NYU: 5 reasons for optimism in the hotel industry

NYU Leaders

NEW YORK—During the second day of the New York University International Hospitality Industry Investment Conference, Scott Berman, principal at PwC for hospitality and leisure, cited a range of recent concerns facing the hospitality and travel industries. The first quarter of 2016, while not awful, was “underwhelming,” he said, and crises like the Zika virus and political unrest (both domestic and abroad) could affect how people travel and where they choose to go. 

So, he asked a panel of leaders at the day’s opening general session, why should the room full of industry insiders be optimistic for the future of hospitality? 

1. Geoff Ballotti, president and CEO, Wyndham Hotel Group

Ballotti cited HOTEL MANAGEMENT’s recent column by Glenn Haussman, which claimed that the sushi served at networking events is an easy way to gauge the health of the industry. “Lots of assorted pieces and creative rolls, the industry is flying sky high,” Haussman wrote. "Just a couple types of sushi pieces and California rolls, the industry is headed for a downturn. Nary a piece of fish to be found and lots of vegetable rolls—time to panic!” Rates and occupancies have both never been higher, Ballotti said, noting that the most recent Memorial Day weekend was the most-traveled since 2005 with 34 million  people on the road. 

Sushi
The quality of sushi served at events can be a good indicator of industry health.

2. Kevin Jacobs, EVP and CFO, Hilton Worldwide

Jacobs pointed out that 80 percent of the people attending the general session were developers, and that the overall mood among developers has been optimistic. “We’ve signed 40,000 rooms year-to-date,” he said. 

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3. David Kong, president and CEO, Best Western Hotels & Resorts

Kong said that 17 states and Canadian provinces are down in revenue per available room. All of these markets, he noted, share a theme: They are all affected by the plummeting cost of oil. “The rest are strong,” he said. That gives me confidence.” In fact, he said, this has been one of the best years that he has seen, going by three key indicators of industry health: earnings, employment growth and gross domestic product growth. “It’s not robust, but it’s not bad,” he said, acknowledging that a downturn is inevitable in the future. “At some point, earnings will be affected by rate growth, and most RevPAR growth will come from rate growth.” For these reasons he said, his optimism was a bit more “cautious” than others.’  

4. Elie Maalouf, CEO, the Americas, InterContinental Hotels Group

Maalouf said that the fundamentals of the hospitality industry are still intact. The middle class is growing, he said, and they want to spend money on things like travel. “As long as we run our business well, we’ll have a business to be in.” While he would not predict what the next quarter would be, Maalouf said that “healthy skepticism” is good for business, and helps hoteliers stay focused on putting the right brands in the right locations with the right partners signing the right deals. “We’re optimistic,” he said. 

5. J. Allen Smith, president and CEO, Four Seasons Hotels and Resorts

Smith noted that the biggest effects on travel last year—whether medical, political or natural—were localized. “When we look at the broader picture, look at global wealth, there isn’t that looming dark cloud on the horizon.” There are, of course, factors that are out of the industry’s control, including disease epidemics and terrorism hotspots, but as Smith put it, “one dissipates, one emerges. Focus on the things that you can control.” 

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