Why Marriott, Hilton, and Hyatt say hotel rates are going up

Despite high inflation, a soft economy, and fears of a recession, the hotel industry is not experiencing any slowdown.

It’s just the opposite, with Hilton CEO Chris Nassetta predicts that the hotel chain will “have the biggest summer we’ve ever seen in our 103-year history this summer.”

Few industries have been hit as hard as travel by the Covid-19 pandemic, which has limited nearly all leisure and business travel plans. But as vaccination rates and restrictions eased across the country, travelers are back. In May, global leisure and business trips Topped the 2019 levels For the first time since the outbreak of the epidemic.

But while this has come at a cost driven by high demand from fellow travelers as well as other inflationary pressures, hotel operators still believe there is room for a further rate hike.

“The price has gone up for everything, so we’re no different than it is when you go to the gas pump or the grocery store or any other aspect of life; it’s my discretion,” Nassetta said on CNBC’s “Squawk on the Street” on Monday. .

Two things are keeping demand high: a leisure consumer who has more than $2.5 trillion in increased savings, and strong corporate balance sheets combined with “very good” profitability, Nassetta said.

“They’ve spent two years from an entertainment standpoint and from a business standpoint with meetings and events without being able to do the things they need to do,” he said. “They have the availability of discretionary income in both sectors to do that and they have the need, and that matches the demand.”

Marriott Over the Memorial Day weekend, CEO Tony Capuano said the company’s revenue per available room, which measures hotel performance, was up about 25% in 2022 compared to 2019. Regis, those hotels saw a roughly 30% increase in rates for the first quarter of 2022 compared to 2019.

“I think as long as we provide the service, which can be challenging in markets where labor is tough, we still see really great prices,” Capuano said at the closing bell on Monday. He notes that while there is “very strong price potential” in places like leisure and coastal destinations, “central country, and some urban markets have not returned as quickly.”

Another potential boost to demand could come as the Biden administration did down now Covid-19 testing requirements for air travelers from abroad.

While other countries such as the UK and Greece have long raised their requirements, the US still requires travelers to provide proof of a negative Covid-19 test the day before boarding a flight to the US, regardless of their vaccination status. Their own. It was one of the last countries to still apply such a rule.

Travel industry executives said the restrictions were hurting demand for international travel. “The requirement to conduct pre-departure testing creates uncertainty for travelers, another obstacle that may prompt them to choose a destination with less friction,” Capuano said in a statement to CNBC’s Sima Moody.

“The Biden administration is commendable for this action that will welcome returning visitors from around the world and accelerate the recovery of the American travel industry,” Roger Dow, president of the American Travel Association, said in a statement. “Inland international travel is extremely important to businesses and workers across the country who have struggled to recover losses from this valuable sector.”

life Foreign travelers to the United States spend significantly more than domestic travelers, and that testing requirements “create friction,” President and CEO Mark Hoblamazian said on “Squawk on the Street” on Tuesday.

But even without travelers who may have grounded their flights due to the requirements, demand remains high. “In almost all areas, all business and leisure sectors are all running on all cylinders,” Hoplamzian said.

Keith Barr, CEO of IHG . Hotels & Resorts Which owns brands such as InterContinental and Holiday Inn, said he expects demand to continue growing for the rest of the year as travel becomes more normalized after the pandemic.

This will likely come with further price increases as inflation and other costs are taken into account.

“Demand is very strong … we have the pricing capacity, but in reality, we haven’t kept pace with inflation,” Barr said at Tuesday’s closing bell. “There is still some pricing power in this business going forward, and demand will continue to emerge through the summer.”

These prices are likely to rise as there will be “very little new additional capacity in the industry,” Nassetta said. The laws of supply and demand and the laws of economics are still in place and in good health.