Hotel CEOs on price gouging, daily housekeeping and mini bottles of shampoo

The CEOs of five of the world’s major hotel chains gathered this week to share their thoughts on the state of the industry — and you’ll probably not be shocked to hear they had a lot to say about inflation, staffing shortages, “bleisure” and a slew of other topics relevant to travelers (and your summer travel plans).

CEOs at the annual NYU International Hospitality Industry Investment Conference at the New York Marriott Marquis in Manhattan included Hilton’s Christopher Nassetta, Mark Hoplamazian of Hyatt, Marriott’s Anthony Capuano, Sébastien Bazin from Accor and Keith Barr from IHG, among others.

Here are just a handful of things TPG learned from the CEOs on how the future of the hotel industry is shaping up as travel returns to more "normal" levels, despite some pandemic-era issues still lurking in the background.

Hotels have their heads above the recession clouds

Economists might be looking ahead and muttering the r-word (recession), but the hotel CEOs don’t appear to be seeing the same dark clouds. If anything, they’re all riding the same outlook wave: Pent-up travel demand is strong enough that it can exceed any dips in the economy, the thinking goes.

"Even in the face of a confluence of challenges — Ukraine, interest rate environment, etc. — most of us are not seeing it in our numbers,” Marriott International CEO Anthony Capuano said. “The volume of pent-up demand is extraordinary."

Don’t book that China trip anytime soon

All the CEOs indicated that Asia Pacific, especially China, is a question mark in light of tighter international travel restrictions remaining across many countries in the region. Even with lockdowns lifting in Beijing and Shanghai, the question of when China will reopen to the rest of the world is a mystery.

“I don’t think the international borders of China will reopen until spring of next year,” IHG CEO Keith Barr predicted.

Hotel bargains? Never heard of them

We don’t have to tell you that room rates in the U.S. soared in recent months (though, we have a few times because it’s such a steep ascent) and are likely to only go higher. Leisure travel led the recovery and continues to do so, but business and group travel also are beginning to pick up recovery momentum — and that means more competition for rooms, giving owners more pricing power.

“My view is we're going to continue to see very robust growth, and we will continue to have great pricing pressure for probably the next year,” Hilton CEO Christopher Nassetta said.

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Price gouging?

You decide: Despite the inflated hotel rates, the hotel top brass all defended their ability to raise rates — and emphasized this was not happening across the board. (Own a resort in Florida? Yay! In San Francisco? Maybe not so fast.)

They also noted their costs are going up like anyone else’s: The prices of labor (up more than 20% in certain parts of the country, per Hyatt CEO Mark Hoplamazian) and materials to keep a property in business are all higher, so that means rates also need to be higher to pay off some of that behind-the-scenes inflation.

“If you look across the broader system, people are not anywhere on average back to [pre-pandemic] profitability levels,” Nassetta said. “If you own a resort in Florida, high five, you are crushing it.”

Labor conundrum

Hotels still have a collective staffing shortage heading into summer: the overall U.S. hospitality labor workforce is still down about 1.3 million jobs from pre-pandemic levels. That’s a massive problem for properties commanding much higher rates than before the pandemic.

“Guests are willing to pay those rates, but along with those rates comes an expectation of service delivery,” Capuano said.

One solution they suggested? Immigration reform to allow more workers into the country to staff up hotels. Of course, everyone on the panels Monday acknowledged that faces a huge headwind in Congress.

Pandemic? What pandemic?

If you look at weekly hotel performance figures of the world’s top three hotel markets — the U.S., Europe and China — it can sometimes seem like there isn’t a pandemic anymore.

Hotel performance in recent weeks in the U.S. consistently remained above 2019 levels while it see-sawed in Europe and remained at roughly half of pre-pandemic performance in China. Hotel owners want the U.S. to lift its coronavirus testing requirements to enter the country, but acknowledge the latest omicron subvariant surge is likely holding back the government from dropping that requirement.

