NATIONAL REPORT—The CEO Check-In Panel, a yearly highlight of the NYU International Hospitality Industry Investment Conference, was moved to the virtual realm as conference chair Jonathan M. Tisch, chairman/CEO of Loews Hotels & Co and co-chairman of the Board of Loews Corporation, moderated a group from the C-suite to provide insights on the effect of the COVID-19 pandemic on their businesses and their projections for the future.
Panelists included Chris Nassetta, president/CEO, Hilton; Arne Sorenson, president/CEO, Marriott International; Keith Barr, CEO, InterContinental Hotels Group (IHG); Sébastien Bazin, chairman/CEO, Accor; Mark Hoplamazian, president/CEO, Hyatt Hotels Corporation; and David Kong, president/CEO, BWH Hotel Group.
Tisch started off the session by offering what will be needed for the industry to begin its recovery.
“Even as shelter in place and other restrictions are lifted, Americans and people around the world will approach travel slowly and cautiously until they feel confident that their risk of contracting the virus has fallen, either through a testing and contact-tracing system that far exceeds what is currently in place or, ultimately, via vaccine,” he said. “There will be no meaningful recovery of travel until people feel confident in the safety of the entire travel experience. To move forward, we need widespread and regular access to testing; health and safety guidelines on how we can safely open and operate our businesses; liability protections for businesses that follow proper health and safety guidelines; and ways to stimulate demand by incentivizing people to travel.”
He then asked the panel for their insights on how they and their teams have faced the challenges caused by the pandemic and where they are today.
Bazin stressed the importance of telling team members that family always comes before anything else.
“The first thing you have to do is accept something that you’ve never been through before,” he said. “Accept the unknown, accept that there are obstacles for which you don’t have the answers, and then you talk as much as you can to your many employees, whether they’ve been furloughed or not, and you tell them that first is health, second is family and work only comes third. Don’t look at the next 12 to 18 months, but look at the next three weeks or four weeks, to make sure you have the liquidity and make sure everybody’s safe.”
Kong and Barr expressed that they have been heartened by the way the industry has come together in this time of need.
“For example, AHLA’s Stay Safe initiative and the brands coming up with their cleaning programs to demonstrate that the industry players care about the health and well-being of our customers to give them confidence to come back and stay at hotels,” Kong said.
Barr added that he’s been encouraged by “the way that the people in our industry, across all of our companies, have reacted day in and day out, and the caring, the concern they’ve shown for each other; even as we’re making very tough decisions about having to cut wages and furlough employees, [we’re] hearing about the concern they have for the company, caring about leadership and each other, too.”
Nassetta provided the advice of “keep a steady hand on the wheel,” adding, “All of us, as leaders, have a lot of people looking to us—whether that’s our family, loved ones, friends or the hundreds and thousands of people that wake up every day that work in these fine companies of ours—and what they need to have is hope. They need to have a light at the end of the tunnel, and it’s our jobs to give him that.”
Hoplamazian said that he’s been preaching to his staff that they need to practice self-care. “They need to stay attuned to what’s happening with them mentally, emotionally and physically, and to keep well very holistically,” he said.
The government has stepped up to help the industry through the CARES Act and the Payroll Protection Program (PPP), but Sorenson directly asked of the leaders in Washington, “We need your help. You have got to step in here with unemployment insurance that’s immediately available and at much better levels than was done before. We need you to step up for hotel owners, most of whom are small businesses, so we can navigate from where we are to a hopeful place where we can be going forward.”
Looking to Recovery
Tisch then posed the question: “What will be the first markets to come back? Where do you start to see recovery as you look out for the next month to 90 days?”
Kong started it off by providing an example of one of Best Western’s hotels that did well during the Memorial Day weekend.
“I was just talking to one of my board directors that owns a hotel in Seaside, OR, and he just opened because the city just allowed it,” he said. “The first week that it opened, he ran 100% occupancy, a rate that’s higher than the previous year. So, he had a better RevPAR than the previous year.”
He continued, “Demand is going to be dominated by road trips. People prefer to drive in the safety of their cars rather than fly, and I think open-air destinations such as beaches and parks would get the lion’s share of that pent-up demand.”
