Hotel Execs See Ongoing Good Times
I’m fascinated by the hotel business, and find my interviews with hotel executives to be consistently interesting. With their fingers on the pulse of both business and leisure, those in the hotel world have a unique perch to analyze the economy. As part of our coverage for the Franchise Times 200 (see our October issue), I interviewed heavy hitters from Hilton and Marriott.
Unintentionally, both conversations started the same way.
“The overall fundamentals of this business are about as good as I’ve ever seen then,” said Jim Holthouser, executive vice president of global brands at Hilton. He cited stable economic growth, hotel demand outstripping supply growth (4%:1%), growing pricing power on the part of hotel operators and a growing attraction of capital from outside influences, suggesting there are plenty more hotel rooms to be built in the coming years.
“The fundamentals of the business are very strong,” said Marriott’s Liam Brown, president North America select and extended stay lodging and owner franchise services—one insane, but presumably impressive title.
Brown called out similar metrics, adding that the company signed more than 650 hotel agreements in 2014, which was a company record.
“We’re on target this year to reach more than a million rooms open or under development before the end of this year, and our owners and franchisees are set to invest $50 billion in new hotels over the next few years.”
So, distilling that down, it’s much more than my anecdotal observations that new hotels are popping up in every city center I visit. Major hotel brands have their right feet planted firmly on the gas pedal.
While many of Hilton’s brands are strong, particularly Hampton Inn, Holthouser said its upper-crust portfolio has been strongest as gen X-ers and millennials now consider travel a birthright rather than an optional luxury.
“Travel used to be considered a luxury,” he said. “In very affluent western societies, Europe and the U.S. and Canada, people have the means of traveling.” He added that, in 2013, a billion people crossed international borders for the sake of travel, and that’s expected to reach 2 billion people in the next 20 years.
“India, Brazil, there’s so much explosive growth in terms of people traveling that’s not even fully realized yet,” Holthouser said.
With Ritz-Carlton, Bulgari, JW Marriott, Edition, Renaissance, AC and Moxie, Brown said that Marriott’s luxury brands are also the stars of its portfolio. As hipper, more city-focused brands continue popping up, like its new AC Hotels, he added that revamping traditional, heritage brands like Marriott has become an interesting challenge for hotel companies.
“You have to constantly challenge yourself to reinvent, revamp, reposition and recast in the consumer’s mind the perception that they might have,” he said, likening legacy hotel flags to newly resurgent car brands like Buick. “Sometimes it can be hard, because you build this beautiful brand-new hotel and then you’re carrying the weight of what you have out there already on your shoulder.”
Looking ahead, Brown sees continued sunny skies in the global hotel biz as long as GDPs continues their slow but steady march upward.
“Our business is highly correlated to GDP growth,” he said. “The business of America is business, people traveling on business is our bread and butter, our highest rates and our most loyal travelers.”