Not Every Brand Will Survive Covid-19, According to Hotel Executives
CEOs of Marriott, Hilton, IHG and Hyatt spoke to hospitality students about the state of the industry
Key insight:
The hospitality industry will likely have the effects of the Covid-19 crisis seared into its collective memory for years to come—but, week by week, the troubled sector is beginning to recover.
That optimism was the primary takeaway from a panel discussion featuring executive leadership from the world’s largest hotel brands. The virtual event, hosted by New York University’s Jonathan M. Tisch Center for Hospitality, featured Hilton president and CEO Christopher Nassetta, IHG CEO Keith Barr, Hyatt president and CEO Mark Hoplamazian, and Marriott president and CEO Arne Sorenson, who came together to speak to hospitality students.
At the beginning of the discussion, Hoplamazian mentioned the current unrest in the country in the wake of the death of George Floyd.
“[This] comes at a time when we have to acknowledge that there is a lot of pain and suffering in the world—yes, Covid-related, but also the outpouring of the grief and the anger that we’ve seen over this past week surrounding the events of George Floyd’s death are also really wrong and very important for us to recognize,” Hoplamazian said.
The executives discussed how they are handling the pandemic and the severe lack of travel demand. According to the American Hotel and Lodging Association, nearly 8 million Americans lost jobs in the hospitality sector in April alone, and the industry is expected to lose more than $120 billion this year.
But early April was also when the industry seems to have bottomed out, with Americans now inching out of their homes and starting to travel locally. Best Western president and CEO David Kong mentioned a seaside hotel that hit 100% occupancy the day travel restrictions were lifted in the state where it was operating. Barr said one of IHG’s luxury hotels in Vietnam reached 80% occupancy with domestic travelers looking for a break.
“We are at double the occupancy than when we were at the bottom,” Hilton’s Nassetta said. “Sadly, that’s still not a very high level of occupancy.”
Hilton’s occupancy bottomed out at 13% in April and is now between roughly 25% and 30%. Earlier this week, Sorenson said Marriott had seen occupancy surpass 20% in its opened hotels. In China, all of Marriott’s 350 hotels are open.
Likewise, Hilton will begin marketing to leisure travelers, as that segment is expected to rebound well before business and group travel.
“Trends have to start somewhere,” Nassetta said. “Fish where the fish are.”
Nassetta said it would take three years for the hospitality industry to return to pre-Covid levels—a sentiment Delta’s CEO previously shared.
While drive-to destinations are already recovering before their urban counterparts, the range from which they pull travelers has expanded.
“The circle that our hotels draw from has grown a lot,” said Hoplamazian, who said 90% of Hyatt’s guests over Memorial Day weekend and the following weekend had driven to their destination. Hyatt’s resorts in Arizona saw customers predominantly coming from Texas, Colorado and California. Hyatt’s Florida resorts also saw most of its guests from other states.
Some executives said they believed a post-Covid future would be one with fewer individual hotel brands under conglomerate ownership. Marriott oversees more than 30 brands, while in January, Hilton introduced its 18th brand, Tempo, an “approachable lifestyle brand” for the “modern achiever.”
“Not every brand is going to make it to the other side. There are thousands of brands of all size all-around the world, and this is a global crisis,” Nassetta said. “Not to be harsh, but there are going to be winners and losers, and some in the middle. I do think you’ll have some consolidation.”
Marriott’s Sorenson offered a different perspective, saying having various brands provides leverage.
“We think we compete better with the tech disruptors by having a range of choices within our portfolio,” said Sorenson, who added that the portfolio of brands was less important considering they all feed into Marriott’s loyalty program, Bonvoy.
Barr cautioned companies against making changes too quickly.
“Let’s not overreact to the long term with what’s happening today, saying we should radically reengineer the brand portfolio or reengineer the customer experience and redesign hotels,” he said. “I don’t think there are too many brands, but I think they are going to have to evolve a bit in the short term, without question.”
