There are plenty of opinion pieces available every December that describe the next year’s industry trends in everything from hotel design to market segment performance, the year’s ”hot” travel destinations and which new wellness therapies will be in strongest demand. This year, however, soon after the travel magazines featured the best hotels of the year in their summer issues, early looks at trends for 2023 began to appear. These early articles were a hint that travelers’ preferences and behaviors were changing too quickly to be captured by the annual trend snapshots of the past.
While these trends are always general forecasts, they are a good reminder that as an industry, the need for decision-supporting data is strongest at times like now, when new products and technologies are introduced, a new generation is coming of age, and demand growth for many of the industry’s services and products is changing direction, either rebounding from weakness in demand caused by the pandemic, or shrinking in demand as consumers are resuming active lives and spending less time at home.
We learned in October that business travel in the United States was recovering in earnest when we interpreted strong September results. In November, we became more confident about the group and meeting market, as October results for the segment were 21% higher than September’s.
We think that a retreat in luxury resort average daily rate levels is coming, but so far, only a seasonal softening of demand is appearing in weekly results.
All of this is to say that despite having more hotel and consumer data than ever, our industry forecasting during times of change and uncertainty is tentative at best, until confirmed by looking in the rear-view mirror. And unfortunately, the forecasts are for change and uncertainty to intensify in the coming years.
What we have seen through the current business cycle is analogous to the various levels of intensity with which doctors care for cardiac patients. As long as there are no major events, an annual stress test and periodic monitoring of medications are sufficient and justified standards of care. But following a heart attack or stroke, the patient may be enrolled in a cardiac rehab program, be temporarily prescribed stronger blood-thinning medications, and be monitored on a quarterly, rather than annual, basis.
During 2020, in the depths of the pandemic, MMGY published its “traveler pulse” results eleven times, which were based on bi-weekly and monthly surveys of travelers regarding the factors that would most likely influence when and how they might resume traveling. STR is still issuing weekly Market Recovery Monitor reports. The increase in data reporting supported the hope that industry players would be able to detect the earliest hints of behavior changes among and within the principal market segments so that strategic responses could be quickly implemented.
How valuable is it to hospitality and wellness service providers and to product manufacturers to more accurately predict the influencers of demand that drive their core customer segments? To Peloton, the maker of app-enabled exercise bikes and treadmills, it has been worth roughly 95% of the firm’s market capitalization since early 2021, when its stock price reached a high of $167.42 per share. As of mid-November 2022, the stock was trading in the $10 per share range.
We have watched the home exercise equipment and the gym and health club membership businesses duke it out since early 2021 over whether more people would go back to patronizing their clubs and group classes “IRL” for the social aspects of fitness, or whether they would remain loyal to their new habits of sweating in the privacy of their homes while virtually competing with friends or strangers via any number of fitness apps that were downloaded 400 million times last year.
With record sales in 2020, Peloton was focused on expanding production capacity to support a larger customer base. However, by early 2022, inventories were piling up and the company responded by slashing prices, resulting in negative operating margins and further damaging business results. This happened as consumers were increasingly interested in returning to gyms to re-engage socially.
As it turns out, Peloton was focused on building future capacity that could meet the demands of a past sales peak, while the real-time sales data collection and analysis functions apparently were not processed quickly enough to impact a course correction in business strategy.
For hotel room night demand, we are fortunate that the most recent historical data can tell us whether or not business travel is still lagging or is continuing to climb.
The promise of big data and artificial intelligence should be of some help in refining forecasting in the future. However, inflection points, those times in which demand growth changes from positive to negative or vice versa, will likely remain the most challenging periods for forecasters and the least reliable times for supporting business-case decisions with compelling market data.
Andrew Cohan, ISHC, is managing director of Horwath HTL and based in Miami.
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