Hotel CEOs Are Now Less Optimistic About Business Travel Outlook This Year

When Skift last spoke to hotel executives about their views on corporate travel business in 2017 in late January, pre-Trump travel ban, a large majority seemed fairly optimistic that this could be the year that corporate travel bounces back.

A month later, however, it seems that some executives may be changing their more optimistic outlooks from the beginning of the year to ones that are a bit more cautious and muted, especially since a newly revised travel ban is expected to be issued next week.

Here’s what hotel CEOs said during their recent earnings calls about corporate travel business.

Hilton: “We Feel Pretty Good About It”

Early in the year, Hilton CEO Christopher Nassetta seemed especially bullish about the prospect of a more “optimistic” corporate “psyche” that would, hopefully, translate to and uptick in corporate transient travel business at his hotels.

And even with the travel ban, his viewpoint, for the most part, has not seemed to change, particularly because the fourth quarter did see a “post-election boost” in business travel.

“I think we’re seeing very broad based – more positive sentiment across a broad range of industries,” Nassetta said. “As we now have a little bit of the year behind us, we have a few green shoots that are essentially that the corporate business, the business transient business has, as I said, picked up a bit post-election. It’s continued into the first part of this year. We feel like we’ve got a decent group base on the books.”

He did, however, say later, “Having said all that, it’s early in the year. There is a lot going on. If you watch cable news and read the newspapers and some of the things that have created the positive sentiment, I think, in the business community relate to the idea of tax reform, regulatory reform, the possibility for infrastructure spend. And well, I think there is decent momentum on a number of those things. In the end, what will matter is what actually happens. So, I think the psychology in the business community is more positive than it was certainly when we talked last time. How positive it gets, how long it stays positive is entirely dependent on what actually happens on some of the things that I just mentioned that are swirling. But we feel like – what we’re seeing right now makes us feel like the guidance we’ve given is a darn good guidance. And when we look at what we’ve delivered so far this year, and we’ve already had an opportunity to work with our teams to re-forecast the year based on what they’re seeing in activity, short-term plus the longer term group business, we feel pretty good about it.”

Marriott: “We’re Going to Be Cautious”

Echoing his earlier statements from the beginning of this year, Marriott CEO Arne Sorenson wasn’t so sure that this year would necessarily be a better year for Marriott’s corporate travel business. While he sees signs of optimism, as Nassetta does, he isn’t entirely convinced it will translate into more corporate transient travel business.

“I think we’re going to be cautious about claiming that we’re in a different world until we start to see, either through bookings or through the stayed-and-paid actual RevPAR numbers, the kind of performance that would allow us to say, you know what, actually, that optimism is proving to be real,” Sorenson said. “And we just – I think today you can, if you want to go out and find anecdotes to prove a point of view that things are better, there are some anecdotes out there. But if you actually go and look at the data with a cold, clear gaze and say, are you really seeing the kind of data that would show that our business is performing differently than we thought a quarter ago? We don’t see that clarity yet.”

He also said that the company has heard from some groups who have said they are reconsidering holding their meetings in the U.S. in light of the recent travel ban.

” … We have some anecdotes about folks who have reached out to us and said, you know what? Rather than focus on that hotel in the U.S., why don’t we look at what you’ve got in Canada? Or why don’t you look at what you’ve got someplace else? And if we’re hearing a handful of those anecdotes already – I’m sure there are a number that we’re not hearing, which are groups who had not yet contacted us but who are not – would have contacted us were it not for this executive order. But instead are maybe going directly to one of our hotels in another country or they’re simply deferring their efforts to plan that business.”

Given everything that’s happening, Marriott will be operating in 2017 “with an expectation that we’re going to continue to slug it out in a pretty low-growth GDP environment,” Sorenson said. “If there is strength in GDP, it’s all upside. But if there is no strength in GDP, we want to make sure we’re delivering the best results we can.”

IHG: “It Is Too Early to Say”

InterContinental Hotels Group (IHG) CEO Richard Solomons didn’t have much to share with regard to whether this year would be the year corporate travel business comes back, but he did have a bit of fun answering a question about it during an analyst call, making some reference to the numbers of people who stayed in D.C. during Trump’s presidential inauguration.

“I think it is too early to say, Paul, would you [say]?” Solomons asked IHG CFO Paul Edgecliffe-Johnson, who replied, “Yes, it really is. I mean, if you look in the January numbers as well, Stephen [referring to the analyst], and we did, they weren’t a bad set of numbers. [There were] obviously some benefits from D.C. and inauguration in that and …”

At which point, Solomons interjected, “Big inauguration,” followed by Edgecliffe-Johnson’s statement, “Yes, the huge inauguration, but nothing really that I will read into the numbers other than that.”

Host Hotels & Resorts: “Continued Weakness”

For Host Hotels & Resorts, one of the largest hotel real estate investment trusts in the U.S., 2017’s outlook is still a mixed bag. New CEO James F. Risoleo said 2017 was still a year marked by “uncertainty” just as it was in 2016, and while he also noted “a wave of economic optimism has taken hold” he said, “Unfortunately, the turnaround in the stock market and economic sentiment has not yet translated into consistently improved results for our business. Part of this has been the result of continued weakness in corporate business travel, resulting in a negative mix shift with operators, replacing high rated corporate business with lower rated corporate business, such as contract, discount or government.”

Risoleo added, “Given historically high occupancy, in order for RevPAR to reaccelerate, corporate business will have to return and reverse this trend. We are very pleased with our November and December results, which led to performance that was stronger than forecasted. However, we believe it is too early to determine if that was simply pent-up demand or the start of a more positive long-term trend. Our hope is for the latter, if the new administration can follow through on its proposals for lower taxes, reduced regulation and infrastructure spending. In addition, January was a very strong month driven primarily by the inauguration in D.C., but we are still in a wait-and-see mindset.”

He also said the group is keeping a close eye on the strength of the U.S. dollar, “which could potentially impact international demand to gateway U.S. destinations” and noted, “We also could face potential demand shortfalls from the negative sentiment surrounding the administration’s proposed travel ban.”

Hyatt: Corporate Groups Are Looking for Wellness Opportunities

Hyatt Hotels president and CEO Mark Hoplamazian didn’t talk extensively about corporate transient travel during his fourth quarter earnings call, but he did talk about the potential opportunities Hyatt now has for its corporate group business given its recent acquisition of wellness group Miraval.

“If you look at Miraval, based on a lot of work that we’ve done over the last year, wellness is among the most compelling of the areas of interest for our customer base. And it’s not just the transient leisure customer base, and this is a critical point. It’s also amongst corporate customers,” he said. “So our corporate clients, there are a number of large corporations that we serve in our hotel business today that are dedicating increasing levels of time and resources to their own wellness programming within their workplaces. They want to also bring these practices into their meetings, for example. So while we have great confidence that we can expand the Miraval business way beyond the few resorts that we start with, because we didn’t buy the brand just to end up with three resorts here, this is a platform and a very leverage-able brand on a global basis.”