NEW YORK—It's shaping up to be a good four- to five-year stretch for the hotel industry. That's if you believe a slew of hotel executives at the New York University International Hospitality Industry Investment Conference, here at the Marriott Marquis.
The annual conference is an early summer barometer of which way the wind is blowing in the hospitality industry. In this case, it's a tailwind, said Thomas Baltimore, CEO of RLJ Lodging Trust, during the "REIT Beat" panel. "I think we are in the fifth inning," he said. "I see another four to five years in the cycle."
Jay Shah, CEO of Hersha Hospitality, was in agreement on Baltimore's prediction. "Unemployment continues to improve and that helps the economy," he said. "We are in an era of urbanization, globalization and digitization. It drives travel."
Added Monty Bennett, chairman and CEO of Ashford Hospitality Trust, "We have many years to run. The Fed is very accommodative. Rates need to move up to slow it. I don’t see recession any time soon."
CEOs Check In
Good news from the real estate investment trusts, yes, but what do the hotel company CEOs think? Turns out, more of the same optimism. Richard Solomons, CEO of InterContinental Hotels Group, said it best: "We have 37 months of record demand."
The other hotel operators during "The CEOs Check In" panel (pictured) were of similar accord. "There is rising wealth, greater demand and a big influence in technology," said Frits van Paasschen, CEO of Starwood Hotels & Resorts Worldwide.
"The high end and low end are both doing positively," said J. Allen Smith, president and CEO of Four Seasons Hotels & Resorts. "With exception of locations of political strife, there are remarkable RevPAR gains from around the world."
Understanding guests, personalization and emerging markets were other topics of import. Arne Sorenson, CEO of Marriott International, said Marriott Rewards, Marriott's loyalty program, will hit 50 million members this year. "They all like being engaged," he said. "The focus now is on capturing folks we don’t have. Let's find SPG members, bring them in and see what they are all about."
IHG Rewards is about 80 million members strong, said Solomons. "It's the personalization piece," he said. IHG recently added new brands, health-minded Even and Hualuxe, a brand for the Chinese guest because "Chinese travelers are different than others," Solomons said. "Consumer segmentation is key, not a price point. There is interest in our new brands because you are talking to the customer about that they want."
For Smith, a relative newcomer as CEO, and whose background is in real estate asset management, luxury is still not about the box but the guest. "Our connection with the consumer," he said. "It's all about people and service. I've yet to discern a correlation between guest comments and the building. No one has ever written me about floors, architecture—they write about the people, the staff. Culture and people distinguish our brand. It's about customization, personalization, the Instagram moment—that’s what people are seeking."
In other markets, its about understanding who the customer is, like in China. "The Chinese traveler is focused on mobile and last-second check-in," said van Paasschen. "It's about understanding forces of change."
Amanda Hite, president of STR, offered a fundamentals overview of the industry. Supply growth, she said, was still muted at .8 percent growth in the U.S.—there are 103,000 rooms currently under construction in the U.S., a 43-percent boost over last year. The bulk of the rooms—68 percent—are in the limited-service segment.
In New York, there are 13,230 rooms under construction—the highest in the U.S.—followed by Miami. "It will be interesting to see how it's all absorbed," Hite said.
Demand growth remains steady, Hite said, with the highest increase—10 percent—in the Middle East. The only decline in demand was in Africa at -2.3 percent.