While acknowledging something of a slowdown in recent months, a handful of high-level executives from prominent management firms remained cautiously optimistic about the industry’s growth prospects going forward during a panel discussion at the recently concluded BITAC Independent event.
Taking place at the JW Marriott Marco Island Beach Resort in Marco Island, FL, the event included a panel discussion entitled “View From The Top: Company Leaders Weigh In On Key Industry Issues For ’22 And Beyond.” During the discussion the panelists offered their perspective on a number of factors impacting the industry, including the economy, a potential group business recovery, ongoing labor concerns and rate traction.
Mike Nixon, chief development officer and president, Expotel Hospitality, pointed out there has been “a good hold in occupancy and ADR” and that “people are generally more optimistic about the future” in hospitality. However, he did acknowledge some challenges do exist.
“I think we do have some headwinds, but generally speaking I see this as something that we’re going to get through without a deep commitment on our part as hoteliers. I think it’ll be a shallower trough than we’ve seen in the past,” he said.
Chris Green, divisional president, Remington Hotels, pointed out the industry was “off to the races” in the first part of the year before trailing off in Q2.
“Memorial Day weekend is where it started slowing down a little bit. I think that’s where you’ve seen the inflection point of the economy creating a little bit of headwind just with regards to the cost of doing things. So we’re backing up just a hair heading into the fall, but we’re still overall ahead of where we thought we were going to be two years ago looking at the forward-looking forecasts,” he said.
Lovell Casiero, SVP, sales and marketing, PM Hotel Group, acknowledged “a little bit of a slowdown in Q1 across the industry” as a result of the Omicron variant of COVID. She also pointed out that while group bookings continue to gain momentum overall, business transient, in particular, is still lagging. She noted that business transient travel is expected to end the year at some 56 percent compared to 2019 levels.
“Within our portfolio group is doing really well, but not the mid-week group. We’re hopeful that when the fall comes and into next year we’ll see that [return]. Specifically on the business transient traveler, the reality is we need them to get back in their offices and that hasn’t happened yet,” she said.
Tom Luersen, president, CoralTree Hospitality, touted the long-term prospects for group business while acknowledging it’s still a struggle for some major city locations.
“The group business is strong. From the second-half of ‘22 all the way through to ‘25 looks very, very promising and rates are not yielding yet, which is a positive thing. We’ve certainly got some urban markets that are challenged, such as the northeast, Chicago, New York and others are slower to recover, largely due to the office market and IBT travel, but for the most part they’ve got displaced with smart business, which is leisure and unconventional transient business. It’s made it a really promising year for us,” he said.
Casiero, meanwhile, raised another key concern for major metropolitan locations in the U.S., particularly as it relates to the approaching mid-term elections.
“Hopefully the people that get in office will help with the crime issues that we’re having because the center city hotels are still suffering. When you think about the buyer they’re looking for safety and security. So the politicians getting into office can help address some of the crime issues that we’ve seen in Philadelphia, Washington, DC, New York, Portland, and places like that,” she said.
Luersen cited a number of key macro-economic issues that bear watching, such as the cost of health care, labor and rising interest rates, as well as international travel, among other things.
“I think it’ll be an important next 24 months to watch what happens. We’re in an unprecedented time. This was a long cycle, it was 12 years, typically cycles are seven and eight years. I don’t think you’re going to see these big Vs and different alphabet soup that the economists talk about, but I think you’re going to see it’s really about money and labor markets,” said Luersen.
Green agreed and elaborated on the impact of labor.
“We’ve seen 18 months in a row of month-over-month wage growth in the hospitality industry. For a long time being as cost conscious as we were, we were not doing the right thing on the wage side and that’s come back to bite us. It’s the biggest impact currently to the change in our operating profits at the hotels. While we’re doing great on rate, wage pressure is creating a tremendous downflow on the profit side,” he said.
Nixon also weighed in on the economic headwinds.
“We’re seeing some weird things in our financial world. We’re seeing a rise in interest rates in the middle of a recession, which doesn’t happen. The rising interest rates are related to the inflation rate so that’s the right thing to do, but a weird thing to do in a recession so how is that going to affect us? I’m not sure yet,” he said.
Nixon, however, praised the industry for keeping rates up and further reinforced his optimism.
“We saw in 2007 everybody driving rate to the bottom trying to get their fair share. I think we have maybe a smarter outlook as an industry now. I think what we’re going to see is that really the hospitality industry is going to do well even in the middle of a recession,” he concluded.