HB on the Scene: Optimism for 2023 travel at ALIS

The hospitality industry struck an optimistic tone as it gathered at the JW Marriott/Ritz-Carlton Los Angeles L.A. Live for the 2023 edition of the Americas Lodging Investment Summit (ALIS).

During the “Boardroom Outlook: Strategy – Capitalizing on shifting travel trends,” moderator Francis J. Nardozza, chairman/CEO, REH Capital Partners LLC, was joined by panelists Danielle Bozarth, senior partner, McKinsey & Company; Sloan Dean, CEO, Remington Hotels; Elie W. Maalouf, CEO Americas, IHG Hotels & Resorts; Jim Merkel, cofounder/CEO, Rockbridge; and Patrick Pacious, president/CEO, Choice Hotels International. The panelists shared some insights on what travel will look like in the new year.

Bozarth said that, based on the consumer work it does, her company is “pretty optimistic” about travel in 2023, particularly when it comes to leisure travel. But with that growth in travel, “the other thing that we continue to hear folks talking an awful lot about is how do they—particularly with their analysts in the investment community—continue to manage the growth that is coming in and the challenges around growth, while also continuing to improve both their P&L and their operational capabilities and managing the balance between the two?” she asked.

Pacious said that the leisure boom in travel is being driven by what he calls the three Rs: remote work, rising wages and retirement. “If you look at remote work, it’s really lifted that constraint of time, where the work week is now maybe three days a week, and the other two days a week, people have the flexibility to work from anywhere,” he said. “So, in our business, we’re seeing more Thursday night check-ins for weekends and Monday morning check-outs. Yes, we’re seeing inflation, but we’re also seeing rising wages, particularly for the middle class. If you look at the Atlanta Fed through the third quarter of last year, they do a wage tracker and that was up 8.5%, which is slightly above where inflation has been. Wages are more sticky than other aspects of inflation. So, I do think the middle class since the pandemic has gotten a bit of a pay raise, and they’re using that extra money on travel, particularly in leisure.”

He continued, “When you look at retirements, you look at the labor force participation rate, which is significantly below where it was pre-pandemic. With all the retirements that you’re seeing—and you’re not seeing sort of this influx of legal immigration that’s helping our hotels—you [have] a lot more people who have freedom to travel whenever they want to because they’re not in the workforce.”

IHG’s Maalouf is noticing a return of business travel as well, using the well-attended conference as an example. “Here we are—Monday, many of us left on Sunday, and we missed the playoffs to come here in January to be with a whole bunch of people in L.A.,” he said. “And, look, the room is full, which is very gratifying and shows you just one indication that business travel is back. You listen to the heads of United Airlines and Delta Airlines, they’re saying they’re full. If you try to fly today, they are full. It’s not a lot of leisure, especially in January. It’s business traveling domestically.”

Dean said that business travel is not the only type that is back. “Group is not only back, it’s better than it’s ever been,” he said. “I think you will see a lot of companies talk about group being up not only single digits, but double digits from 2019.”

Rockbridge’s Merkel said that as an owner, he is fundamentally optimistic. “We just believe that all the trends that are out there are in favor of more demand for hotels in the future,” he said. “Twenty years ago, we were redeveloping and developing hotels in a much different way than we’re doing today. It’s simply to create places where people want to be. So, developing or redeveloping hotels or operating them, in order to be successful, you have to meet demand on what it wants.”

Look for more ALIS coverage in the February issue of Hotel Business.