Unflinching hotel executives embrace changing travel patterns

LOS ANGELES — COVID-19 was a global inflection point, a pivot into a new way of living that is possibly permanent.

The remaking of the way people socialize, the way people work, the way people eat have all had an impact on the way people travel, and this is not necessarily a bad thing, according to hotel executives speaking at the Americas Lodging Investment Summit, here at the JW Marriott at LA Live.

The shift in travel trends means changing the way hotels cater to customers. One thing is for sure, leisure travel, which saved the hotel industry from abject collapse, continues to deliver demand and revenue, but will it last? According to Pat Pacious, president & CEO of Choice Hotels International, the leisure boom is being driven by some long-term fundamentals and what he called the three Rs: remote work, rising wages and retirement.

“Remote work has lifted the constraint of time,” he said, noting an increase in Thursday checkins and Monday checkouts. He continued, “Wages are up and the middle class got a pay raise and is using it on travel. Last, retirement, giving them the freedom to travel.” Pacious said Choice is well positioned for this last cohort because, as he put it, “People tend to travel in midscale properties when not traveling on the corporate dime.”

Last year, Choice acquired Radisson Americas, which allowed Choice to push further into the upscale segment, supplementing its Cambria brand. Also, the 450 Country Inns & Suites “slot in nice between Comfort and Cambria,” Pacious said

Elie Maalouf, CEO Americas, IHG Hotels & Resorts, described the “irreplaceability” of travel amid what he called an incoming era of “acceleration” after COVID. “Travel is at the top of discretionary spend,” he said. “Business travel is coming back,” he said confidently, noting airline CEOs who say they are flying full planes.

From left: Pat Pacious, CEO of Choice Hotels Intl.; Danielle Bozarth, senior partner at McKinsey; Jim Merkel, CEO of Rockbridge; Sloan Dean, CEO of Remington Hotels and Elie Maalouf, CEO Americas of IHG Hotels & Resorts.

Joining in the optimism was Sloan Dean, president & CEO of Remington Hotels, a third-party management company, who called group business “better than ever,” noting group revenue up over double-digit percentage in 2022. He added that the increase in group is helping offset the decrease in corporate transient travel. He added that Remington’s revenues are fully back to 2019, but he is still waiting and adamant to get profit back to 2019 levels and beyond. Part of the issue has been the rise in expenses, from wages to utilities, that hoteliers are still coping with.

The one non-hotel exec on stage was Danielle Bozarth, senior partner at McKinsey & Co. Her company is known to record loads of air miles, meeting with clients across the globe. She said her company is still traveling, but it looks a bit different than before. “It’s the lifeblood of our business,” she said, though noting that travel on a per consultant basis is dropping, especially as McKinsey seeks to meet its sustainability goals. She said while recruitment in the past was done in person, now it’s typically done remote.

At one point in the discussion, moderator Frank Nardozza, CEO of REH Capital Partners, asked the panel plainly if there were too many brands in the market, to which the brands on stage denied, while the one owner on the panel said there was certainly some confusion. “There is definitely blur and overlap in the brands,” said Jim Merkel, CEO of Rockbridge. Still, he’s pro-brand. “They are a risk mitigator for the owner, but some brands are better than others.”

Merkel added that from an investment perspective, what COVID did was defer dollars that otherwise would have been put back into capital improvements for hotels. And now it’s catching up. “There are lots of undercapitalized hotels and owners out there,” he said. “The dollars were not going into the assets during COVID, they were going to survival.”

The optimism that abounded on stage was summed up by Merkel. “To be an owner, you have to be optimistic. Travel is a growth industry. There are and will be shocks, but there is more demand for hotels in the future. They are places where people want to be.”