The hotel industry has never had a more promising future, but terrorism, disease, and the rise of nationalism worldwide pose varying threats.
Airbnb, disease, terrorism, the TSA, Donald Trump, and the best business climate ever mark the biggest trends impacting hospitality and tourism today, according to the CEOs of Marriott International, Hilton Worldwide, InterContinental Hotels Group, Choice Hotels, and Loews Hotels, who spoke at the NYU International Hospitality Industry Investment Conference yesterday.
Christopher Nassetta, CEO of Hilton Worldwide, repeatedly attempted to put the overall state of the hotel business in a rosy perspective to provide greater context around some of the more troubling trends impacting travel in 2016.
“Forget the next quarter or two,” he said. “The next five, 10, 15 years, frankly, I think the rest of our lives for everybody in this room, all things being equal, are going to be fantastic in terms of what’s going to happen in travel and tourism, what’s going to happen in the hotel business, and what’s going to happen in terms of our growth.”
Nassetta and some of the other CEOs based their healthy hotel business predictions on World Tourism Organization statistics that show international tourist arrivals billowing from 1 billion to 1.8 billion by 2030.
Equally important, they said, the growth of the global middle class, Millennial preferences for experiences over things, and Boomers’ pent-up demand for travel are spurring the best possible scenario for hotel development, well, of all time.
“We are one of the largest employers and biggest businesses in the world, one of the fast growing businesses in the world, with tremendous opportunity,” Nassetta continued. “Why? It’s because over the last 20 years, the middle class has doubled. Over the next 20 years, every expectation is that the middle class will double again.”
This is based on a global perspective, which was continually emphasized by all of the hotel CEOs, who promoted unprecedented opportunities for new hotel development in emerging markets.
“If you look at lodging opportunities around the world, there are markets that are more mature like the United States and to some degree Europe,” Nassetta said. “But it’s a big world, and if you look at it on average, hotel rooms are significantly underpenetrated around the world almost in every market, particularly in the emerging markets, relative to what you’re going to see in population growth and demand as tourist arrivals grow.”
Arne Sorenson, CEO of Marriott International, added, “This extraordinary growth is from the demand side, because of the growing middle class around the world, people reaching retirement, and Millennials are more interested in experiences than collecting cars and houses.”
Summing up the oft-quoted “Golden Age of Hospitality” theme at the NYU Hospitality show, Stephen Joyce, CEO of Choice Hotels, said, “With Boomers, as they get more time on their hands, our argument is that they’re just going to travel all the time.”
Trump, Zika, ISIS, and interminable TSA lines, they agreed, are the big things standing in the way of that positive outlook, however.
Everybody’s Scared of Trump
Donald Trump’s populist ideals revolving around closed society, especially with regard to Mexicans and Muslims, were brought up numerous times yesterday. Jonathan Tisch, CEO of Loews Hotels, equated Trump’s political posturing and fearmongering to the state of panic following the 2001 attacks on the World Trade Center.
“Today’s political discourse features fear-filled rhetoric — the misguided idea of Fortress America is sadly back on the rise,” stated Tisch. “It was the same mentality in the aftermath of the tragedy of 9/11 when we learned that pulling back from the rest of the world is simply not an option. Adopting that approach did us more harm than it did us good…. We should have learned that retreating from the rest of the world blocks the exchange of goods and ideas that continues to make this country great.”
Sorenson was equally dismissive of the Republican presidential candidate, and many other political movements around the globe.
“The rise of nationalism, in effect, threatens the ability of people to move freely around the world,” he said. “You can see it in the United States. You can see it in Europe. You can see it in lots of parts of the world where people are using different tools and turning back inwards, strengthening borders, demonizing foreigners, and to some extent, overstating risks.”
Tisch On Zika, Terrorism, and the TSA
Tisch discussed the role that perception plays on travel purchase decisions, and the industry’s responsibility to try and change those perceptions.
