What Hilton, Hyatt and IHG Could Reveal This Week on Development Deals

A bulk of the world’s largest hotel companies will report their first quarter earnings over the next two weeks, and it will give insight into how successful their branded-is-better development logic has been over the duration of the pandemic.

Hilton, Hyatt, and IHG report this week while Marriott and Choice Hotels both report on May 10. Each of these companies spent the better part of last year touting the benefits to brand affiliation (global distribution, loyalty programs, customer familiarity, etc.) coming out of the crisis, but actual results will likely be mixed.

Choice is likely to be one of the more successful companies to beef up its development pipeline in recent months. Wyndham Hotels & Resorts, widely seen as one of Choice’s direct competitors, posted strong gains to its pipeline in the first quarter.

Wyndham’s development pipeline grew slightly to 187,000 rooms in the first quarter. The 62,000-room China portfolio is 20 percent higher than it was a year ago. That should bode well for Choice, given its brands are typically located in drive-to and leisure markets.

Wyndham CEO Geoff Ballotti chalked up his company’s success to maintaining focus on growth through the pandemic and not laying off a single staffer involved in bringing in more franchise agreements.

“For opportunities, you need franchise sales teams in place, and we have those teams in place,” Ballotti said on the company’s earnings call.

A Mixed Bag: Companies like Hyatt, Hilton, IHG, and Marriott will all point to signs of growth, but it may not be as robust as some of the companies centered largely on more economy and mid-tier brands like Wyndham and Choice.

Accor, which provided a first quarter financial snapshot last month, had a slight reduction in its global pipeline, contracting by about 1,000 rooms and five hotels in the last three months. But the other major brands may actually take this as somewhat good news: Paris-based Accor is heavily concentrated in Europe, which has faced multiple rounds of lockdowns due to slower vaccine rollouts.

If Accor, which fared worst among major hotel companies last year with a $2.4 billion annual loss, only lost five hotels in its development pipeline, the other “big 4” may not have much to worry about.

The 4,967 hotel projects under construction or in various stages of development at the end of the first quarter in the U.S. was actually a slight decline from last year, Lodging Econometrics reported late last week. But this isn’t anything like the sharp drop in hotel construction and planning seen during the 2008-2009 downturn.

“While this is a slight dip in the pipeline year-over-year, it’s not unexpected given the lockdown and travel restrictions over the past year,” the Lodging Econometrics report stated. “Americans are becoming more optimistic about summer travel and are making plans now. As a result, operating performance is expected to soar late this spring, summer, and fall.”

Eyes on IHG: We’ll be watching IHG the most this week. Its Holiday Inn and Holiday Inn Express brands are some of the most popular midscale brands of the major companies.

IHG announced in the first quarter 60 Holiday Inn Express properties are slated to open across Europe in the next five years, and it’s likely the company will continue to tout such growth — especially on the conversion front — on Friday’s call.

IHG CEO Keith Barr also noted on the company’s fourth quarter earnings call that the Middle East and Southeast Asia were strong growth opportunities to negotiate with owners of existing hotels to take on a brand. Roughly 60 percent of the hotels across those two regions are independent, Barr said.

Friday’s earnings call will be an early indicator of whether the company was able to make inroads with any of those existing hotel owners.

“That mainstream, select-service space is incredibly popular with owners because of high returns,” he added. “Midscale, the growth engine of the company, will continue to accelerate going forward.”

Taking the Vegas Development Model to Macau

Macau’s gambling revenue recovery isn’t impressing investors, despite the robust travel rebound across Greater China thanks to domestic travel. It isn’t a shock, then, some developers are turning to the Las Vegas playbook to carve out a new long-term strategy.

April gross gaming revenue was up to $1.1 billion, according to Macau’s Gaming Inspection and Coordination Bureau. While a major improvement from the less than $100 million in revenue seen in April 2020 during the depths of the pandemic, this year’s numbers still came in below analyst expectations, Bloomberg reports.

Mainland travel to the island softened in light of tougher-to-obtain visas and virus tests required to cross the border into the special administrative region. None of the major casino companies are singing a swan song to Macau — it is the largest gambling market in the world, and booking trends are looking good for the upcoming Golden Week holiday.

But it may be time to look at diversifying the revenue stream.

Shake Things Up: Las Vegas operators shifted away some of the focus on the casino to other revenue generators like restaurants, nightclubs, and entertainment in recent years.

Casino gambling accounted for a little more than 30 percent of overall Las Vegas resort revenues before the pandemic. But companies like Las Vegas Sands and Wynn Resorts had a different financial split pre-pandemic in Macao, where more than 80 percent of overall revenue came from the casino floor in the years leading up to the pandemic.

A push to bring new attractions to Macau is already underway.

Las Vegas Sands is rolling out this year the $2.2 billion Londoner Macao — a UK-themed resort with replicas of Big Ben, the House of Parliament, select suites designed by soccer star David Beckham. MGM Resorts plans to expand its two Macau resorts with more hotel rooms and other entertainment options.

“We still have and continue to have long-term aspirations and hopes for [Macau] returning this year,” MGM Resorts CEO William Hornbuckle said last week.

Talking Timeshares

The timeshare sector’s recovery momentum pushed ahead last week, as the newly named Travel + Leisure Co. (formerly Wyndham Destinations) posted a $29 million first quarter profit.

Hilton Grand Vacations, which announced a $1.4 billion acquisition of Diamond Resorts earlier this year, reported a small $7 million loss; however, the company noted March occupancy rates averaged nearly 70 percent and reservations activity was back to 2019 levels.

“There is a cadence to how consumers are starting to travel again,” Travel + Leisure Co. CEO Michael Brown said on the company’s investor call. “We knew the owners would come back. They came back very quickly.”

Travel + Leisure posted some of the more impressive swings in bookings in the last quarter, especially over the month of March.

California bookings were down 44 percent in January but are currently up 27 percent. Bookings in Nevada were down 27 percent the first two months of the year but are now up 16 percent. Hawaii was down 40 percent and is now up by 33 percent from 2019.

Sales Overlap: Leaders at Wyndham see opportunity to further work together with its timeshare partner, which was spun off from the hotel company in 2018. Travel + Leisure still has ties to Wyndham thanks to its “blue thread” linkage to the Wyndham Rewards loyalty program.

Wyndham CEO Geoff Ballotti indicated last week there was the potential for some franchisees to bring Travel + Leisure teams to take over concierge services at some hotels and drive even more brand awareness to its timeshare and travel subscription offerings.

“There are so many new initiatives our two teams are working on to continue to drive new owner sales for Travel + Leisure,” Ballotti said.