Corporate travel continues to grow as the global economy hums along immune to the geopolitical issues cropping up around the world. How long can it last? And will increasing hotel rates eat away at the increased spending made by corporations?
It’s common knowledge that corporate travel is in the midst of a period of impressive growth.
Group business remains strong for hotels, and travel technology companies see strong bookings being made around the world. It seems like U.S. tax reform and the windfall it has given companies is allowing them to continue to increase their spending on business travel and meetings alike.
Hospitality company executives, in particular, laid out the upside of this phenomenon In their first quarter of 2018 earning calls. Strong demand will hopefully allow them to raise rates even more, making money for franchisees by capitalizing on demand from energy and financial companies.
This also translates to increased spending on food and beverage, among other areas, as hotel chains pivot to provide more services outside rooms and event spaces.
Here are some excerpts of what the most important executives in travel said about corporate business in the first quarter of 2018.
Arne Sorenson, CEO of Marriott International
“We had special corporate rate growth of about 3 percent in Q1, which, all things considered, is not bad… Obviously, we negotiate special corporate accounts typically in the Fall. And to the extent that we are more optimistic about the economy collectively now than we were in the fall, we presumably can do a bit better in those negotiations if they were happening today than we did last fall. But that’s hardly a stark difference.
“And just let’s take a reminder here. I think Marriott is performing extraordinarily well. Marriott’s business model is performing extraordinarily well. We feel meaningfully better about our prospects today than we did a quarter ago. But we’re still talking about 2 percent to 3 percent RevPAR growth in the U.S. for full year 2018. We’re not changing numbers to sort of a mid- to high single-digit number, which obviously is something we’ve seen in some prior economic environments.
“And of course, that 2 percent to 3 percent RevPAR growth, that continues to put a premium on making sure we’re driving rates… making sure what we can on the cost side.”
Kathleen Kelly Oberg, CFO of Marriott International
“From a rate perspective, we just generally feel good. I think when you’re talking about fundamental business, we continue to see oil and gas, from a percentage increase basis, right at the top [of increasing corporate travel business]. But then for very steady kind of above-average professional services and technology, I would put at the top of the list. We still continue to see good numbers for financial services but not like the professional services and the technology and the oil and gas.”
Chris Nassetta, CEO of Hilton Worldwide
“The overarching view is that [companies] are more optimistic. They ultimately are spending more. They’re ultimately hiring more and they’re feeling better and I think they feel like they have more visibility in some very important areas that were hanging out there, regulatory and tax, where there was a serious lack of clarity on where those things were going over the last bunch of years.
“So I think they’re feeling good, and they are definitely both traveling more in a transient and a group context, and they’re spending more. I thought the food and beverage numbers I gave in the prepared comments, because I think that’s an important note, it’s only one quarter, obviously, but trends have to start somewhere. But I think it is reflective. And as I talk to our teams and I talk to CEOs, the companies that are big customers of ours, clearly, that confidence is translating and them letting them sort of loosen up on the purse strings.
“If you talk to the folks in hotels as the big groups are coming through, people are just spending more on individual events. They are doing more individual events. They’re doing coffee breaks that they might have cut out. Lots of examples. But again, it’s a quarter, but it’s… the beginning of a good trend of the confidence in the business community translating into higher spend.”
Mark Hoplamazian, CEO of Hyatt Hotels
“As I look at the quarter, there are really three things that stand out on the group side to me. One is short-term demand, the strength of short-term demand. The second is the strength of the corporate. And the third is incentive business. On the short-term demand front, we had very positive progression in both in the quarter, for the quarter and then the in the year, for the year bookings. And this is the second quarter in a row that we have experienced a positive progression in both of those dimensions. You have to go back to the end of 2015, the third and fourth quarter of 2015 to find two quarters in a row in which we saw strength in short-term bookings. So that’s encouraging.
“The other thing that I would say about the profile of the business in the quarter on the group side is that virtually all of the negative variance that we saw year-over-year was driven by associations. Corporate actually held up very, very well. It was down modestly both in terms of demand — that is room nights — and in rate, but not materially in either case. And this is a period, again, during which we have the Easter shift. And remember, we’re also lapping the inauguration last year. So when I combine those 2 things and I see corporate holding up as it had, I find that notable.”
Sean Menke, CEO of Sabre
“I will add one thing, I mean, if we continue to look at just corporate travel, corporate travel continues to improve. If we look at brick-and-mortar just growth on a global basis, it has been growing a lot. That does go back to just the corporate side of the equation. So that continues to be an encouraging sign.”
Mark Okerstrom, CEO of Expedia Group
“Egencia grew gross bookings 15 percent, exceeding $2 billion in quarterly bookings for the first time while first-quarter revenue was up a solid 23 percent. We posted another quarter of over 20 percent year-over-year growth in new client signings as the investments we’ve made in Egencia sales team over the past year continue to pay dividends. So we have good momentum in this business, a healthy sales pipeline and we’re progressing well towards hitting our ambitious goals for Egencia.”
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Photo credit: Marriott International CEO Arne Sorensen. Corporate travel growth has been a boon for Marriott as it moves to slash commissions on meetings. Skift / Skift