Hotel CEOs: Pent-up demand has been unleashed

The hospitality sector may still have far to go in terms of recovery, but several of the industry’s top executives reported that progress has picked up markedly.

The CEOs were gathered for a virtual panel that was part of an NYU International Hospitality Industry Investment Conference webinar series.

BWH Hotel Group CEO David Kong told attendees that he witnessed an “unleashing of powerful pent-up demand” in the U.S. starting Memorial Day weekend, during which time the company enjoyed an all-time high RevPAR performance.

“It’s very encouraging,” Kong said during the June 7 event, which was moderated by CNBC news anchor Sara Eisen. Kong also suggested BWH could reach 2019 business levels before 2023 “because we’re very strong in the leisure segment.”

Hilton CEO Christopher Nassetta echoed Kong’s optimism, predicting that the industry is on track to have “the best leisure summer we have ever had in the history of the business.”

Marriott International CEO Tony Capuano added that the picture looks similarly promising from a rate perspective, with leisure demand helping to drive an encouraging level of pricing power. Capuano said Marriott’s resort portfolio saw Memorial Day weekend ADR up 35% over the same weekend in 2019.

Still, Nassetta acknowledged that hotels will need to see similar levels of pent-up demand reflected on the business travel and group sides in order to fully bounce back.

“As you get into the fall, my belief is that we’re going to see a real step change,” predicted Nassetta. “You’re going to see business and group really start to come back. We’re on a solid road to recovery, and I think that when we wake up in two years, what will surprise us is that the slope of the recovery will be steeper than any of us [expected].”

Likewise, Capuano said he was “very bullish” about a business travel rebound, with in-person meetings likely to continue creating a competitive advantage for most sectors.

“Talk to anybody that’s in the relationship-management business, and it’s impossible to cultivate these relationships via technology,” said Capuano. “People have made do by necessity, but you talk to a partner from any consulting firm and ask them, ‘What happens the first time that you decide make a pitch via technology and your primary competitor makes the trip?’ They’re quick to respond, ‘Oh, then all bets are off.’ And we’re right back to traveling the way we were pre-pandemic.”

Concerns about hotel labor shortage

That upswing won’t be without headwinds, however. Hyatt CEO Mark Hoplamazian cited the industry’s “acute labor shortage” as a major challenge moving forward, with a lack of staffing likely to put a strain on the summer leisure surge.

“We’re working really hard to identify where we can tap employees from different sectors,” said Hoplamazian. “We didn’t historically really compete head-to-head [for labor] with retail or logistics and distribution centers, but we are now.”

As the hospitality sector grapples with a widespread labor shortage, hoteliers are turning to more creative and aggressive efforts to secure talent. Read More

Hoplamazian said Hyatt is currently exploring strategies to tap into new labor pools, including outreach to disadvantaged or underserved communities, as well as connecting with youth programs.

BWH’s Kong similarly expressed concern around the staffing shortage, emphasizing that, as a whole, the hospitality industry will have to “provide a better environment” in order to better attract and retain talent, with growing wages also an important piece of the puzzle.

Nassetta, however, said he expected labor issues to ease as a growing number of states opted for early elimination of supplemental unemployment benefits, which have provided a financial cushion for many out-of-work hotel employees and allowed them to delay a return to the workforce. 

“Twenty-six states are on a path to eliminating the subsidy, [and starting] Sept. 6, the federal top-up goes away [for all states],” said Nassetta. “I think that, along with kids getting back in school and a greater level of vaccination, is going to help us stabilize things.”

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