CEOs of major travel companies hope market turmoil won’t derail summer rebound
As economic pundits raise fears of a recession, the most powerful names in travel and hospitality are pushing back, pointing to bookings that exemplify a positive image of the American consumer.
“We think this summer is going to be gangbusters for travel,” Marriott CEO Tony Capuano said last week.
Marriott reported an 81% increase in revenue in the first quarter compared to the same quarter a year ago, as more leisure and business travelers hit the road as Covid restrictions eased .
Despite worries about inflation, Expedia CEO Peter Kern said he didn’t see travelers canceling their plans because there was so much pent-up demand after the pandemic.
That demand has pushed the average daily rate at U.S. hotels up 40% from a year ago, according to hotel analytics firm Smith Travel Research.
“We haven’t seen any signs of an impact on consumers in terms of travel spending. We all know there were pent-up savings and underspending during Covid,” Kern told CNBC.
Expedia saw its gross bookings jumped 58% in the first quarter from a year ago, a significant jump but slightly below Wall Street estimates.
As travel rebounds, publicly traded travel giants are starting to spend more on marketing and advertising, setting the stage for a competitive summer.
Kern hosted a travel conference last week in Las Vegas, where the online travel operator unveiled a number of new technology updates that give travelers new data they can use to make smarter choices when booking travel. These enhancements include a price tracker and personalized hotel ratings based on guest reviews.
Reserve credits CEO Glenn Fogel not only joined the chorus of hospitality executives bolstering the resumption of travel as restrictions ease, but also shared a stunning number: gross bookings for this summer are 15% above levels of 2019, before Covid shut down the world.
“Travel is coming back, we’re all excited. We’ve been through a tough time for two and a half years with people not being able to travel the way they wanted to,” Fogel told CNBC.
Could the market, the economy play the spoilsport?
The question now is whether the summer of 2022 will be as strong as CEOs envision it – or whether consumers are rethinking travel due to economic constraints or prolonged stock market volatility.
Market turmoil could potentially hurt the “wealth effect,” Patrick Scholes, lodging and leisure analyst at Truist Securities, told CNBC. “Basically, if we see a sustained bear market, people feel more cautious about their ability to spend. »
Things aren’t so bad yet, thanks in part to the strength of the housing market, he said. “For example, personally, although my stock portfolio is down this year, it’s probably offset by the appreciation in the value of my home,” he added.
Past economic downturns have led to a decline in travel bookings. Data from STR shows that after every economic downturn, Americans have withheld travel, leading to a drop in bookings.
Pebblebrook Hotel Trust Chairman and CEO Jon Bortz doesn’t think history will repeat itself. “There’s so much emotion attached to travel right now… [that] people are not going to cancel a trip to see family for the first time in two years,” he explained.
While higher interest rates could push consumers to opt for cheaper options, executives see no evidence of that yet.
Some industry experts disagree, saying they are starting to see the concerns come to light.
Beyond reservations, the construction of new hotels has fallen in recent months. More than 154,000 rooms were under construction in March, down 15.7% from a year ago, according to STR.
“Construction costs have risen dramatically in part due to wage inflation, supply constraints and higher interest rates,” Jan Freitag, national director of real estate research group CoStar, told CNBC.