NEW YORK—The second panel at the 38th annual NYU International Hospitality Investment Conference gave four CEOs the chance to take the stage and address the audience with their take on the year so far. Industry talks are often chock-full of discussions on our current place in the cycle and whether or not the downturn is around the corner, but Christopher Nassetta, president and CEO of Hilton Worldwide, said that the industry's often-circular discussions on the topic may be necessary.
According to Nassetta, the hospitality business has a lot to look forward to, with the world full of unripe markets that many brands have under-penetrated as far as hotel rooms go. On top of that, travel continues to pick up pace at home. The middle class has doubled in size during the past 20 years, Nassetta said, and it is poised to do so again, creating a new wave of large-scale travelers.
"Forget the next quarter or two, the five to 10 years, the rest of our lives are going to be fantastic for travel and the hotel business," he said.
Arne Sorenson, president and CEO of Marriott International, was on board with the optimism. "People want more experiences, they aren't collecting cars and houses," he said. This view was supported by Stephen Joyce, president and CEO of Choice Hotels International, who said baby boomers are gaining more time to travel just as millennials are earning enough income to do so as well. But for Joyce, the mega-trend is the increased acceptance of non-traditional lodging such as Airbnb.
"Five years ago, the number of people willing to accept non-traditional lodging was 6 percent of travelers," Joyce said. "Today it's 37, heading on 60. That's why we launched Vacation Rentals by Choice."
A Golden Age
The panel was asked if the industry is currently in the golden age of travel, something Nassetta said is hard to debate to the contrary. "We have one or two generations coming up, and they are both very focused on experiential travel and the act of traveling," Nassetta said. "They are interacting with people more intensely than the generation before them. These trends converge to create a special elixir for travel and tourism."
But what about the fluctuating fundamentals the industry has seen throughout Q1 2016? Is the cycle over or not? According to Joyce, the industry's greatest concern, supply, is not a concern at all because the upcale segment is getting the most new additions in order to match demand. On top of that, Joyce said the fundamentals going into 2016 have never looked this good.
"How high will [revenue per available room] be? People want it to hit 7 percent; it probably won't be that but we think this summer will be huge," Joyce said. "It could be 4 percent RevPAR growth. If you've been around this business that's a pretty good year."
Barriers to Success
But all is not perfect, and the panel had a few different issues with the current state of hospitality. Richard Solomons, CEO of IHG (InterContinental Hotels Group), in particular wants the name "sharing economy" stripped from the short-term rental market. While Solomons said that hotels currently don't have a way to add value to what companies like Airbnb offer without adding service, he also said the "democratization of travel" hasn't taken place as much as a series of corporations have simply created a new industry.
"Stop calling it the sharing economy, it's basically a business," Solomons said. "Let's not give it an attribute they don't deserve."
Sorenson, however, said there were two major barriers to the industry's optimism for the future, and they aren't fears regarding increased supply. First, Sorenson said recent movements have taken place in the U.S. to create angst regarding the quality of existing jobs, which is something the industry needs to respond to. But even more concerning is the fear of foreigners and rising nationalism that is threatening the ability of certain people to move freely around the world.
"We are demonizing foreigners, overstating risks," Sorenson said. "There are risks we need to address, but those can be twisted into tools that are about something else."