As the dust was settling on the U.S. presidential election on Friday, the hotel industry’s leading CEOs met in a virtual panel and to a man – there were no women other than the moderator – there was renewed optimism.
The panelists were assuming Democratic candidate Joe Biden would win the election and that the U.S. Senate would remain Republican-controlled, which they believe will create an environment more ripe for compromise to help a battered nation recover economically and emotionally as it battles through the pandemic and philosophical differences.
During the 42nd annual NYU hotel investment conference run virtually, CEOs Keith Barr of IHG, Sébastien Bazin of Accor, David Kong of BWH Hotel Group, Chris Nassetta of Hilton, Arne Sorenson of Marriott International and Mark Hoplamazian of Hyatt Hotels Corp. expressed how they need the country’s leadership, no matter the makeup, to stabilize the economy by first passing a stimulus bill to help small business (their owners and franchisees).
“Then we will see where things go from there,” Sorenson said.
“It’s necessary with millions of frontline team members out of work,” Nassetta said about the urgency of passing stimulus as well as workouts to keep growingly insolvent small businesses afloat. “We need to address the nuances of CMBS loans and ultimately deal with the crisis to build back confidence.”
Nassetta also referenced a word used by Chairman and CEO of Loews Hotels & Co. Jon Tisch during the panel’s introduction, collaboration. “And hopefully you see that, and that we’re speaking with one voice around the world to governments about what they need to do.”
Nassetta added that the emergence of vaccines to address the pandemic won’t be enough to bring back the economy and the hotel business. “It won’t build enough trust,” he said. “We also need a massive testing regime and contact tracing to let people assess the risk and build up their confidence to become mobile again,” he said, adding that after the health crisis is under control there needs to be further stimulus and incentives specifically geared at getting people mobile again.
In the panel moderated by CNBC anchor Kelly Evans, Hoplamazian called the need for further stimulus acute, referencing a recent survey that said without assistance, more layoffs will come.
“We already have almost 2 million people out of our industry either furloughed or out of work… I think the chances of lame duck action is low, which is extremely disappointing.” He added, “The issue that’s ahead of us is to ensure that we get additional assistance to the small business owners so that they can actually bridge themselves to the future and maintain a level of employment.”
Hoplamazian also pointed to the need to repurpose the Main Street lending program, which he called a complete failure.
“A tiny, tiny percentage of the US$465 billion that was set aside has been actually awarded. “They recently made some changes to reduce the loan size so that it can capture smaller businesses, but honestly, the procedures are so cumbersome that I’m not sure that’s going to make any difference at all.”
Because of all the challenges to access those funds, Hoplamazian suggested moving those funds back to the PPP lending program, which has been more effective.
But even the PPP program has only been a bandage and not truly effective for the hotel industry, said Kong. “We’re only talking about 2.5 times payroll and related costs,” he added. “It’s really not sufficient for our industry.” He prefers a Congressional proposal that would provide needs-based grants for businesses down more than 25% in revenue with loans up to six months of expenses based on 2020 losses.
When asked about the impact of the U.S. presidential election, Bazin said the new president has to recreate and solidify ties with the European Union. “We need to be battling together,” he said in reference to generating more stimulus packages for owners.”
In a comment echoed by Barr, Bazin added, “They [governments] provide liquidity for those little guys next to us. The relationship between the big guys and the small guys has never been more evident, has never been more important and crucial for the industry.”
Outlook for 2021
At the close of the session, Evans asked the panel what they think 2021 will bring to the hotel world.
Sorenson joked, “We’ll be up massively from 2020.” He added more seriously, “Maybe it’s mid-year, maybe it’s second quarter, maybe it’s the third quarter, or, of course, it could be some other time we don’t know, but there will be an increasing sense that COVID-19 is getting behind us from the risk perspective. As that happens, there will be a step up in travel. It will be not instant, but it will be pretty darn quick. And what happens after that, of course, (we’re) going to find out how seriously harmed the underlying economy is because demand for travel depends on economic strength.”
Nassetta reaffirmed what Sorenson said, “I will go down right now by saying 2021 will be the highest RevPAR growth year in the history of lodging… I think the winter is going to be choppy. Asia, which is getting better sequentially, is really driven by Japan and China. Other parts of Asia are reasonably stable. We see Europe going backwards… I keep telling my team when the tulips come up on the East Coast of America, I think we’re going to be in a very different place… Having said that, I do believe it’ll take ‘23, ‘24 to get back to the levels of demand that we had in ‘17, ‘18, ‘19… Travel is an unstoppable force.”
Hoplamazian referenced a different dimension of rebound and recovery: the human condition and how much people’s emotional and psychological wellbeing have been assaulted.
“I think 2021 will provide a tremendous level of new hope,” he said, referencing the emergence of a vaccine. “It helps to frame how people can start to feel hope and feel optimism and feel positive about the future.”
Barr concluded by saying he hopes the hotel industry in 2021 will be perceived as having done the right things through the pandemic. “I think we’re going to be into the recovery in the second half of next year, and that we can look back and say that we made a difference. We made an impact. We may have not been perfect, but I’m quite proud of everyone in this call for the difference that they made.”