The leader of the world’s largest hotel company said the worst of the financial fallout from coronavirus is in the rearview mirror. But business meeting bans and corporate work-from-home policies aren’t helping the travel industry accelerate any faster into a recovery.
Marriott CEO Arne Sorenson on Monday said demand and occupancy rates across the company’s portfolio have increased every month in every region of the world since bottoming out in April. While drive-to and leisure travel led the hotel industry’s recovery around the world, China — the country furthest ahead in a rebound — is even seeing the return of business transient and group business travel.
But some of the world’s largest companies enacted worker policies through the summer of 2021 in response to coronavirus fears, and that could hinder how far hotels can bounce back financially in the next few months.
“While we all need to make decisions to protect our people and make sure that we’re not putting people out in risky environments, there’s absolutely no reason for us to be making decisions about what offices look like or what travel looks like in the second quarter of 2021,” Sorenson said during an investor call.
Sorenson did not mention specific companies by name. But Google last month extended a coronavirus stay-at-home order for employees through June 2021 due to fears of spreading coronavirus. Facebook cancelled meetings with more than 50 people until June 2021.
While Facebook, Google and others tout these policies as promoting worker safety, Marriott has a clear financial motive to hope the timeline shrinks and workers are traveling earlier than the summer of 2021.
Group business travel accounts for a third of room revenue in luxury and upper-upscale hotels across the U.S. The group business sector also accounted for between 22 and 24 percent of total U.S. hotel occupancy between 2012 and 2019, according to STR.
“Too often we see big, big companies making decisions to keep offices closed as much as the next year,” Sorenson said. “It’s frustrating to us in in the sense that it’s sort of withdrawing from the economy.”
The corporate call-out comes as travel analysts caution the hotel industry is vulnerable to a potential double dip recovery, as summer leisure travel recedes in the fall and business transient activity doesn’t kick back in like it normally would. But Sorenson appeared less concerned with a potential leisure traveler demand shortcoming in the next few months.
Leisure travel accounted for 36 percent of Marriott bookings in the 2019 summer months and only dipped to 32 percent in September and October. Leisure travel once again picked back up in November and December due to winter holidays and vacations.
“We are optimistic the second quarter will mark the bottom, and the worst is now behind us,” Sorenson said.
Marriott still has a significant financial hole to crawl out of.
The company reported a second quarter loss of $232 million and a little more than 84 percent drop in global revenue per available room, the hotel industry’s key performance metric. While the company is seeing monthly occupancy growth in all regions it operates, some parts of the world are rebounding faster than others.
Occupancy levels hit 60 percent in Marriott’s Greater China portfolio, which accounts for nearly 10 percent of the company’s global room count. The numbers show, while leisure travel still accounts for most reservations, business and even group business travel is beginning to flicker back to life in China.
“The recovery of travel in Greater China demonstrates the resiliency of demand once the virus is under control,” Sorenson said. “At the current rate of recovery, the Greater China market could approach 2019 occupancy and [revenue per available room] levels as early as next year, even assuming limited international guests.”
Despite the ongoing surge of new cases in the U.S., Sorenson wasn’t as bleak on his U.S. recovery outlook as some travel analysts have been in recent weeks. The U.S. is still behind China in recovery and relying primarily on leisure and drive-to travel. But despite a dip in occupancy in early July stemming from the case surge, Marriott’s U.S. portfolio still increased occupancy by 5 percent from June.
“That tells us that, notwithstanding the frustration around the virus numbers, the American traveler and consumer and, I think, increasingly the business traveler will say, ‘You know what? We’ve got to get back to normal life,’” Sorenson said.
Dimmed Optimism? Maybe Not
Sorenson in June noted the U.S. and China, despite their political differences, would lead the world in travel recoveries due to their similarly strong domestic traveler base. Europe, which relies more on long-haul travel, would take longer to return to 2019 hotel performance levels, Sorenson said.
He later signaled to The New York Times in late July he was “less optimistic” than he was earlier in the summer due to the spread of the virus across the U.S. But he clarified Monday the dimmed optimism doesn’t necessarily extend to his overall hotel outlook.
“I am no more optimistic about the virus than I was a month ago,” he said. “I am, however, more optimistic about the recovery of travel and the recovery of our business.”
The July numbers from the U.S. show a “gratifying resilience” in the American traveler, Sorenson added. He also expects travel demand will eventually fully rebound to pre-pandemic levels.
The long-range view extends to the development community, at least in China. A tightened lending environment in the U.S. is making it harder for new deals to get signed. But signings in the Asia Pacific region, led by China, are up 30 percent.
“It’s easy to be in China and look at Covid-19 as not a thing of history quite yet — that obviously won’t be until we get a vaccine … but, by and large, the Chinese are back to traveling again,” Sorenson said. “Owners in the region are taking a long-term view of the market.”
Even in the U.S., most stalled projects are simply delayed rather than getting cancelled. The company’s global development pipeline is at 510,000 rooms, with more than 230,000 rooms currently under construction.
“While this was by far the most challenging quarter in the history of the company, I am pleased by our progress,” Sorenson said. “I am optimistic about the trajectory of our business in the months and years ahead.”
Read More —> Source link