As economics pundits raise fears of a recession, the most powerful names in the travel and hospitality industry are pushing back, indicating bookings that illustrate a positive picture of the American consumer.
“We think this summer will be a travel gangbuster”, Marriot CEO Tony Capuano said this last week.
Marriott posted an 81% increase in first quarter revenue compared to the same quarter a year ago as more leisure and business travelers returned to travel with the easing of Covid restrictions.
Despite concerns about inflation, Expedia CEO Peter Kern said he doesn’t see travelers cancel plans because there is so much pent-up demand after the pandemic.
This demand has caused the average daily rate of US hotels to rise 40% from a year ago, according to hospitality analysis firm Smith Travel Research.
“We haven’t seen any signs of impact on consumers in terms of travel expenses. We all know there were pent-up savings and under-spending during Covid,” Kern told CNBC.
Expedia saw its gross bookings are up 58% in the first quarter from a year ago, a significant jump but slightly below Wall Street estimates.
With travel rebounding, publicly traded travel giants are starting to spend more on marketing and advertising, setting the stage for a competitive summer.
Kern hosted a travel conference last week in Las Vegas, where the online travel operator unveiled a number of new technology updates that provide travelers with new data they can use to make smarter choices when booking a trip. . These enhancements include a price tracking tool and personalized hotel scores based on guest reviews.
Reservation holding CEO Glenn Fogel not only joined the chorus of hospitality executives who strengthened the resumption of travel as restrictions eased, but he also shared a staggering number: gross bookings for this summer are recording 15 % above 2019 levels, before Covid closed the world.
“Travel is coming back, we’re all happy. We’ve been through a tough time for two and a half years where people haven’t been able to travel the way they wanted,” Fogel told CNBC.
The question now is whether summer 2022 will be as strong as CEOs imagine, or whether consumers are rethinking travel due to economic constraints or prolonged stock market volatility.
The market turmoil could eventually damage the “wealth effect,” Truist Securities housing and leisure analyst Patrick Scholes told CNBC. “Basically if we see a sustained bear market, people feel more conservative about their ability to spend.”
Things are still not that bad, thanks in part to the strength of the housing market, he said. “For example, personally, while my stock portfolio may be down this year, it is likely balanced by the appreciation of my home’s value,” she added.
Previous economic slowdowns have led to a drop in travel bookings. STR data shows that after each economic downturn, Americans have held back travel leading to a drop in bookings.
Pebblebrook Hotel Trust President and CEO Jon Bortz doesn’t think history will repeat itself. “There is so much emotion related to travel right now … [that] people won’t cancel a trip to see their family for the first time in two years, “he said.
While higher interest rates could push consumers to opt for cheaper options, executives see no evidence of this right now.
Some industry insiders disagree, saying they are starting to see the peak of concern.
Looking beyond bookings, new hotel construction has declined in recent months. More than 154,000 rooms were under construction in March, a decrease of 15.7% from a year ago, according to STR.
“Construction costs have increased substantially due in part to wage inflation, supply constraints and higher interest rates,” Jan Freitag, national director of the CoStar real estate research group, told CNBC.