“I think it’s hard to debate that it’s not the ‘Golden Age of Travel,’” Hilton Worldwide CEO Chris Nassetta told attendees of the 38th annual NYU International Hospitality Industry Investment Conference.
While he used a double-negative to prove his point, Nassetta remained positive throughout the conference’s “CEO Check In” panel that hotel industry fundamentals are strong around the world and could withstand the challenges facing hospitality brands.
Several fellow hotel industry giants — including Choice Hotels CEO Steve Joyce, InterContinental Hotels Group CEO Richard Solomons and Marriott International CEO Arne Sorenson — agreed with the Hilton leader’s optimistic assessment during the morning panel session at the NYU conference, taking place at the Marriott Marquis in New York.
“Over the last 20 years, the [global] middle class has doubled, and over the next 20 years the expectation is that it will double again,” Nassetta said. He added that a doubling of tourist arrivals over the past two decades has coincided with the growth in that worldwide middle class.
“If you look at lodging opportunity around the world, there are markets that are more mature, like the United States, but it’s a big world,” Nassetta said. “If you look at it, on average, hotel rooms are significantly underpenetrated around the world almost in every market relative to what you’re going to see in population growth and demand.”
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Marriott’s Sorenson added that different dynamics for consumers around the world, be they the growing middle classes of emerging markets or the ascendant generations of Millennials and Generation Z in the United States, would supply growth opportunities for years to come.
“You look at people in the United States,” he said, “they’re probably more interested in collecting experiences than in collecting cars and houses, which was probably the case 30 years ago when people were at the same stage of their careers.”
Nassetta shared that view as well, saying the hotel industry would benefit from a “demographic tsunami” as well as a “psychographic tsunami” that would produce a Millennial customer base sure to be the largest part of the travel population for the next decade or more.
“They’re very focused on experiences and traveling, and seeing the world and interacting with people in a way that’s much more intense than the generations before them,” Nassetta said. “You put those two together, they create a very special elixir for travel and tourism for a very long time.”
Solomons also struck a very optimistic tone about the long-term prospects for IHG and the global hotel industry.
“Human beings are naturally curious, and they’ve always traveled,” Solomons said. “It’s up to us to make it easier and cost-effective for them, and we’re very positive in the long term. … We just have to manage whatever the downturns or short-term implications are, which we’ve done before.”
A short-term hotel recession might not even be imminent, said Choice Hotels’ Joyce, who is expecting a “huge” summer travel season in 2016 for his brands and the whole U.S. hospitality industry.
“Mark Woodworth [from CBRE] put it well,” Joyce said, paraphrasing another presenter at the conference. “Just because the cycle has peaked doesn’t mean it’s over. … Our view is, gas prices are low, consumer sentiment is up, and people feel pretty good about their jobs. Everything we’re seeing says our folks will be out there for several trips.”
Joyce added that the question is, how high will RevPAR growth be, at least through 2017 and 2018? But over the six-year period this hotel industry cycle has lasted, he said, the sector has outperformed other industries because fundamentals have been strong. “If we get some GDP growth, we’ll get RevPAR growth,” he predicted.
If hoteliers are too focused on RevPAR this quarter or next quarter, they’re not defining the Golden Age of Travel correctly, Sorenson said. “But if you look at it over the long term,” he added, “these demographic trends are exciting, and we’ll build from that.”