporting that's occurring already,” he said.
IHG’s owners and investors are seeing the same demand patterns, not just in occupancy, but in rate that’s exceeding 2019 levels in many markets, Maalouf said. That’s why development activity has recommenced in a healthy manner with first-quarter signings above 2018, the company’s high-water mark for first-quarter signings.
In the company's first-quarter trading update, IHG's Americas division reported nearly 8,000 rooms added to the pipeline.
“Construction is a bit slower as we’ve all heard due to supply chain shortages and due to labor shortages, but that’s getting resolved,” he said. “I think the will to build, the will to grow supply in the industry is here and back and will exhibit itself going forward.”
That interest is ranging across IHG’s brand portfolio, he said. Holiday Inn Express is the powerhouse while extended-stay brands Staybridge Suites and Candlewood Suites are making good progress. Signings for the upscale brands Voco, Kimpton, Indigo and InterContinental are moving at a strong pace as well.
Franchisees are worried about high inflation, the labor shortage, rising interest rates and food shortages, Maalouf said.
“Our owners are taking stock of all these concerns, but they’re also remembering that demand is strong and what they need to do,” he said. “What we need to do to help them is to capture that demand at the highest rate possible with the greatest guest experience possible and still absorb those costs.”
On the development side, that means looking for alternative suppliers for construction, he said. For food and beverage, that means different suppliers and recipes.
IHG deferred property-improvement plans for several years due to the pandemic, and now is the time to get hotels into a condition to earn the rates they’re charging guests, he said. IHG is having constructive talks with owners about how to renovate their hotels, many of which were heavily occupied during the pandemic.
“Now we’re getting heavy occupancy and a lot of use on leisure and non-customary travel, and it’s putting a lot of burden on the properties,” he said. “I think we’re aligned with our hotel owners on the need to refresh the properties and put them in the right condition.”
The company also is working with owners on financing in certain situations, he said. Housekeeping services are being adapted to give guests a choice, not necessarily to save costs but to reflect the shortage in labor, he said.
“We all see the strong demand, we see the strong revenues, we're needing to absorb and find all opportunities and alternatives around the costs so we can still serve the customer,” he said.
For more from IHG's Elie Maalouf, watch the video above.