Hilton, Marriott Chief Executives Prepare for Industry's Next Cycle
Hotel Brand Leaders Predict Demand Will Recover Soon
BERLIN — The chief executives of two global hotel industry titans agree that while the COVID-19 pandemic has shifted travel and hospitality — in some ways, possibly forever — the business remains cyclical and this crisis, too, will pass.
In two keynote sessions at last week’s International Hotel Investment Forum, Hilton President and CEO Chris Nassetta and Marriott International CEO Tony Capuano discussed the challenges, concerns and futures of their companies and the hotel industry in general.
During the “Talk of the Titans: Shared Visions For Future Success” panel, Nassetta said one of the biggest challenges of the pandemic was that many hoteliers had two concerns running concurrently — the personal and the business.
“It was complicated, challenging. Usually the two are detached, but [the pandemic] is a unique experience. We have a way to go, but this is my fourth conference in the last four weeks,” he said, noting that hotel conferences are a signal that business is getting back to usual. Nassetta said he feels much pride and optimism in where his company is now and where it's headed.
“Some might argue it is premature, but I feel pride in the 450,000 team members in 120 countries, how we have supported owners and one another, our communities. Necessity is the mother of invention, and the necessity is that we are better off together,” he added.
At a separate panel titled “Dawn of a New Era: Where Do We Go From Here?” Marriott's Capuano said employees have been through a lot during the past 18 months but are ready to move forward.
“It is time to compartmentalize those emotions and get back to work. We’ve took time to reflect, we’ve stepped back, now we’re triaging responsibilities," Capuano said. “Marriott has a battle-hardened management team. We’ve gone through the recession, 9/11, COVID-19" and the loss of former Marriott CEO Arne Sorenson.
Demand Reboot Both CEOs said they were confident the pandemic has not hampered demand.
“It has not created a scenario where people travel less, but more. Demand levels will be greater than they were. People will gravitate to what they want most, which is experience and human interaction,” Nassetta said.
“We’ll have two or three years of disruption, and this absolutely will change travel patterns, behaviors and budgets. It will shift things,” he added.
Also on Nassetta’s panel was Pieter Elbers, president and CEO of KLM Royal Dutch Airlines. Elbers said his company has returned flights to 95% of its destinations, is running between 70% and 75% of flights with the return of approximately 60% of its customers.
“People in summer were willing to travel despite the mess of administration needed," Elbers said. "When U.S. customers could come back to Europe, they did. Asia is more diverse and complicated. It is going to be later" to return to 2019 levels.
Nassetta said the numerous global rules and regulations around COVID-19 are making some people decide to stay at home.
“In four or five years, it will look pretty much the same, maybe a little more leisure. People are thinking they need to live a little more … and as things go back to normal, segmentation will start to settle. You don’t do 65%, 70%, 75% midweek occupancy in the U.S. without business,” he said.
The hotel industry is often viewed as a cyclical business. Kenneth Hatton, managing director and head of hotels for Europe, Middle East and Africa at CBRE Hotels — and former executive vice president at hotel firm Belmond — said “the black swan is not a black swan but more a migrating bird that comes back every year.”
Capuano said while recent crises have come thick and fast, the hotel industry will remain cyclical in nature.
“It requires thoughtful stewardship of the balance sheet and [portfolios with] geographical diversity, but we already have seen some markets come back with powerful pricing,” he said.
Hoteliers have applauded the lending community, which Capuano said has shown “thoughtfulness, flexibility and patience.”
“Brand companies also have to be thoughtful. Where can we provide relief within the construct of our business model?” he said, adding one possibility is access to FF&E (furniture, fixtures and equipment) reserves.
Future Complications Getting back to the peak levels of hotel performance in 2019 has begun, but requires more work, and more flexibility.
Capuano, Elbers and Nassetta spoke of mandatory double vaccinations to board airlines — which they admitted would be complicated in Europe — as well as the need for the industry to help in addressing climate change, the requirement to promote diversity and careers in the industry, and the necessary partnership between hotel firms to offset the next crisis.
“I spoke to both pandemic-era administrations [President Donald Trump’s and President Joe Biden’s] about my views, some of which have been accepted," Nassetta said. "I do think vaccines are the best path out, to get through this and to create a return. Mandatory vaccinations are dirty words in some parts of the U.S., but we will never get the world to agree to the same standard.
“If we do not work well together, it will just take longer and affect all of our profitability."
Capuano said in the wake of the Great Recession, most hotel industry CEOs just patted themselves on the back and celebrated the survival of their companies. “Many in the hotel business looked with envy at how airlines banded together, had a unified standing and went to government looking for solutions. That did not happen broadly within the hotel industry, which was rattled a little, but not shaken to the core,” he said.