A Candid Conversation: Hospitality Leaders at NYU

When you have the CEOs of IHG (Elie Maalouf), Marriott (Anthony Capuano), Hilton (Chris Nassetta), Accor (Sébastien Bazin), and Hyatt (Mark Hoplamazian) on one stage chatting like childhood buddies, you pinch yourself a few times to make sure it’s real.

That’s exactly what happens yearly at the NYU Hospitality Investment Conference like it did this year. “The CEOs check in” is a session that started remotely during the pandemic and has been going strong ever since.  They handled various topics with aplomb and distinct optimism, giving us all the feeling that the industry is doing well and headed in the right direction despite some headwinds this year. Here are a few nuggets of shared wisdom from the session.

Shifting Sands: How Travel Patterns are Evolving

While the US might be slowing down a bit, other regions are booming. The Middle East and Southeast Asia are on fire, fueled by a growing middle class with serious wanderlust. We’re talking about a 200 million person increase in these regions over the next few years, compared to the US middle class of 100 million. This middle class loves to travel, and they’ve got the infrastructure to support it with modern hotels and transportation popping up everywhere.

One key takeaway from the CEO sessions was a future brimming with opportunities outside of Europe and America. These regions are expected to see demand for hotels soar 3-4 times higher than supply, according to industry leaders. That doesn’t mean the US is out. It’s still the biggest market, and it’s still growing, especially in the mid-market hotel segment.

Europe’s a bit of a patchwork. Northern Europe isn’t seeing the same boom as the South. And the Paris Olympics might not be the travel windfall everyone expected. The real benefit might come later, thanks to the new infrastructure.

India is a game-changer. International travel is surging, with ADRs jumping 30% year-over-year. The big change in India is that hotels have gone public, signifying real capital formation previously dominated by families and small groups. China’s back in the game, too, but mostly focused on domestic travel for now. But here’s the thing: China and India are poised to be the two biggest hospitality markets in the world. Sure, there will be bumps along the road, especially in China, but in the long run, China will be the number one outbound market, and India’s growth will explode in the next decade. Looks like the next 10-20 years will see India and China become goldmines for all these hospitality brands.

Economics of the new travel paradigm

Business travel has picked up significantly. For example, New York is up 20 percent for business travel over last year, and leisure travel is up 10 percent over a high base from last year. Small and medium-sized business travel led the way, but large corporate accounts are up as well. Predictions like Bill Gates’ about a permanent 50 percent decline in business travel have been proven wrong.

Travelers are willing to pay more. Revenue per available room (RevPAR) isn’t quite where it should be, but prices are creeping up across all sectors. Leisure travel is all about experiences, and people are happy to pay for them. And guess what? Group bookings are going gangbusters, with fees for advanced booking surging for two years straight. Corporate bookings are ticking up month after month, even during this election year. With a lack of new hotel construction, there’s a squeeze on supply. IHG is getting clever, converting office space into hotels to meet the demand. Marriott is doubling down on luxury, which gives them a bigger slice of the pie (20% of fees for 10% of volume). Accor is another luxury leader, with less than 20% of its portfolio in luxury, but it generates a whopping 45% of its revenue.

Unlike other sectors, the travel industry is set to see significant job growth. Currently, 10-12 percent of jobs worldwide are in travel and hospitality, and this is expected to increase to 25 percent.

The industry is cyclical, with the lows being higher than previous highs, indicating resilience. Geopolitical challenges are somewhat mitigated by the asset-light model that these brands are adopting. For example, in China, all the assets are Chinese-owned.

Travel industry titans are embracing artificial intelligence (AI) – GenAI, as they’re calling it. It’s not just about fancy chatbots for guests. GenAI is streamlining internal processes and hotel operations. With the labor force not expanding, it creates the capacity to enhance services without increasing screen time for agents.

Building Bridges, One Journey at a Time: Why Travel Matters More Than Ever

Conrad Hilton once said that travel and tourism make the world a better place, and this belief is more relevant now than ever. Travel is the true antidote to many of the world’s challenges. In an increasingly polarized world, travel fosters understanding, connection, and unity among people from diverse backgrounds. It’s a powerful force that brings us together and enriches our global community, underscoring the importance of continuing to grow and invest in the travel industry.

Whether it’s optimizing hotel operations, enhancing customer engagement, or developing new travel experiences, Tech4TH is dedicated to pushing the boundaries of what’s possible. We believe that by working together, we can create a future where travel not only brings joy and adventure but also unites people and cultures across the globe.