Recession And Recovery?
Lodging Conference Panel Points To Positive Signs For Industry Amid Economic Challenges
The impact of the broader macro economy and ongoing recession on the lodging industry was the focus of a panel of hospitality leaders, most of whom are not expecting a meaningful turnaround until some point in 2023.
Speaking during the general session entitled “A View From The Top” at The Lodging Conference in Phoenix earlier this week, the executives—who ranged from owner/operators to brands and research firms—offered their perspective on everything from the war in the Ukraine to the much anticipated return of the business traveler.
Mit Shah, CEO, Noble Investment Group, underscored how the overall outlook has taken a turn for the worse in recent months following positive second quarter earnings reports.
“You saw company after company from American Express to Hilton, Marriott and other companies in our space all having their guidance raised thinking that this is going to have a run to it. I believe we’re all kind of feeling the impact of dollars coming into the system and trying to get soaked back up. So the real question is can we move rate and pricing power faster than the other kinds of spending slows down and interest rates go up? I think we feel a lot differently about it than we did six months ago,” he said.
Gilda Perez-Alvarado, Global CEO, JLL Hotels & Hospitality, also acknowledged the current economic recession has impacted the company’s forecasting and outlook.
“100 percent and it’s not just domestic economic policy, but global right now. That’s the biggest risk we’re all facing at the moment,” she insisted.
Meanwhile, Arash Azarbarzin, CEO, Highgate, was asked how long he expects the current economic recession to last?
“Our estimates and our thinking is it will carry through fourth quarter and we’re looking to see a turnaround in the first quarter of next year. The travel on the leisure side of our business and that crazy max spending has slowed down. The question is, is corporate travel going to come back this quarter or next quarter? If the corporate travel comes back we’ll ride that wave into next year. We haven’t seen any mutations or slowdowns yet, but we haven’t seen that upshot that we’re looking for either. I guess my hope is by next quarter,” he noted.
Michael Deitemeyer, president/CEO, Aimbridge Hospitality, reinforced the point.
“The leisure or ‘bleisure’ has carried us because business travel is coming back much slower. I was optimistic post-Labor Day about what would happen and it really hasn’t ticked up at all. So we’re cautiously optimistic that we can push through this with the leisure continuing to outpace [group business],” he stated.
Justin Knight, CEO, Apple Hospitality REIT, Inc., emphasized the unique nature of the current economic situation.
“I interact with investors regularly and this is the first time in 25 years that I’ve talked about recovery and recession at the same time. I think we have incredibly interesting dynamics for our industry right now, because we are I think on margin continuing to see recovery in our business despite the fact that when you look at the macro numbers for the overall economy there are some troubling areas. I think it will be interesting to see how things play out next year. I think I’m probably in the camp that from a macro standpoint we push into next year before we kind of get through what we’re dealing with right now,” he said.
Knight went on to sound a positive note for hospitality. “When you think about the way this past year played out, January and February were particularly soft. So as we move into January and February this year, at least for our industry on a year-over-year basis we should be seeing meaningful growth.”
The extended-stay segment, meanwhile, unlike many other segments, has continued to experience meaningful growth in recent years. According to Greg Jucean, president/CEO, Extended Stay America, “it’s a great time to be in extended stay; we’ve rode out the last couple of years fairly well.”
Jucean, nevertheless, thinks for the industry to be “where we need to be” it will likely be Q3 or Q4 of next year.
“I think in July things paused a bit with a lot of corporations because they’re uncertain right now. While I do think consumer spending will go up overall people are just taking a measured approach with hiring. Things tend to take longer than we hope in our industry sometimes,” he added.
When asked about their chief concern going forward, the majority of the panel pointed to inflation over another pandemic, 2022 elections and global conflict. However, Knight and Perez-Alvarado both explained why they opted for the latter.
“I think global conflict has the greatest potential to have long-term negative ramifications,” said Knight.
“It’s a root cause for inflation if you think about it. And it will dictate how we look at elections in 2022 and it will impact our ability to answer accordingly for anther pandemic,” said Perez-Alvarado.