Barr noted, “I was talking to the Six Senses team in Asia this morning. They’re doing well. The hotel in Vietnam ran 80% occupancy this past month, and that was all domestic travel. It wasn’t people flying into Vietnam.”
With regard to the Americas, he said, “We are actually seeing the peak occupancies on Tuesdays and Wednesdays. There is business travel that is taking place—not a huge amount, but people are having to go out there and travel to do work.”
Nassetta provided a small bit of optimism: “We are double the occupancy we were at the bottom. Sadly, that’s still not a very high level of occupancy. I think we bottomed out at about 13%, and we’re running 25% to 30% at this point.”
He added, “I think it will start, and has started, with leisure, then business, then group—in that order, and I think it will be sort of a series of concentric circles around individual locations. People are coming out of their homes, and they’re saying, ‘Gosh, I’ll travel in my neighborhood or my region,’ and they’re getting a little bit more comfortable going by car to another region. Eventually, they’re going to be more comfortable getting on a plane and going a little bit further across the country and then, ultimately, getting on planes and going to conferences and going around the globe. But we’re a long way from that.”
Hoplamazian pointed out that he is seeing guests take long road trips to his hotels.
“The circle that our hotels will draw from has grown a lot,” he said. “The number-one source market for some of our resorts in Arizona this past weekend and over Memorial Day was Texas. There were a lot of people driving pretty far distances to get there. With respect to Florida, we also had strong results over the last couple of weeks, all leisure driven, also drawing from multiple states.”
He then noted that contact tracing has helped Hyatt’s business in China. “We’re running mid-40s occupancy in Mainland China, which is a significant progression over the last nine weeks or so,” he said. “What we’ve seen is it’s moved from what was exclusively leisure to now some big corporate travel, and we believe that a lot of that has to do with the fact that the contact tracing experience has yielded some confidence in being able to be back on the road and actually do some business travel.”
Sorenson voiced his frustration with the fact that many corporations have continued to keep their offices closed, which is hampering any business travel.
“Too many corporations are going to the most conservative place, which is to keep offices closed for a long period of time, and sometimes to communicate travel bans that are extending many months in advance, maybe even to the end of 2020 or well into 2021,” he said. “I think we will see, no matter what the corporate policy is, folks say, ‘I want to get back to the office. I want to get back to travel. Let me get out there and do the things that turn me on about my work,’ and that is often going to be about going someplace.”
Brands in the ‘New Normal’
The next part of the session focused on brands: how they will survive and if some will fall by the wayside.
“Brands mean something to our guests more now than ever before with the focus on safety, hygiene and cleanliness,” said Barr. “But how did the experiences evolve? We’re all trying to sort out: What’s the future of buffets? What’s the future of restaurants and bars? How do we operate the guest experience? I’ve told our team not to overreact for the long term. We shouldn’t radically reengineer the brand portfolio or the customer experience, or redesign hotels. Let’s do what we need to do in the short term to give customers the sense of safety and security for traveling, and continue to look at how we can sharpen up our brands.”
Nassetta believes that some brands won’t make it out of the crisis.
“I think by definition you will probably have fewer brands in the sense that not every brand is going to make it to the other side,” he said. “There are thousands of brands of all sizes all around the world, and this is a global crisis; that will mean that there’s going to be—not to be harsh—winners and losers, and some in the middle. So I do think that you’ll have some consolidation.”
Hoplamazian noted a company’s finances may determine if a brand survives.
“The duration and the profile of the recovery is still so uncertain that it is challenging, especially for smaller organizations that don’t have balance sheets that allow them to raise capital going into this,” he said. “There will be some that don’t make it. It might be that they don’t have the right model, but maybe at least as much in play is going to be the liquidity perspective.”
Sorenson added that the brands that offer a unique experience will likely be the ones that travelers will turn to.
“I think if you look back a couple of decades, if we delivered a consistent experience that was enough,” he said. “That consistent experience of course required a good-sized and clean room, and friendly service, but didn’t necessarily require a unique design or a design that engaged the senses. In some respects, we have seen all of that change. I think there is already a sense that I need to see where I am. I need a variety, even in the biggest brands.”