A lifelong, suffering Baltimore Orioles fan, I am predisposed to pessimism. It’s innate. And it’s through that lens that I view much of the world, with a sprinkle of skepticism and a pinch of cynicism.
Yes, I don’t self-identify as a Pollyanna—not close—and it might be an unhealthy trait, but it’s just something I can’t shake. Like the Orioles, we are primed for disappointment.
Hotel company CEOs, on the other hand, exude optimism. It expels from each and every pore. No matter the conditions, the hotel industry is positioned for near- and long-term success, but it’s a position that runs contrary to nearly every economic indicator today, washing ashore like a red tide.
- Inflation: As of May 2022, the annual increase of 8.6 percent is the largest 12-month increase since 1981 (source: U.S. Bureau of Labor Statistics)
- Gas: $4.98 average for regular, $2 higher than at the same time last year (source: AAA)
- Airfare: The average price of a domestic round-trip ticket has surged 26 percent over the last year to $290 (source: Hopper)
- Hotel rates: ADR in the U.S. as of June 11: $155.37 (+15.4 percent) (source: STR)
- Home mortgage: The average 30-year rate is now above 6 percent (source: Mortgage News Daily)
- Rent: The national median was $1,827 a month in April, up 16.7% from a year ago, and could be more than $2,000 a month by August (source: Realtor.com).
None of these indicators favor households or businesses and should have a huge impact on discretionary spend. And, yet, the hotel industry to now is seemingly thriving. According to STR, weekly room demand has reached a pandemic-era high as more rooms were sold (27.6 million) than in any week since early August 2019.
One of my LinkedIn buddies commented: “No doubt there has been a pullback in spending on goods, but so far spending on services, and especially travel, has held up very well with no weakness in demand.”
I’m getting the yips—like a dog before an earthquake.
Here are three CEOs at the NYU Hospitality Investment Conference:
- There is a massive amount of pent-up demand, even in face of reduced economic growth.
— Chris Nassetta, CEO, Hilton- I have never seen so much demand or pricing power.
— Sébastien Bazin, CEO, Accor- The volume of pent-up demand is extraordinary.
— Tony Capuano, CEO, Marriott International
It’s hard not to be pumped up about so much pent up!
Only I’m not convinced of it all. I guess it’s the Orioles fan in me. Even Barclays backs me up. A recent analysis by the bank noted that spending on services like travel, which was growing more than 30 percent from 2021 rates this year, has now slowed to half that pace. These signs of a service slowdown run contrary to the notion that Americans have shifted their spending from goods to services. Sorry, LinkedIn buddy.
Listen, I hope I’m wrong. I hope travel explodes the rest of the summer and carries forward on a healthy post-Labor Day arc. There is no doubt people will travel; COVID-19 made us take it for granted and now that the masks are off, people will want to show their faces again!
But the data is off-putting to put it mildly. And retrenchment in travel could be a casualty of it. There is a huge delta right now between what is and what will be. How that spread moves will make all the difference—good or bad.
David Eisen is content director, media for Questex Hospitality, parent company of Hotel Management.