5 things hotel CEOs told us about the future of travel
The entire world is dealing with the novel coronavirus pandemic, and while it is still very much with us, many people are ready to get on the road again after months of being homebound due to local lockdowns.
Throughout the pandemic, we've seen companies in all areas of the travel industry make changes to react to the new reality of the coronavirus. Airlines have adjusted change and cancellation policies, extended elite status for flyers and have tried to institute ways to maintain social distancing -- with varying degrees of success -- for example.
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Hotels have also offered elite-status extensions and more flexible change and cancellation policies. They've implemented new cleaning and sanitization programs, ways to practice social distancing and plans to clearly communicate these plans to guests.
While travel remains at historically low levels, there are signs that the industry is beginning to come back to life. The number of people passing through TSA checkpoints throughout the United States continues to increase on average, and hotel occupancy rates have crept back up from their low points.
In their first quarter financial results, hotels reported declines across the board in terms of revenue per available room (RevPAR), occupancy and profits, but they noted that they took immediate action to shore up as much liquidity as possible to weather the current crisis.
And, just a few weeks later at the NYU Jonathan M. Tisch Center of Hospitality virtual CEO check in on Tuesday, June 2, the CEOs of some of the world's largest hotel brands shared their insight into what they think the future of travel will hold as the world continues the process of opening up and we start to make sense of our new normal.
Related: What your hotel stay will look like after coronavirus
Here's what they had to say:
Road trips will dominate summer travel
“People are driving longer distances for sure. The road trip is becoming part of the experience,” Hyatt CEO Mark Hoplamazian told TPG’s Scott Mayerowitz during a press conference Tuesday.
Over Memorial Day weekend, the top source of travelers for Hyatt properties in Arizona was Texas. (El Paso to Tucson is 318 miles while it is 1,064 miles from Dallas to Phoenix.)
Hoplamazian is driving from the Chicago area to Wisconsin with his family this summer, and Hilton CEO Chris Nassetta added that his family has convinced him to rent an RV to drive to his father’s ranch in Montana. He was resisting the long trip but noted that the more time he spent locked up at home, the more exciting it seemed.
Both CEOs noted that it will take longer for Caribbean and Mexican resorts to recover. “That is going to require more comfort with air travel and that has yet to come,” Hoplamazian said.
Domestic travel is coming back first
Within the U.S., most expect to see beach destinations as well as national parks and other less-populated destinations to receive the majority of those traveling this summer.
We're already seeing this trend play out as the nation continues to reopen. In Seaside, Oregon, the Best Western Plus Ocean View Resort, just allowed to reopen, saw 100% occupancy over the Memorial Day weekend, according to David Kong, CEO of Best Western International. He added that the RevPAR for that property was actually higher than last year, a sign that pent-up demand is real.
The domestic travel trend isn't exclusive to the U.S., either. As IHG CEO Keith Barr pointed out, one of its properties in Vietnam, Six Senses Ninh Van Bay, has reported 80% occupancy over the past month, with practically all of the guests coming from within Vietnam.
Arne Sorenson, CEO of Marriott International, noted that second to the U.S., the Chinese market is most reliant on domestic travel. "China's recovery ... is not driven by any inbound travel. In fact, most inbound travel is prohibited. It's driven by Chinese, both leisure and business travel, and I think in the United States we will see something similar," Sorenson said.
The European Union can vaguely be thought of as one domestic market, but with the onset of the pandemic came a reemergence of the traditional borders between nations. As such, the continent will face some unique challenges as each country has its own set of rules. However, AccorHotels chairman and CEO Sébastien Bazin noted that "as of the 15th of June, the entire Schengen frontier will be reopened." The notable exception is the U.K., which Mr. Bazin said is "unlikely" to open its borders with the European Union on June 15.
Younger travelers will get back out first
Sorenson explained that while he certainly doesn't want to see companies pressuring their employees to take business trips that would possibly be detrimental to their health and well-being, he did note that he's a little frustrated with the ultraconservative stance many companies are taking, particularly with travel bans for employees.
He went on to explain that younger workers will likely return to travel before their older counterparts, saying "the younger employee ... is much more negative about remote work than the older one is. Because they're often at home with less square footage, they're trying to raise kids in the same environment, their career depends upon their being seen and being connected with folks for those informal communications in the offices, and I think we will see, no matter what the corporate policy is ... they will force the change on these big institutions."
He reasons that younger employees will feel a stronger desire to get out of their smaller spaces and return to the things that they loved previously about their jobs -- namely, traveling.
Business travel will lag, possibly for years
Kong said, "The business segment is far more challenged. I think unless there's a vaccine that's proven, big conventions will take years to recover probably, because of social-distancing requirements..."
Meanwhile, Barr noted that while IHG was still seeing some business activity, it remains at a very low level, and "it is principally drive... [people are] less comfortable getting on a plane today..."
Until air traffic returns to levels closer to what we saw in 2019, hotels will likely see fewer business travelers. And, with so many people having adjusted to remote working and major offices indicating that they will never reopen their office space, it stands to reason that business travel will remain lower -- perhaps significantly so -- for quite some time.
It's not a foregone conclusion, though, and as Hyatt's Hoplamazian noted, in countries like China and South Korea, which have developed robust testing and contact-tracing systems, businesses have begun to wade back into the domestic travel market. Hyatt has seen its properties across mainland China cross the 40% occupancy mark.
Hotels aren't going to reinvent the wheel
Hilton's Nassetta said while there's going to be a long road to a complete recovery, "When we wake up in, call it three years, the business will look a lot like it did three or four months ago."
He acknowledged that there will indeed be changes in the industry, and predicts that there will be less individual brands in existence, but believes that now is the time for these companies to look inward, improving on things that boost the customer experience and eliminating things that don't.
His advice for his company is to have a "steady hand on the wheel, don't jerk the wheel right and left ... the reality is things will return to a sense of normalcy."
The recovery will be piecemeal and come to different segments of the business and locations around the world at different times. When the industry does recover fully, travelers may not be in for a much different experience than what was provided in late-2019 and early 2020.
Barr agreed with Nassetta, saying that he's asking his team to "not overreact for the long term, but [plan] for what's happening today. Let's do what we need to do in the short term to give customers a sense of safety and security for traveling."
He went on to say that he does not think it's necessary to make radical changes to IHG's brand portfolio, the overall customer experience or design of specific hotels. But, he does believe that it's a time to make adjustments to "sharpen" its brands and keep them evolving to meet the needs of today's hotel guests.
For those who fear that a hotel stay may be unrecognizable after the pandemic subsides, take solace in Barr saying, "I think [hotels] will look more like [they did] four months ago in a couple of years time than look radically different."
The hotel industry is facing the toughest challenge in its history. And after several months of consistently horrible news, we're starting to see the signs of a long recovery.
We're seeing several trends solidify, like the relative strength of the domestic leisure market and destinations that are accessible by car.
There's no doubt this recovery is going to take several years but for those lamenting the end of the hotel as we know it, your fears may be misplaced. We could emerge with a hotel industry that looks similar to the one that we came to know before this crisis -- but possibly with fewer brands vying for your business.