What to Expect From This Week’s Hotel Earnings Season Kick-Off

Several of the world’s largest hotel companies report second quarter earnings this week, and don’t rule out the potential for at least one to post a profit. Another just needs to show it has stopped the financial bleeding from the pandemic for investors to be happy.

Accor, Hilton, and Wyndham all report this week, and all happen to represent different vantage points of the hotel sector.

Paris-based Accor, which posted a $2.4 billion loss last year, has been one of the most-impacted global hotel companies due to its significant exposure to Europe, where off-and-on lockdowns hindered the recovery momentum. Hilton saw a less staggering (albeit still grim) $720 million loss last year, likely a result of the company’s smaller exposure to Europe than Accor and greater presence in the U.S., where lockdowns ended earlier.

Accor simply needs to show some level of recovery — likely from domestic European leisure travel as well as inbound traffic from the U.S. to countries that reopened borders in recent months — is underway to satisfy expectations.

Hilton needs to show leisure demand to its resorts and hotels compensates for lagging performance in convention hotels and business travel-oriented properties in major cities.

Wyndham, however, needs to show a profit — and it almost certainly will. While the company lost $132 million last year, it also reported occasional profitability through the pandemic and only lost $7 million during the fourth quarter of last year during a winter surge of new cases in the U.S. Wyndham CEO Geoffrey Ballotti was among the most bullish on the prospects of what vaccine distribution could do for the industry’s performance.

“We are encouraged the vaccines are working, and we believe they will help to deliver a multi-year resurgence in leisure travel unlike any other in our industry’s history,” he said on an investor call in February.

More Than Money Talks: Massive profits are unlikely, especially at Accor and Hilton, until corporate travel revives and international borders are open. But that won’t keep hotel CEOs from trying to distract from less-than-stellar numbers with a growth story.

Conveying conversion momentum — that is, deals where owners of existing hotels are willing to “convert” their property branding to one of these companies’ brand flags — has become the standard executive boost of confidence on earnings calls during the pandemic. It’s an especially important growth tactic in a downturn, given lenders are less likely to greenlight a ground-up construction project for something like a hotel.

“We have a long-proven track record of growing net rooms through lodging cycle downturns by igniting our conversion engine, which is fueled through the strength and flexibility of our value proposition,” Michele Allen, Wyndham’s chief financial officer, said on an investor call last year at the beginning of the pandemic.

Every other major hotel chain executive had a similar tone on their respective earnings calls over the last year.

Accor will likely also point to its ongoing growth in the lifestyle hotel sector, properties that focus more on local experiences and heightened food and beverage offerings. The company announced a spin-off of its lifestyle brands last year with Ennismore, owner of Gleneagles and the Hoxton. While that deal has yet to complete, it is still a key source of growth and optimism for the company that has struggled so much over the last 16 months.

“I’m a big, big believer the lifestyle segment will account for probably more than 20 percent of all the hotel offerings on this planet in the next 20 years,” Accor CEO Sebastien Bazin said on an investor call earlier this year. “It’s a major acceleration and a statement in where Accor should be positioning ourselves but also not forgetting our legacy brands.”

Fall Fears: While hotel CEOs will likely rally around optimism due to the recovery spearheaded by leisure travel demand, they also have to face reality. The highly contagious Delta variant of the coronavirus is now the leading source of new cases around the world and threatens the return of much-needed business travel.

While occupancy rates continue an upward trajectory in markets like the U.S., there have also been setbacks. An outbreak of cases in the Chinese province of Guangdong sent occupancy averages across the country in a downward spiral in late spring. Hotspots of the virus in the U.S. include Florida, which has many of the American hotel markets that have performed best during the pandemic to date.

Airline CEOs like United’s Scott Kirby maintained optimism last week on earnings calls heading into fall, but hotel executives this week should be prepared to explain how to offset business losses in the coming months if corporate travel demand still isn’t ready to kick back into gear.

It’s a Short-Term Rental! It’s a Hotel! It’s…Both?

The line between short-term rentals and traditional hotels is especially blurred when it comes to Mint House.

The short-term rental provider launched four years ago and today toes the hotel line more than the likes of Vrbo and Airbnb. Mint House works with landlords and multifamily real estate developers to take over certain parts of a development — sometimes even the whole building — and run them like a hotel. Rather than taking out a long-term lease for these spaces, Mint House operates on a revenue sharing agreement with the landlord or property owner.

“That means we’re both working together in some ways to generate as much revenue and profitability into that building as possible as opposed to signing a lease where there’s a fixed payment, and then everything that we do is entirely our business,” said Mint House CEO Will Lucas in an interview with Skift.

The company, which currently operates 21 properties across 12 U.S. cities, survived the pandemic and sees plenty of growth opportunities ahead. Mint House is working with developers on some of the brand’s first ground-up projects, and the company previously indicated a growth target of 50 properties by 2025 as well as plans for a subscription-based service for travelers.

But Mint House also needs to get ahead of the competition. Not only do brands like Sonder compete in this space, hotels also appear primed to make similar inroads in residential real estate.

“We definitely know for sure that a number of hotel companies are aware of this space and are very interested in the space and interested in participating in the space in some way for sure,” Lucas said.

The Sell: So why should a real estate developer of a new apartment building in New York City or Nashville go with Mint House rather than wait around for one of the traditional hotel players to build up a presence in this space? The scrappy start-up can offer many of the brand standards that appeal to travelers without the high-cost infrastructure that comes with a massive global hotel company.

Adjectives like nimble, agile, and tech-savvy are more synonymous with a company like Mint House than traditional hotel companies. But Mint House also has many of the features of a hotel.

The company’s brand standards call for buildings — typically Class-A high-rises in urban centers — to be highly amenitized with features like a pool and fitness center. Within a unit, expect things like high-end bedding and toiletries, and there is even a digital platform to navigate through things like reservations and check-in.

But don’t expect this to always be an “us vs. them” battle between short-term rental operators and the hotel industry.

“I would not be surprised if we saw some partnerships or mergers of some kind between short term rental operators and hotel operators down the line,” Lucas added.

The Standard Expands to Belgium

Standard International partnered with Belgian lodging trust Befimmo on a new hotel slated to open in Brussels in 2025, the companies announced Monday.

The property will include 180 hotel rooms, 20 apartments, and various bars and restaurants. While it may only be one property, it’s a step forward in Standard’s long-awaited — and often vague — international expansion plans.

The company currently operates seven hotels — primarily in the U.S. but also with locations in London and the Maldives — and has eight more on the way, including locations in Australia, southeast Asia, Lisbon, and the Brussels property. Standard International also has six properties in various stages of development for its Bunkhouse brand.

“[The Standard, Brussels] property is a perfect step for The Standard in Europe,” Standard International CEO Amar Lalvani said in a statement.

A Hilton High-End Brand Deepens Its U.S. Presence

Hilton’s LXR Hotels & Resorts brand, known best recently as the soft brand behind one of the three brands within the massive Resorts World complex in Las Vegas, is gaining further ground in America.

The brand, whether you know it for its recent Vegas stint or for being a recycled flag from Blackstone’s prior Wyndham-Hilton ownership overlap, will expand to the northwest in Seattle. Hilton inked a deal, announced Monday, to convert the 120-room Hotel 1000 to an LXR affiliation.

The conversion deal is part of Hilton’s plan to add five hotels to the LXR portfolio this year.