THE U.S. HOSPITALITY and travel industry is changing in many respects, but the fundament of people respectfully serving other people is the bedrock on which the business is built.
Jonathan Tisch, chairman and CEO of Loews Hotels & Co., opened the 40th annual NYU International Hospitality Industry Investment Conference on June 4 by reminding the 1,000-plus audience at the Marriott Marquis on Times Square about the age-old tenants of hospitality while highlighting a few modern challenges.
Besides Tisch, other industry leaders shared their takes on what keeps them up at night as well as what investors in the U.S. hotel industry can look forward to.
This month, many companies and analysts have brightened their outlooks on the future business performance of hotels.
Amanda Hite, president and CEO of STR, said, “RevPAR growth exceeded expectations during the first quarter of the year and lifted our projections for 2018 as a whole.” STR in conjunction with Tourism Economics predicts the industry will continue posting record-breaking performance levels through 2019. The only cloud on the horizon is lower occupancy in the fourth quarter as the metric will not compare to that recorded by hotel businesses in the aftermath of last fall’s hurricanes.
STR and Tourism Economics expect RevPAR to increase by 2.9 percent this year and 2.4 percent in 2019. ADR will grow by 2.5 percent in 2018 and 2.3 percent in 2019. But occupancy will remain flat both years, 0.4 percent and 0.1 percent, respectively.
As for supply and demand, the number of rooms will increase by 2 percent in 2018 and 1.9 percent in 2019, while demand is anticipated to grow by 2.4 percent and 2 percent.
CBRE’s forecast is similar. “We continue to be impressed by the ability of the U.S. economy to support demand growth for accommodations away from home,” said R. Mark Woodworth, senior managing director of CBRE Hotels’ Americas Research. “Helped by an expanding economy, first quarter 2018 lodging demand grew at 3 percent, a full 1.1 percentage points greater than anticipated. This sustains 33 consecutive quarters of demand growth, a streak that started in the first quarter of 2010.”
Although the performance outlooks are U.S. centric, Tisch reminded the audience that the travel industry is more global than ever. “Forty years ago, travel was a luxury,” said Tisch, a third-generation hotelier. “Today, travel is democratized and 3.7 billion people will travel this year.” The industry itself is no longer a niche sector. “There are opportunities on the horizon, and that is why I am optimistic about the future.”
Christopher Nassetta, CEO of Hilton Worldwide, said during a panel session on June 4 that a year ago he and others had “quite a bit of trepidation” about the fate of the global economy. “There are still things to worry about, certainly, but everybody feels a lot better than we did a year ago.” He said the industry is in the longest upcycle in its history and it is “untested territory” but business continues to do well. Leisure demand is strong and with tax reform, corporations have invested more in business travel. “Transient business travel last year was flat, and now that’s the big difference. It is translating into more confidence in the industry. Every company – big, medium and small – has more money.”
Arne Sorenson, CEO of Marriott International speaking on the same panel as Nassetta, said, “Tax reform is a powerful event; it drives powerful change and optimism in the U.S. community.” However, that upbeat attitude created by tax reform may be dampened if the U.S. government gets into a trade war with other countries, he said.
Sorenson also noted RevPAR growth, while positive, is still at “anemic levels, and in that kind of environment, depending on your business model, you are working really hard to get profitability, including using digital tools to grow.”
Speaking of the digital realm, Sorenson said Marriott and other hotel companies are in “an absolute war about who owns the customer.” Hotels are competing with OTAs and other digital powerhouses such as Facebook and Amazon on product and service, Sorenson said. “We have disruptors who without a doubt think they share our customers. Make no bones about it, they want to own our customers.”
In his opening presentation, Tisch highlighted four current challenges to the industry: “Intense” global competition; safety and security; aging and inadequate infrastructure; and tourist overcrowding at key destinations.
On global competition, Tisch noted the U.S. lost out on 7.4 million visitors, $32 billion in spending and 100,000 additional jobs over the past year because of the message Trump administration policies are sending to foreign travelers. “America’s message to the world is not very welcoming,” he said. “Other countries such as Germany and China are winning at our expense.” Tisch advocated for the preservation of Brand USA, which markets U.S. travel to the world. The Trump administration and some lawmakers have advocated ending the program, which is funded by fees paid by participating organizations, not tax dollars.
On security, Tisch remembered the car driver in May 2017 who ran over pedestrians in Times Square, killing one and injuring more than 20. “Tourists are targeted all over the world.” He said hospitality leaders can help government representatives come up with effective policies and procedures to improve security. The Trump administration has called for more extreme vetting of visitors to the U.S., but many effective and friendly processes already exist. The best model, Tisch said, is TSA Pre-Check, which performs “rigorous” background checks and creates a more secure, efficient and effective vetting process.
On a June 4 panel, Katy Fallon, executive vice president and global head of corporate affairs for Hilton Worldwide, said biometrics is an effective and rapidly advancing science that can be deployed for safe travel.
Tisch said the topic of aging infrastructure is one he talks about “year after year” but the federal government has failed to address improvements of roads, bridges and airports. On a June 5 panel, Eric Danziger, CEO of Trump Hotels, said airports in other parts of the world feature modern design and accommodations while U.S. airports are far from welcoming. “They are ugly and antiquated,” he said. “Our sense of welcoming is not very strong.”
While Danziger said tourism is alive and well in New York City – “just look out the window” – Tisch noted major destinations are suffering from overcrowding. Local residents are protesting and many are moving out of the markets. “There is a rising tension between locals and tourists,” he said. “It has become a major problem. In Barcelona, the city has banned new hotels.” In the U.S., national parks are dealing with a massive influx of visitors.
Tisch recommended travel marketers, including Brand USA and the U.S. Travel Association, help direct tourists “off the beaten path.” “We can work with local leaders to restore cultural heritage and to spread the tourism dollar. We have a responsibility to preserve destinations, to partner with local communities and leave them better than how we found them. It is time for us as leaders to actually lead.”