While acknowledging the overall impact of the pandemic, IHG’s Elie Maalouf expressed a heavy dose of optimism suggesting that although the ‘golden age of travel’ might be over the lodging industry could be entering a diamond age.
Maalouf, CEO of the Americas, IHG Hotels & Resorts, weighed in on a number of key industry issues, as well as current conditions for IHG, in an opening day ALIS (Americas Lodging Investment Summit) session entitled “CEO Center Stage: On The Road Again.”
Maalouf underscored some of the reasons for his optimism.
“COVID really disrupted our industry, but it also validated it. It validated the fact that travel for pleasure and profit is irrepressible…We’re getting through, people want to come together. Demand is coming back, rates are at record [levels], and capital is flowing back in the industry. Yes COVID may have ended the golden age of travel, but the diamond age is just beginning,” he said.
The IHG executive maintained that a big reason for his optimism is the return of business travel, which he sees as inevitable.
“It’s not just leisure travel, which is just on a tear for quite some time now, it’s also business travel recovering. Here’s what business travelers won’t tell you, they love to travel…they’re addicted to it. So millions of business travelers are going to be coming back. So for 2022, I would say between spring break and Labor Day we can have record performance in this industry,” he said.
Maalouf acknowledged the labor crisis the industry is facing and suggested that the hotels will have to adjust to the new normal.
“The fact is there will not be enough people today or tomorrow to provide the services, not just in our industry but other industries, that we used to provide. So in all those segments [besides luxury] we’re going to change services, whether it’s housekeeping or F&B or other amenities. I think as guests are returning they’re willing to adapt and accept it on one condition and that is as we change the services that we still execute them exceptionally well and consistently. So if housekeeping goes from a daily stayover to just a daily touch, fine, we’ve got to communicate it properly and execute it properly. You can get this to the future, but luxury lifestyle has to be luxury lifestyle. In the other segments we’re going to this scenario where hotels have a good return, guests will still pay the previous rates and maybe even more, as long as we maintain that trust of delivering the revised services every time,” he said.
When asked about how the industry looks as in investment, Maalouf pointed to a number of fundamentals that tell a positive story.
“Hotel asset valuations, based on the transaction data we see, have generally recovered to 2019 and in some cases higher. RevPAR in 2022 is projected to be close to or to 2019 already. Supply will have slower growth for a few years, but demand is higher and rates are higher. It’s not just occupancy that has recovered, but rates have fully recovered and exceeded 2019, which people thought would take decades to return. So if you’re a hotel investor and you’re looking to develop and own for say 5 years I wouldn’t say the conditions are perfect, but I would say the fundamentals are about as good as they’ve been for some time,” he concluded.