Hyatt, Hilton, and Marriott were struggling to keep their doors open during the pandemic, but now that the revenge travel boom is in full effect, they are showing their true colors.
Hyatt, Hilton, Marriott Warn High Prices Here to Stay
Executives from three major chains warned that the high prices travelers are seeing this summer are here to stay, at least for a while. While revenge travel following the pandemic was something predicted (right here on this blog, in fact), exceeding 2019 levels, widely considered heretofore to be “Peak Travel”, remains impressive. At the risk of being self-righteous, I made this claim just two days shy of two years ago to the day: “As such, my prediction is that Peak Travel may not occur again until at least early 2022.” In fairness, I had assumed it was aircraft retirement and replacement that would be the sticking point – I was wrong, it’s not the retirement of aircraft but the pilots that fly them that’s the problem.
Add in the highest inflation in 40 years (half of the US population hasn’t seen these levels in their entire lifetime) and the current demand is completely shocking.
And it’s not just cheaper, broader select-service hotels with lower price points that are pushing demand. In fact, the luxury segments saw even higher growth.
“In Marriott’s luxury portfolio, which includes hotels like JW Marriott, Ritz-Carlton, and St. Regis, those hotels saw nearly a 30% increase in rates in the first quarter of 2022 compared to 2019.” – CNBC
Hyatt Hotels CEO, Mark Hoplamazian, sees great performance across the board with no slow down in sight. IHG CEO, Keith Barr, echoed those sentiments.
“Pretty much across the board, all the business segments and leisure are all firing on all cylinders,” Hoplamazian said.
“Keith Barr, the CEO of IHG Hotels & Resorts which owns brands like the InterContinental and Holiday Inn, said that he expects demand to continue to grow for the rest of the year as travel is more normalized post-pandemic.” – CNBC
Barr added that despite these price increases, they haven’t kept up with inflation but 25% room rates and high occupancy with reduced service suggest that’s probably not true.
Hilton is excited about revenue this summer as well.
Reduction of Benefits Due to COVID
It wasn’t so long ago that hotels were on the verge of collapse among a complete abandonment of business travelers, especially in the convention space. Hilton Hotels opted to do away with daily housekeeping at many of its properties, a move several hotel operators followed. The chain also removed its breakfast benefit and replaced it with a daily credit for elites by which incidentals can be charged to the room but the credit almost never covers even a modest breakfast.
Hilton is hardly the worst offender, Marriott benefits were nearly wiped off the board entirely including select suite upgrades, breakfast, and seemingly any benefit they no longer wanted to offer.
Breakfast was an easy casualty as was housekeeping due to COVID. Communal spaces with open food is a tough benefit to deliver, and short-staffed housekeeping interacting with guest spaces was also unwise. Despite more than 100,000 daily cases being reported, mortality has fallen dramatically and nearly every vestige of the pandemic has gone away.
Yet the benefits haven’t returned. Housekeeping may be a tough position to fill, but that’s the business they’ve entered. If we all collectively agreed that some benefits could go away for obvious pandemic reasons, fair enough, but despite these restrictions and need for them diminished if not disappeared, why have benefits not been returned?
Because they don’t have to. Hotel chains (and their independent franchisees) are raking in cash, something they clearly have no problem telling investors and business media. That said, if the looming recession occurs, hotel chains might be forced to compete again. Don’t worry though, there’s no recession according to the US Treasury Secretary, Janet Yellen:
“There’s nothing to suggest a recession is in the works,” Ms. Yellen said. – New York Times
For those keeping score at home, two straight negative quarters of negative GDP growth is considered a recession. The first quarter of this year qualified with 1.5% negative GDP, the second quarter is forecasted to buck the trend by showing a slight gain, but we will find out in a couple of weeks if that’s true.
Typically, in economic downturns, major travel brands expand their benefits to entice travelers over the competition.
What About Those PPP Loans?
Remember the $793 billion in PPP loans to protect employee payrolls that American taxpayers incurred during the pandemic. Hotel chains and their franchisees consumed a tremendous amount of support supplied by the citizens of the US. Of those, 90.2% of loans were forgiven entirely – I’d argue that more will continue to wiped away.
So just to review, the hotel chains and their franchisees couldn’t afford to offer priority elite checkout, or cereal at breakfast during the pandemic. The US taxpayer came to the rescue with a ton of free money. The hotel chains still couldn’t offer benefits back to travelers, and now that they most certainly can – they simply do not intend to do so.
If you want to search for your favorite hotel (or any business) that took PPP money, how much, and how much was forgiven, here’s a helpful tool: Propublica Tracking PPP.
The pandemic was a significant setback for every sector of the economy but particularly for the travel industry. However, now that rates and occupancy at Hyatt, Hilton, Marriott, and IHG not only have returned but exceeded the best year on record, the takeaways remain out of reach. The PPP program was a necessary evil at the time, but with the behavior and frankly the hubris of hotel executives, there will be no sympathy from this travel writer if Secretary Yellen is wrong, and once again hotels find themselves competing for our business and their own survival.
What do you think? With hotels firmly out of peril, should the COVID takeaways be returned or is this just supply and demand?
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