Hyatt, Hilton and Marriott were struggling to keep their doors open during the pandemic, but now that the revenge travel boom is in full force, they’re showing their true colors.
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Hyatt, Hilton, Marriott warn of high prices here to stay
Executives from three major chains have warned that the high prices travelers are seeing this summer are here to stay, at least for a while. While post-pandemic revenge travel was something predicted (right here on this blog, in fact), the overshoot of 2019 levels, widely considered so far as “Peak Travel”, remains impressive. At the risk of being self-righteous, I made this claim just two days before two years ago to the day: “As such, my prediction is that Peak Travel may not happen again for at least the beginning 2022.” In all fairness I had assumed it was the retirement and replacement of aircraft that would be the sticking point – I was wrong, it is not the retirement of aircraft but the pilots who drive them which are the problem.
Add to that the highest inflation in 40 years (half the US population hasn’t experienced these levels in their entire lives) and the current demand is completely shocking.
“Marriott CEO Tony Capuano said that over Memorial Day weekend, the company’s revenue per available room, which measures hotel performance, increased about 25% in 2022 versus 2019.” – CNBC.
And it’s not just cheaper, larger, lower-priced hotels that are driving demand. In fact, the luxury segments have seen even higher growth.
“Across Marriott’s luxury portfolio, which includes hotels like JW Marriott, Ritz-Carlton and St. Regis, these hotels saw rates rise nearly 30% in the first quarter of 2022 compared to 2019.” – CNBC
Hyatt Hotels CEO Mark Hoplamazian sees strong performance across the board with no slowdown in sight. IHG CEO Keith Barr echoed those sentiments.
“Pretty much across the board, all activity and leisure segments are all running at full capacity,” Hoplamazian said.
“Keith Barr, CEO of IHG Hotels & Resorts, which owns brands like InterContinental and Holiday Inn, said he expects demand to continue growing for the rest of the year as travel is more normalized after the 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 also excited about revenue this summer.
“…Hilton CEO Chris Nassetta predicts the hotel chain “will have the biggest summer we’ve seen in our 103-year history this summer.” – CNBC
Reduced benefits due to COVID
Not too long ago, hotels were on the verge of collapse amid a complete abandonment of business travelers, especially in the convention space. Hilton Hotels has opted to remove daily housekeeping at many of its properties, a move that several hotel operators have followed. The chain has also scrapped its breakfast perk and replaced it with an elite daily credit whereby incidentals can be charged to the room, but the credit almost never covers even a modest breakfast.
Hilton isn’t the worst offender, Marriott perks have been almost entirely wiped off the board, including some suite upgrades, breakfast, and seemingly any perks they no longer want to offer.
Breakfast was an easy victim as was housekeeping due to COVID. Common areas with open food are a hard perk to offer, and the light-staffed housekeeping interacting with guest areas was equally careless. Although more than 100,000 daily cases are reported, mortality has dropped dramatically and almost all vestiges of the pandemic have disappeared.
Still, the profits did not come back. Housekeeping can be a tough job to fill, but it’s the field they’ve gone into. If we have all collectively agreed that certain benefits could disappear for obvious pandemic reasons, that is fine, but despite these restrictions and their need diminishing, if not gone, why have the benefits not been returned?
Because they don’t have to. Hotel chains (and their independent franchisees) are making money, which they clearly have no problem telling investors and the business media. That said, if the impending recession occurs, hotel chains may once again be forced to compete. But don’t worry, there is no recession, according to US Treasury Secretary Janet Yellen:
“There is no suggestion that a recession is underway,” Ms Yellen said. – New York Times
For those keeping the accounts at home, two consecutive quarters of negative GDP growth are considered a recession. The first quarter of this year qualified with a negative GDP of 1.5%, the second quarter should reverse the trend posting a slight gain, but we will know in a few weeks if this is true.
Typically, during an economic downturn, major travel brands extend their advantages to attract travelers over the competition.
What about those PPP loans?
Remember the $793 billion in PPP loans to protect employee payrolls that American taxpayers took out during the pandemic. Hotel chains and their franchisees have consumed an enormous amount of support provided by American citizens. Of these, 90.2% of loans have been fully written off – I would say more will continue to be written off.
So, just to review, hotel chains and their franchisees couldn’t afford to offer priority elite checkout, or breakfast cereals during the pandemic. The American taxpayer came to the rescue with a ton of free money. Hotel chains still couldn’t offer benefits to travelers, and now that they most certainly can, they simply have no intention of doing so.
If you want to find your favorite hotel (or any business) who took PPP money, how much, and how much was forgiven, here’s a useful tool: Propublica Tracking PPP.
The pandemic has been a significant setback for all sectors of the economy, but particularly for the travel industry. However, now that rates and occupancy at Hyatt, Hilton, Marriott and IHG have not only returned but surpassed their best year ever, takeout remains out of reach. The PPP program was a necessary evil at the time, but with the behavior and frankly the hubris of hotel managers, there will be no sympathy from this travel writer if Secretary Yellen is wrong, and once of the more hotels find themselves competing for our business and their own survival.
What do you think? With hotels firmly out of danger, should COVID takeaways be returned or is it just supply and demand?