Hyatt, Hilton, and Marriott have been struggling to keep their doors open during the pandemic, but now that the revenge travel boom is in full force, it’s showing its true colors.
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Hyatt, Hilton and Marriott warn that high prices are 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 retaliatory travel after the pandemic has been something to expect (here on this blog, in fact), it has surpassed 2019 levels, hitherto considered “peak travel,” impressive. At the risk of being self-righteous, I made this claim just two days before the day two years ago: “As such, my expectation is that Peak Travel may not happen again until at least early 2022.” In fairness, I was assuming that aircraft retirement and replacement would be the sticking point – I was wrong, it’s not aircraft retirement but pilots who fly them.
Add to that the highest inflation in 40 years (half of the US population has not experienced such levels in their lifetime) and current demand is just shocking.
Marriott CEO Tony Capuano said that over the Memorial Day weekend, the company’s revenue per available room, which measures hotel performance, was up about 25% in 2022 compared to 2019.” – CNBC.
And it’s not just cheaper hotels with a wider selection of services and lower price points that drive demand. In fact, the luxury segments experienced higher growth.
“In Marriott’s luxury portfolio, which includes hotels such as JW Marriott, The Ritz-Carlton, and St. Regis, these hotels saw an approximately 30% increase in rates in the first quarter of 2022 compared to 2019.” – CNBC
Hyatt CEO Mark Hoblamazian sees great performance across the board with no slowdown in sight. IHG CEO Keith Barr echoed those sentiments.
“Pretty much across the board, all business and entertainment sectors are running on all cylinders,” Hublamsian said.
Keith Barr, chief executive of IHG Hotels and Resorts, which owns brands such as InterContinental and Holiday Inn, said he expects demand to continue to grow for the rest of the year because travel has become more normal after the outbreak. – CNBC
Bar added that despite these price increases, they haven’t kept pace with inflation, but room rates of 25% and high occupancy with low service suggest this is probably not true.
Hilton is excited about revenue this summer, too.
“…Hilton CEO Chris Nassetta predicted that the hotel chain “will have the biggest summer we have ever seen in our 103-year history this summer.” – CNBC
Curfew due to corona virus
It wasn’t long until hotels were on the verge of collapse amid a complete desertion of business travelers, particularly in the conference space. Hilton hotels have chosen to eliminate daily housekeeping at many of their properties, a move many hotel operators have followed. The chain has also removed its breakfast feature and replaced it with an elite daily credit with which petty cash can be charged to the room, but the credit never covers even a modest breakfast.
The Hilton is hardly the worst, the Marriott benefits have been completely wiped out including select suite upgrades, breakfast, and apparently any benefit they no longer wish to provide.
Breakfast was an easy victim as was housekeeping due to COVID. The common spaces with open dining is a tricky feature to offer, and the short staff housekeeping that interacts with the guests’ premises was not wise either. Although more than 100,000 daily cases are reported, the death rate has dropped dramatically and almost all remnants of the epidemic have disappeared.
However, the benefits are no longer. Housekeeping can be a tough place to occupy, but this is the business they get into. If we all collectively agree that some benefits can disappear for obvious, fair enough, epidemiological reasons, but despite these limitations and the need for them diminishing if not disappearing, why haven’t the benefits been returned?
Because they don’t have to. Hotel chains (and independent franchisees) are making money, which is something they clearly have no problem telling investors and the commercial media. However, if the looming recession occurs, hotel chains may have to compete again. Don’t worry, though, there is no recession according to US Treasury Secretary Janet Yellen:
“There is nothing to suggest a recession is happening at work,” Ms Yellen said. – The New York Times
For those who keep scores at home, two consecutive negative quarters of negative GDP growth count as stagnation. The first quarter of this year qualifies as 1.5% of negative GDP, and the second quarter is expected to buck the trend by showing slight gains, but we’ll find out in a couple of weeks if that’s true.
Usually, in times of economic downturn, major travel brands expand their advantages to attract travelers over the competition.
What about PPP loans?
It mentions $793 billion in public-private partnership loans to protect employee salaries that American taxpayers have incurred during the pandemic. Hotel chains and franchisees have consumed a huge amount of support from the citizens of the United States. Of those, 90.2% of loans have been fully forgiven – I’d say more will continue to vanish.
So just for review, hotel chains and their franchisees haven’t been able to offer elite priority checkout, or cereal for breakfast during the pandemic. The American taxpayer came to the rescue with a lot of free money. Hotel chains still can’t offer travelers benefits, now that they certainly can – they simply don’t intend to.
If you want to research your favorite hotel (or any business) that earned PPP money and how much and how much, here is a useful tool: Propublica Tracking PPP.
The pandemic has been a major setback for every sector of the economy but especially for the travel industry. However, after prices and occupancy at Hyatt, Hilton, Marriott and IHG have not only returned but surpassed the best year on record, fast food is still a long way off. The PPP program was a necessary evil at the time, but with the behavior and frankly arrogant hotel executives, there would be no sympathy from this travel writer if Secretary Yellen was wrong and once again the hotels find themselves competing for our business and their business. Survival.
what do you think? With hotels so vulnerable, should COVID takeaways be brought back or is this just supply and demand?