"The latest surge in [COVID-19] is what’s holding us back. I’m not sure the American public cares based on the behavior we’re seeing at our hotels, but I do think the [Biden] administration cares,” Nassettta said.

A new kind of hotel stay

Hoplamazian indicated self-service when it comes to things like food and beverage options, as well as a renewed focus on in-room dining, is a major shift at hotels during the pandemic that is likely to stay.

Capuano and Bazin noted a blended trip combining business and leisure — or “bleisure” — is the new normal at their hotels.

Contactless entry and opt-in housekeeping will be pandemic legacies at Hilton, Nassetta said.

Hotels aren't that full

Hotels might say they are full, but in reality, they have just sold out the rooms they have enough staff to manage.

Accor CEO Sébastien Bazin noted that several of his company’s hotels are leaving a floor or two empty because they don’t have enough staff to handle a truly full house.

Sayonara, mini bottles of shampoo

The hotel industry is all about sustainability these days, and one of the most obvious changes is to toiletries found in the guest rooms.

Accor, for example, announced it will eliminate all single-use plastics by the end of this year. That means the wall-mounted soap and shampoo dispensers are the way of the future.

The hotel industry doesn't have fair-weather investors

Capuano indicated the company’s roughly 500,000-room development pipeline is strong and has historically low levels of fallout — even after the worst economic hit seen in the history of the business.

“Our partners don’t dabble in hospitality and jump in and out; they are committed, long-term investors to this industry,” he added.

Luxury liftoff

The pandemic wasn’t an economic boom for everyone, but there was an extraordinary level of wealth created for some of the world’s wealthiest people. That means people have even more money to spend on the highest tier of luxury travel.

Marriott’s luxury portfolio accounts for 10% of the company’s room count, for example, but 25% of the fees collected from owners. “It's a powerful driver of the loyalty program, so you'll continue to see us accelerate our growth from luxury,” Capuano said.

The towel drama continues

Last year at the conference, Hilton CEO Christopher Nassetta posed the question: “When you’re at home, do you change your sheets every day? Do you wash your towels every day? … No.”

This year, he doubled down on the notion that if you use your towels multiple times at home, why wouldn’t you do the same at a hotel?

We answered that question then with the obvious answer: Hotels are not our homes — and now, as hotel prices are skyrocketing, we’re doubling down on it.

Gas prices still aren’t a massive worry

Hotel executives were adamant during the recent earnings season that rising gas prices wouldn’t impede the industry's recovery. But that was when gas prices were just crossing the $4 a gallon average. That average is now above $5 and still trending upward, so something has to give.

So, why aren't people skipping vacation to fill up the car?

CEOs on Monday defended their earlier stance — even if analysts say otherwise — and noted their brand mix generally attracts travelers who can afford the inflation.

“Looking at our daily stats, [a demand fallback is] certainly not showing up in any of the data,” Nassetta said.

Related: 5 ways to save at the pump

Opt-in housekeeping isn't necessarily just for budget stays

The future outlook on housekeeping appears to be moving away from daily service at many hotel brands, but most companies indicated over the last year that daily service wouldn’t disappear at luxury brands.

Nassetta previously said Hilton’s opt-in approach gives guests choice in whether they want someone in their room — but also noted the company’s luxury hotels (as well as most hotels overseas) still have daily housekeeping.

That said, don’t rule out luxury hotels from getting the opt-in treatment: “It’s also true that same dimension of choice applies to luxury travelers, too,” Hoplamazian said. “My view is we need to keep our ears open as to what’s important to them. Some of our luxury travelers don’t want daily housekeeping.”

Alternate lodging wants to be mainstream

As more and more hospitality companies enter the “alternative” lodging space (like Marriott with Homes and Villas in 2019 and Mandarin Oriental’s announcement of luxury home rentals earlier this year), the major brands are trying to position themselves as trusted “institutions.”

The idea is that you’ll know exactly what to expect ahead of time and have better support from these brands and their management partners if something goes wrong compared to regular homeowners on Airbnb.