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Hilton CEO’s 2023 outlook: Don’t expect any hotel bargains, even in a recession

Oct. 27, 2022
4 min read
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Hilton CEO’s 2023 outlook: Don’t expect any hotel bargains, even in a recession
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If you think a recession might usher in a wave of hotel bargains, don’t check out the Hilton reservations system over the next year or so.

Hilton early Wednesday morning reported a $346 million profit for the third quarter. However, there was a recurring theme on an investor call later in the day: Will this be as good as it gets in terms of profitability? There is debate on whether a recession is just around the corner, after all.

Investor call details

Hilton CEO Christopher Nassetta indicated there is still plenty of growth and recovery momentum at his company. International travel is still flickering back to life in parts of the world, like Asia, and there is a revival in corporate and group travel demand. That means hotel rates are likely to continue their ascent — great news for hotel owners but not exactly music to travelers' wallets.

“Despite near-term macro headwinds, we're not seeing any signs that fundamentals are weakening,” Nassetta said on the investor call. “Rising demand, coupled with historically low industry supply growth, should continue to drive strong pricing power.”

While the pandemic may have sparked higher-than-normal levels of domestic leisure travel demand, it also reduced the willingness of lenders to sign off on financing new hotel projects. That reduction in the supply of new hotel rooms hitting the market means less competition and a greater ability for hotel owners of existing properties to raise rates.

Even with extraordinary levels of travel demand over the summer, there isn’t some major wave of new hotels being built. Blame part of that on supply chain woes that have slowed down the construction timelines, even on projects that did manage to pull together bank approval. Don’t expect any of that to change next year.

“The laws of economics are alive and well,” Nassetta said. “Supply is at historically low levels, and it's going to stay there for a while given everything that's going on from COVID and now into the macro concerns.”

Welcome back, business travelers

It’s more than just a slower rate of hotel openings keeping nightly rates high in the face of a recession.

Nassetta, as well as Hilton’s chief financial officer Kevin Jacobs, noted a strong revival in business and group travel demand over the summer and into fall. It’s unlikely that will dissipate heading into next year. More demand streams on top of leisure travelers should lead to even higher hotel rates.

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However, the company doesn’t appear too concerned about the idea of going too high with nightly rates. Hilton still estimates consumers have $2.4 trillion in excess savings accrued during the pandemic. Theoretically, that’s a major tailwind for a hotel company like Hilton.

“Demand is picking up,” Nassetta said. “Why is it picking up? It's picking up because the segments remain strong…People still have the desire and a lot of disposable income and savings to spend [as well as] more flexibility and time. [With] business transient, you have a huge amount of pent-up demand that's accrued as well as in the meetings and events segment. You [also] have the international markets opening up.”

The Hilton CEO sees additional growth opportunities in this area because consumer behavior shows more people are willing to pay extra for experiences rather than physical goods. That, coupled with recent-to-recover demand sources like corporate travel, should give the company and the broader hotel industry more durability amid economic uncertainty.

Nassetta isn’t ignoring signs of the global economy slowing down, though. Governments around the world are raising interest rates in an effort to bring down inflation. Still, he sees reason to be optimistic about Hilton's position in 2023.

“We have these tailwinds like spending more on experiences, [revived] international travel, pent-up demand and then just incremental demand associated with people having to run their businesses [and] gather [for] meetings and events of all sorts — whether it's social or business,” he said. “At the moment, those tailwinds are stronger than the headwinds, and I would say meaningfully stronger, which is why we would continue to recover. We continue to have pricing power.”

How long can it last? Maybe longer than people expect in the face of a global recession.

“My own belief is we have enough wind in our sails to go for a while,” Nassetta added.

Featured image by HILTON
Editorial disclaimer: Opinions expressed here are the author’s alone, not those of any bank, credit card issuer, airline or hotel chain, and have not been reviewed, approved or otherwise endorsed by any of these entities.

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Apply for American Express® Gold Card
at American Express's secure site
Terms & restrictions apply. See rates & fees
Best for the well-traveled foodie
TPG Editor‘s Rating
Card Rating is based on the opinion of TPG‘s editors and is not influenced by the card issuer.
4 / 5
Go to review

Rewards Rate

4XEarn 4X Membership Rewards® Points at Restaurants, plus takeout and delivery in the U.S.
4XEarn 4X Membership Rewards® points at U.S. supermarkets (on up to $25,000 per calendar year in purchases, then 1X).
3XEarn 3X Membership Rewards® points on flights booked directly with airlines or on amextravel.com.
  • Intro Offer
    Earn 60,000 Membership Rewards® points after you spend $4,000 on eligible purchases with your new Card within the first 6 months of Card Membership.

    60,000 bonus points
  • Annual Fee

    $250
  • Recommended Credit
    Credit ranges are a variation of FICO© Score 8, one of many types of credit scores lenders may use when considering your credit card application.

    670-850
    Excellent/Good

Why We Chose It

There's a lot to love about the Amex Gold card. It's been a fan favorite during the pandemic because of its fantastic rewards rate on restaurants (that includes takeout and delivery in the U.S.!) and U.S. supermarkets. If you're hitting the skies soon, you'll also earn bonus points on travel. Paired with up to $120 in Uber Cash (for U.S. Uber rides or Uber Eats orders) and up to $120 in annual dining statement credits at eligible partners, there's no reason that the foodie shouldn't add this card to their wallet. Enrollment required.

Pros

  • 4x on dining at restaurants and U.S. supermarkets (on the first $25,000 in purchases per calendar year; then 1x)
  • 3x on flights booked directly with the airline or with Amex Travel
  • Welcome bonus of 60,000 points after spending $4,000 in the first six months

Cons

  • Weak on travel outside of flights and everyday spending bonus categories
  • Not as useful for those living outside the U.S.
  • Some may have trouble using Uber/food credits
  • Few travel perks and protections
  • Earn 60,000 Membership Rewards® points after you spend $4,000 on eligible purchases with your new Card within the first 6 months of Card Membership.
  • Earn 4X Membership Rewards® Points at Restaurants, plus takeout and delivery in the U.S., and earn 4X Membership Rewards® points at U.S. supermarkets (on up to $25,000 per calendar year in purchases, then 1X).
  • Earn 3X Membership Rewards® points on flights booked directly with airlines or on amextravel.com.
  • $120 Uber Cash on Gold: Add your Gold Card to your Uber account and each month automatically get $10 in Uber Cash for Uber Eats orders or Uber rides in the U.S., totaling up to $120 per year.
  • $120 Dining Credit: Satisfy your cravings and earn up to $10 in statement credits monthly when you pay with the American Express® Gold Card at Grubhub, The Cheesecake Factory, Goldbelly, Wine.com, Milk Bar and select Shake Shack locations. Enrollment required.
  • Choose the color that suits your style. Gold or Rose Gold.
  • No Foreign Transaction Fees.
  • Annual Fee is $250.
  • Terms Apply.
  • See Rates & Fees