Now that the dust has settled on the U.S. Presidential election, travel companies have the task of dealing with a decline in business travelers and the uncertainty in pricing that comes with it.
Forecasts have shown a slight decline in the growth rate in business travel, perhaps a sign that overall economic strength is less robust than previously thought.
It’s also a struggle for travel providers to negotiate strong rates for 2017 in this environment, which reflects a positive for travel managers and companies looking to limit their spending on travel.
Hotel executives are seeing a small increase in their negotiated rates for next year, while airline executives are seeing fares rising on bookings close to the time of travel.
Here’s what some of the world’s top airline and hotel CEOs think, in their own words on recent earnings calls, about the struggles facing travel companies when it comes to business travel and the high level of uncertainty surrounding the global economy. These comments came before the election of U.S. President-Elect Donald Trump.
Chris Nassetta, CEO and President, Hilton Worldwide
“In the U.S., our largest market, macro indicators point to a more positive outlook on the demand side as we head into next year with forecasts for slightly accelerating GDP growth, growth of non-residential fixed investment, rising corporate profits, incremental jobs growth, and certainly having the election cycle behind us won’t hurt. Paired with easier comps, this suggests modest demand acceleration from current levels.
“The two pieces of business where we have reasonable sight lines, corporate negotiated and group, also support a potential acceleration in demand next year. We’re in the early stage of negotiating corporate rates for next year and given record U.S. occupancy levels, we expect to increase rates roughly three percent to four percent. Similarly, in the first half of 2017, we’re seeing mid-single digit system-wide group revenue position growth. This anticipated U.S. demand growth will be paired with supply growth that is expected to increase around 30 basis points next year to slightly less than two percent which is well below prior cycle peaks and still below long-term averages.”
Oscar Munoz, President and CEO, United Continental Holdings
“Domestically, we’re seeing positive close-in corporate booking trends and a better alignment of supply and demand. Additionally, the domestic pricing environment is beginning to feel more rational. We expect the Atlantic to remain the weakest region of the world.”
Glen Hauenstein, President, Delta Air Lines
“I think that the fares that we’re realizing inside of 21 days are improving generally and the question is they are improving at different rates, corporate managed versus unmanaged and I think they are at slightly different rates, with managed being slightly below unmanaged. But the general trends are that inside the month now, we’re seeing a more robust fare.”
Mark Hoplamazian, President and CEO, Hyatt Hotels Corp.
“With respect to our corporate transient business, our corporate rate negotiations have been encouraging showing good year-over-year growth. As such although many of our group and transient metrics appear to be positive as we approach 2017, we’re closely monitoring the underlying dynamics in order to optimize our performance…
“Now on the face of that, we’ve got clear data that says that short-term corporate bookings are weak or weakening. We have had in the quarter for the quarter kind of booking patterns that we’ve seen this year have been significantly lower than they were run rate last year. Part of that is due to the fact that we are sold out in many of our key group hotels from a meeting space perspective.
“So, we’ve crowded out some of the in the quarter for the quarter opportunity. But it’s also true that when you look at where group is sort of trending up or down, it’s really the shorter-term corporate segment that’s been under pressure whereas association has been relatively higher.”
Arne Sorenson, President and CEO, Marriott International
“Corporate customers are clearly cautious….
“Looking ahead to 2017, our North America outlook assumes a steady-as-she-goes economy and modestly higher supply growth. For the 2017 full year, North America revenue group pace for company-operated full service hotels across the Marriott and Starwood portfolios is currently up about two percent. For transient business, we expect current weak corporate demand to persist, although comparisons should get easier.
“We are targeting a higher volume of special corporate rate business for the coming year and expect special corporate room rates for comparable customers to increase at a mid-single-digit rate in most markets.”