Hotel CEOs on summer rates, recession risks and how AI can affect future travel

The top executives of the world's largest hotel companies and ownership groups convened in New York City earlier this month for New York University's International Hospitality Industry Investment Conference.

It might be an all-business kind of crowd, but the conversations had within these walls heavily affect how your next vacation might go. New brands are launched, pricing strategy gets debated, and there are even tidbits that might have you debating your hotel loyalty strategy.

CEOs at the annual conference included Keith Barr from IHG Hotels & Resorts (who is retiring at the end of this month), Sébastien Bazin from Accor, Marriott's Anthony Capuano, Mark Hoplamazian of Hyatt, Leslie Hale of RLJ Lodging Trust and Hilton's Christopher Nassetta, among others.

TPG was on the scene, and we walked away with key takeaways that can help you plan your next vacation and map out where (and how) you want to build loyalty points.

What recession?

While there might be daily economic banter on whether rising interest rates will eventually tip the U.S. into a recession, those fears don't appear to be shared by major hotel conglomerate executives.

Sure, they recognize there are plenty of reasons to be concerned with the economy. But demographic spending pattern shifts coupled with the ongoing recovery of sectors like business, group and international travel have executives and even economists upbeat on the idea the hotel sector might sidestep a recession that otherwise weighs heavily on the broader commercial real estate sector.

"It was proven that the phenomenon we saw pre-pandemic of shifts of spending away from hard goods towards experiences has expanded beyond younger generations and [now is seen] across [all] generations, and we don't really see any slowdown," Capuano said during a panel at the NYU conference. "Even in the face of some pretty troubling economic head winds, forward bookings look pretty compelling."

"Business is really great. I mean, this is an industry that faced more head winds during the pandemic than probably any other and probably now has more tail winds now than any other industry, especially with the global recovery," Barr added.

Mr & Mrs Smith double dip?

Everyone (present company included) figured Hyatt's gain was IHG's loss when Hyatt announced earlier this year it was buying the Mr & Mrs Smith luxury and boutique hotel booking platform. IHG's website now indicates the partnership is officially coming to an end, but don't rule out Mr & Mrs Smith having relationships with select IHG brands (and others) just because of the new Hyatt ownership.

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While the overarching IHG deal might be nixed, IHG's Six Senses ultraluxury brand has three properties continuing to list with Mr & Mrs Smith.

"The [Mr & Mrs Smith] platform is going to continue to run as a separate business. Like we did with [Apple Leisure Group], it's going to operate as a separate enterprise within Hyatt, so I don't rule out any ongoing relationships with other organizations," Hyatt CEO Mark Hoplamazian said during a press conference at the NYU event.

Europe is eye-wateringly expensive

No, it's not just you thinking the price of your European summer vacation is more expensive than ever. South Beach is so last season, as Americans are flocking overseas now that most countries have unrestricted travel following the dropping of pandemic mitigation measures.

Accor, which has the largest European footprint of any major hotel company, reported hotel rates in Paris are 50% above 2019 levels while those in London are 30% higher. Even Berlin hotel rates are 15% above 2019. Some of that is a long time coming, according to Accor's CEO.

"We've been able to restate the rate of a room," Bazin said of the entire industry's logic on hotel pricing. "For 20 years, we were not daring enough until the pandemic. All of a sudden, each of us, we kind of actually moved price."

Bazin also indicated there's an opportunity to go further into the ultraluxury sector with hotel development.

"For the ultraluxury hotels, half of the people booking a room are not asking for the price. They are saying give me the best suite," He added. "So one of the things we need to show is a mixed element of suites. We do not have enough suites."

Budget blowout

As we've been reporting, budget brands were the big talking point at the NYU conference. Marriott, Hilton and Hyatt all launched various versions of an extended-stay brand in recent weeks, and you can read TPG's rundown of the main loyalty benefit differences of the brands.

One main sticking point in all this development? Hyatt is the only one of the three to have a confirmed brand name with its Hyatt Studios. That could be a sticking point, as Marriott looks for an official name for its MidX Studios (working title) and Hilton for Project H3 (another working title).

"By the way, on the names, I just want to mention to you guys that Studios is taken," Hoplamazian said with a laugh to Capuano and Nassetta during a CEO roundtable.

So why is everyone getting into this space? Nassetta indicated company leaders see extended-stay hotels as a $300 billion market.

AI and your future hotel stay

Yes, artificial intelligence will eventually affect how you travel. But it's likely not going to do much during your actual hotel stay, if you can buy what the hotel CEOs were saying this month.

"AI, certainly if deployed correctly, has the ability to further remove friction, particularly from the search process," Capuano said.

But the hotel leaders didn't appear ready to turn the check-in desk into something out of "Westworld."

"I don't want any robot to welcome a guest in an Accor hotel," Bazin said. "That will never exist."

However, Hilton's Nassetta indicated there are ways to use AI to get ahead of guest expectations and better communicate with them during a stay. Who doesn't get a little miffed when today's version of a digital concierge drops the ball and doesn't help out right away?

"There are a whole lot of ways that big data and AI can enable our team members to do a heck of a lot better job serving very specific needs and a fully integrated basis in the moment," Nassetta said. "There are game-changing opportunities."

All eyes on India

For years, China has been the hotel development darling, and the country is often cited as a key market for filling up hotel rooms — both domestically as well as abroad when Chinese travelers take to the friendly skies for a trip. But the CEO panel this month instead pointed to India as a major source of future travel demand.

"When you think about the power of the Chinese outbound traveler with that rising middle class and the wealth creation there, India is going through that same evolution," Barr said. "On that population size, you should have a significant outbound travel impact on the industry in the years to come."

"People tend to forget that India alone has probably 500 million people in the new emerging middle class who never really traveled abroad," Bazin added. "Those 500 million people would go farther and away [to places like] Southeast Asia [and the] Middle East. If you get 10, 20, 30 ... [or even] 70 million of them? It's a game changer for the industry. So watch out for India."

Hiring picks up — Does that mean daily housekeeping?

Another swift change from even a year ago is the outlook on hotel hiring. Even before the pandemic, the hotel industry faced a massive labor shortage problem. It's still not perfect — the leisure and hospitality sector's job count is still down a little more than 2% from pre-pandemic levels — but CEOs note the pandemic ushered in a different outlook on the guest experience.

A restaffed hotel of 2023 looks different than one in 2019 (i.e., it doesn't require as many workers). That shows up in areas like on-site dining: There are now more grab-and-go stations at hotels instead of restaurants or breakfast bars requiring more workers.

While each of the hotel CEOs noted hiring is on the rise and hotels are getting back to normal staffing, there's still evidence of a shallower labor pool. More than 102,000 housekeeping jobs went away during the pandemic, according to U.S. Department of Labor data used in a MarketWatch report.

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