Skift Take

Execs at the major hotel groups have a broadly upbeat outlook as they turn to AI to offset staffing shortages and enhance the guest experience.

The world’s top hotel executives are betting big on AI, groups, and India amid a post-pandemic travel resurgence that’s bolstering the bottom line despite economic headwinds and labor challenges.

That was Monday’s message from CEOs of the world’s largest hotel groups at the New York University International Hospitality Industry Investment Conference.

“Group [room bookings are] the strongest performance segment this year,” Marriott CEO Anthony Capuano said. His peers from Accor, Hyatt and Hilton also touted hefty rate hikes and double-digit growth in lucrative corporate and event bookings.

The upbeat outlook from executives came as hotels turn to AI to offset staffing shortages and enhance the guest experience.

“What’s going to be revolutionary about AI and generative AI is the tools that we will be able to enable our teams with to deliver a customer experience that is far beyond anything that we’ve ever been able to do,” said Hilton CEO Christopher Nassetta.

Leisure demand remains robust albeit slowing, while a supply-demand imbalance stemming from higher borrowing costs and regulatory hurdles has hotel groups eyeing conversions and banking on pricing power.

The executives also flagged India, with its emerging middle class and infrastructure investments, as a key multi-year growth story even as development lags other regions.

Here are the key takeaways.

1. Groups are heavily booking hotels for large meetings and events.

  • “So much of media coverage is about business travel and leisure, but ‘group’ is the strongest performance segment this year,” said Anthony Capuano, president and CEO of Marriott International.
  • “Corporate accounts for Accor across the globe, all the renegotiations with the large corporate accounts are all up between 5% and 8% in pricing over the next 12 months,” said Sébastien Bazin, chairman and CEO of Accor. “It’s significant.”
  • “Our corporate accounts in the year to date through April are up 12%, compared to total business transient, which is up 6% cumulatively year over year,” said Mark Hoplamazian, president and CEO of Hyatt Hotels. He added that reservations for large meetings are seeing “pretty significant mid-single digit year-over-year kind of price growth.”

2. Leisure travel is showing a weakened pace of growth, but it’s still strong.

  • “Last year, leisure was off the charts, and this year we’re still growing [at Hyatt] off a very high base of the last two years compounded,” Hoplamazian said. “But this year the big change is business travel. New York City is up 20% year-over-year, year-to date, in business transient. Leisure is up 10%.”

3. AI could put the hospitality back into the hotel business.

  • Executives noted that AI could enable their teams to deliver a better customer experience by providing tools that improve efficiency and service quality, using big data sets and generative AI to optimize operations, such as staffing and resource management.
  • “What’s going to be revolutionary about AI and generative AI is the tools that we will be able to enable our teams with to deliver a customer experience that is far beyond anything that we’ve ever been able to do,” said Christopher Nassetta, president and CEO of Hilton Worldwide.
  • “There will be some identified efficiencies,” Capuano said. “But the thing we’re collectively excited about is that AI creates capacity for our frontline associates so that they’re spending less time on administrative tasks and they’re instead engaging with the guests in the restaurant or at the front desk.”
  • “People didn’t join this industry so that they could look at a screen,” Hoplamazian said.
  • The pace of AI innovation is accelerating and will significantly impact guest experiences and internal processes, said Elie Maalouf, CEO of IHG Hotels & Resorts, which owns Holiday Inn and other brands. IHG is partnering with Google Cloud to enhance trip planning through its app.
  • The CEOs acknowledged the challenge of a shrinking labor force in markets like North America, Europe, China, and India. Given the limited growth in the labor force, AI and technology will be necessary to run hotels efficiently in years to come.

4. A supply-and-demand imbalance makes hotel development a good long-term bet.

  • Marriott’s Capuano emphasized that supply constraints because of regulation and higher interest rates hobbling loan approvals and construction, coupled with growing demand, create a long-term trend of higher rates and pricing power. He indicated that actual net supply growth in the U.S. is close to zero, with similar trends expected in the near future.
  • While the supply-demand imbalance is significant in mature markets like Europe and the U.S., it’s even more pronounced in emerging markets such as South America and India.
  • “In America and Europe, demand has been at least twice supply growth for the last 20 years,” Bazin said. “But in India, and Latin America, demand growth is often outpacing supply by three or four times.”
  • Problems with construction are leading hotel groups to do more converting of existing properties. “55% of Accor’s pipeline is now conversion,” Bazin said.
  • Sluggishness in new construction because of high interest rates has caused hotel pipelines to rise. For example, Hyatt’s pipeline had grown by nearly 85% since 2017 to 129,000 rooms.
  • “I spent part of this morning looking at a beautiful office building that’s highly under-occupied here in New York City at a great address where the owners are thinking of converting to a hotel,” said IHG’s Maalouf. “Converting an office to a hotel is not easy at all, but if you have the right address and the right floor plate, some owners are interested.”
  • Overall, the supply-demand imbalance will help bolster hotel group revenue and profits over the long-run, on average. “Each of us [hotel groups] is probably going to have 5% to 10% revenue growth for the year, and probably 10% to 12% EBITDA growth for the year,” Bazin said. “There are so many industries in the world that would love to have those numbers.”

5. India is a multi-year growth story.

  • Capuano said that India is experiencing an all-time record in its stock market and has a ravenous appetite for growth in the emerging middle class. He highlighted India’s favorable demographics compared to other Asia-Pacific regions, suggesting significant potential for growth in travel and tourism.
  • “Until the last five years, IHG’s business [in India] used to be 70% inbound international and 30% domestic,” said Maalouf. “I was there in April for a week. Our business is now 70% domestic, 30% international. Pricing power is rising, too. Domestically rates are finally moving up 30% year over year.”
  • Hilton’s Nassetta noted the substantial investments being made in India’s infrastructure, including airports, highways, and roads. All of this will help the hotel business, he said.
  • Bazin highlighted the bureaucratic challenges in opening new hotels in India, due to the numerous stamps and authorizations required. “To open a hotel in India takes between 5 and 6 years, while it takes probably two years in America and three years in Europe,” he said.

Accommodations Sector Stock Index Performance Year-to-Date

What am I looking at? The performance of hotels and short-term rental sector stocks within the ST200. The index includes companies publicly traded across global markets, including international and regional hotel brands, hotel REITs, hotel management companies, alternative accommodations, and timeshares.

The Skift Travel 200 (ST200) combines the financial performance of nearly 200 travel companies worth more than a trillion dollars into a single number. See more hotels and short-term rental financial sector performance.

Read the full methodology behind the Skift Travel 200.

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Tags: accor, business travel, ceos, china, corporate travel, future of lodging, hilton, hotel development, hyatt, Hyatt Hotels, ihg, india, marriott, Marriott International, meetings and events, summer travel, Summer Travel Demand, U.S. travel demand

Photo credit: Marriott CEO and president Anthony Capuano speaking on-stage among a set of hotel group CEOs at the New York University International Hospitality Industry Investment Conference. on June 3, 2024. Matt Rickman / Questex

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