He first called on the hotel industry to support more scientific leadership on the impact of disease on hospitality and tourism, based on Zika’s disruptive influence on Puerto Rico and 13 other countries in the Caribbean. Tisch said Zika is not a one-off. Ebola, SARs, and many other global health scares have drastically affected tourism arrivals in the past, and they will continue to do so.
“Whenever a potential health threat arises, two things happen,” he suggested. “The media plugs the zone with 24/7 coverage and scary headlines, while policy-makers jump into action without having all the facts. These reactions often combine to hurt travel that results in varying policies across the country. To push back and separate fact from fiction, we need a coordinated industry effort to respond thoughtfully and effectively to global health risks, without promoting undue alarm.”
On the growing fears of terrorism worldwide, Tisch said: “Fear of terrorism at home and abroad inject levels of unease and worry to travel plans. Airports, train stations, hotels, concert halls, cafes — all hospitality related and travel assets — sadly are now terrorist targets, prompting many travelers to rethink their plans.”
And lastly, according to Tisch, images of long TSA lines at America’s gateway airports have as equally drastic consequences on travel buying as terrorists and disease.
“National headlines on hours-long TSA lines remind us that travel is in many ways a perception-driven business,” he said. “If people don’t feel safe because of Zika, or global threats, or if they think that it’s going to be a hassle to travel, they simply don’t make the trip. The good news is that TSA already has a remedy at hand, and that as you know is Pre-Check. The travel industry needs to continue to spread the work on the importance of Pre-Check enrollment, and encourage our customers to sign up today. It is a program that is both pro-security and pro-travel.”
Hotels Decide How to Attack Airbnb
The hotel industry finally has a game plan about how to deal with the rise of Airbnb and the threat that room-sharing companies have on legacy hospitality’s market share.
Basically, the hotel industry wants to ignore Airbnb hosts who operate on a part-time basis. Instead, hotel groups need to work with cities to shut down the growing number of commercial Airbnb operators with multiple full-time listings.
“I personally think (Airbnb) is moving from a first phase, which is classic shared economy, where hosts find a way to monetize an extra room in their house or their house when they’re gone,” said Sorenson. “Phase two, which is underway now, is really in many ways like a micro-hotel thing, where small business people are saying I’m going to take a gamble and see if I can make enough spread between the cost to acquire those units and what I can get from customers.”
In that case, Sorenson asserted, those commercial operators need to be regulated just like hotels.
“I think when you’re in that place, it’s crystal clear that the rules should be fair,” he continued. “So if you’re running a micro-hotel, you oughta make sure you’re paying your lodging taxes. You’ve got to make sure you’ve got permits that permit you to do the business, and you’ve got to make sure the product quality is such that it meets the safety standards that apply.”
Nassetta suggested that the hubbub around room-sharing is overblown. He also thinks that Airbnb’s digital platform and its success at connecting direct to customers is something the hotel industry should try and figure out and emulate.
“I think we can coexist, particularly as they get into their second phase of development,” he said. “I don’t think it’s all bad, meaning I agree with the fundamental point that they’ve made quite a nice relationship with their customers. They built a really strong relationship with their hosts — one could argue there’s more strength in that relationship. Their online platform, having a direct connection, is important, so I think there are elements of that that we can all take to heart.”
The hotel CEOs’ response to Airbnb, and in fact, their overall opinion on the hotel industry’s value proposition in general, however, felt surprisingly tepid and generic, especially compared to the rabid consumer excitement surrounding Airbnb.
Tisch promoted how the hotel industry is “safe and secure” and offers “service with a smile.” Sorenson and Nassetta repeatedly discussed how the hotel industry “is about people.”
“When you think about it at its very core, we’re a business of people serving people,” said Nassetta.
“It’s all about people,” added Richard Solomons, CEO of InterContinental Hotels Group. “In our business, our customers are people, our employees are people, your shareholders are people, your owners are people, and it’s just about thinking of people being authentic and respecting them.”
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Photo credit: Hotel group CEOs kicked off the 2016 NYU Hospitality Industry Investment Conference yesterday. NYU School of Hospitality