Suppliers Warily Approach ’23

The unusual post-pandemic economic conditions of 2022 have spurred concerns among some (but not all) economists that a recession looms in 2023. The combination of high inflation, low unemployment and continued supply chain friction combined with Russia’s war with Ukraine, the persistence of the Covid-19 outbreak and in particular China’s continually rigid response to it has persuaded some experts that a downturn is coming. 

Travel supplier executives this autumn during quarterly earnings calls generally expressed concern over 2023 conditions, but not panic, and responses varied. 

“Although, we are aware of the concerns regarding global economic growth, we don’t see evidence of a slowdown in either leisure or corporate demand. In fact, we have seen fares globally remain very strong and well above the fares prior to the Covid -19 pandemic,” Sabre chairman and CEO Sean Menke said in November. “Even with the recovery to date, we believe the opportunity presented by a normalization of travel from Covid is significantly larger than the effect of any prior economic recession on global passenger traffic.”

American Express chairman and CEO Stephen Squeri in October said that “we are mindful of the mixed signals in the broader economy,” and “we have plans in place to pivot should the operating environment change dramatically,” but that “as we sit here today, we see no changes in the spending behaviors of our customers, and our credit metrics continue to be strong.”

American Express Global Business Travel CEO Paul Abbott in November said that “we obviously recognize that the macroeconomic outlook for 2023 has become more challenging over the last few months,” but added that “so far, we are not seeing kind of an impact of the macroeconomic conditions in the recovery numbers. … The recovery has strengthened in September. It strengthened again in October.”

American Airlines CEO Robert Isom in October pointed to strong demand for small and midsize enterprise business travel, leisure travel and blended trips, which “as well as the return of long-haul international travel leaves us very bullish about overall demand even in an uncertain economic environment.”

Cvent CEO Reggie Aggarwal in November suggested hoteliers are “kind of expecting a little bit of economic headwinds for 2023” and recommended they “group up” to lock in event business on the books in case of a recessionary leisure slowdown.

While noting what he called the “headwind” of potentially slowing macroeconomic conditions, Hilton Worldwide president and CEO Christopher Nassetta in October countered it with what he said were the “tailwinds” of pent-up travel demand, increasing international travel as pandemic restrictions fell away, and growing corporate demand for meetings and transient travel.  

“How long does [the economy] slow for? How much does it slow? Those are things I don’t know. I’m not an economist,” Nassetta said. “But my view is, for the next few quarters at least, those are pretty powerful tailwinds.”

Rental car company Sixt CFO Kai Andrejewski in a November statement said that the company was “very satisfied with our economic development” but cautioned darker economic times could be on the horizon.

“Although we are heading for a record year in 2022, we are also monitoring the economic trend very closely and are not immune to respective risks beginning at the end of the year,” according to Andrejewski. 

“Nevertheless, we have a high degree of resilience and the capacity to invest counter-cyclical in our brand, the expansion of our network and our technology.”

The company cited Russia’s war with Ukraine, inflation and high energy prices as potential headwinds that could trigger want it called “a possible slowdown in spending and travel.”

“The possibility of the business cooling down is both real and difficult to project in terms of its extent,” according to the company.

Private aviation company Wheels Up CEO Kenny Dichter in November said that “there are clear macro-concerns that are prevalent in many sectors of the market today,” but added that “we do expect demand from our high-net-worth customer base and our business clientele to be more durable than that of the broader economy.”