The global hotel industry over the next 12 to 24 months will look different, but in three years will recover and "it will look like it did three to four months ago," Hilton president and CEO Christopher Nassetta said Tuesday during a hotel CEO panel hosted by New York University's School of Professional Studies' Jonathan M. Tisch Center of Hospitality. "But we need to work with teams to find the pockets of demand that are going to exist. Today, it's more leisure and more local business transient."
Many on the panel agreed that domestic drive-to travel would rebound first in the U.S., and several noted the pent-up demand for leisure travel after Covid-19 has kept people homebound for nearly three months. Demand figures for open hotels in drive-to leisure destinations on recent weekends and Memorial Day seem to bear out that belief.
Best Western Hotel Group president and CEO David Kong said one of the brand's hotels reopened for the Memorial Day holiday weekend and on its first night had 100 percent occupancy—which was higher than the previous year's level. "Demand will be dominated by road trips," he said.
InterContinental Hotels Group CEO Keith Barr and Marriott International president and CEO Arne Sorenson also said similar activity was happening in regions around the world. China currently is mostly a domestic market, Sorenson said. Barr added that IHG's Six Senses brand in Vietnam had 80 percent occupancy in May, mainly all domestic travel.
Accor chairman and CEO Sébastien Bazin said that for Europe, train travel was just as important as the drive-to markets, adding that the European Union was at an 80 percent domestic dependency. As of June 15, he said the EU's Schengen Area—the countries among which travel is permitted without a passport—may reopen borders to each other's citizens.
Business and Group Challenged
The business travel segment, however, "will be far more challenged," according to Kong. Unless a proven vaccine is available, "conventions will take years to recover because of social distancing requirements and companies being conservative."
Most of the participating CEOs concurred, especially with the statement about groups needing a vaccine before fully recovering. Still, Barr said IHG was continuing to see business travel, principally in drive-to markets, "but it's getting a bit better every single week." And Hyatt Hotels Corp. president and CEO Mark Hoplamazian said he is seeing some meetings volume come back later in the year and into the first quarter of 2021, with hybrid meetings a desired model.
Hoplamazian also sees this as an opportunity to develop different models of engagement that incorporate technology, yet also recognize that the physical connection can be a meaningful, emotional component that can affect people's behaviors. "We need to design experiences across the board, F&B on property, reconceiving how we do buffets for a large number of people," he said. "We're starting to do experiments in Asia."
Sorenson added that he is more optimistic about business travelers and is frustrated with those corporates that are "going to the most conservative place, keeping offices closed for longer periods of time," and having travel bans to the end of 2020 and into 2021.
"I'm not advocating they should put their people in harm's way, but when the voice of the younger employee is heard, [they] are much more negative about remote work than the older one is," Sorenson said. "They want to get back to the office and back to travel, provided it's safe. … Their future career is dependent on being seen … on seeing customers, seeing colleagues, having a meeting to do the things that need to get done."
Enhanced Cleanliness Protocols Boosting Brands?
The executives cited the American Hotel & Lodging Association multiple times for developing its Safe Stay cleanliness and safety guidelines. All of the panelists' companies have contributed to the effort as members of AHLA's Safe Stay advisory council and are building upon those guidelines for their own cleanliness initiatives.
Hoplamazian said that hotels now must have a "vigilant approach to cleanliness and sanitization. The role of brands will be important," he added. "Cleaning, sanitization and auditing of that and monitoring it means a lot to travelers."
Clean protocols now are essential for creating a safe environment for travelers, many agreed. "People are very serious about the protocols," Hilton's Nassetta said. "They want to know exactly what we are going to do, with hygiene, cleaning, how to service F&B, how to use technology with the right mixture for hybrid meetings." On another note, he added, "I'm not saying that means home-sharing is disadvantaged, I think it will continue to grow. But we have an advantage to train people and have cleanliness and hygiene standards that are higher."
The current climate also could be a plus for conversion efforts. Nassetta said 25 percent of unit growth on average is through conversions, but during down times, like the peak of the 2007-08 Great Recession, Hilton was up to 40 percent.
"We have an array of brands that lend themselves to conversions," Nassetta said. "Brands drive across-the-board high marketshare premiums. And when you put good brands together that perform well with commercial infrastructure behind it and 100 million-plus loyalty members, we have proven to owners we can deliver better performance than where they might be, whether as an independent or with a weaker brand."
Sorenson agreed that brands were key and that Marriott's Bonvoy loyalty program was the company's "most important brand," he said. "It allows us to have a relationship with the customer that says, 'Marriott will deliver to me a range of choices that I will value.' "