It was a game of two models this week, with Airbnb and Marriott International both reporting their third-quarter numbers.
In the case of the first, global recession is good for pipeline as more people need to rent out their spare rooms. In the case of the latter, global recession is bad for pipeline as fewer people will be travelling.
As ever, all is not as it seems. At Airbnb, pinning your expansion plans on a dive in people’s fortunes presents a series of issues around presentation. Of course this depends on Airbnb’s presentation itself, ie that of a homespun, neighbourhood platform, just helping the little guy earn a bit of money by renting out a treehouse *cue moving acoustic guitar music, with host offering warm scones and hugs*. The truth is a little more investor based, with apartments acquired solely to rent out, fewer scones and you ain’t getting a hug from a key box.
For these investors, pressures are indeed pressing, but more along the lines of ‘can I pass on energy price increases to guests or is it better to go with traditional renting where I don’t have to fret about such matters?’ So recession: good for pipeline, energy costs rising: bad for pipeline.
CEO Brian Chesky told analysts: “People come to Airbnb because they can find great value. One of the things we’re doing is a move towards all-in pricing, instead of seeing a nightly rate. And then our search ranking is going to prioritise great value and great deal for the fully loaded price.” So stay cheap or drop down the ranking, hosts
The platform is going to make it ‘super easy’ to join, Chesky announced. Coincidentally, many more jurisdictions are planning registration programmes for the platform and its chums. Dave Stephenson, CFO, said: ‘We believe that the reasonable regulation actually normalises hosting. And when you normalise hosting, it can really be a foundation for future growth. So we actually think that you do this in a reasonable way, and it will actually be a tailwind to growth in the future.”
Meanwhile at Marriott International, where zoning is a factor and scones are available regionally, everything was awesome, as the song goes. In an echo of the rest of the sector, ADR was roaring along, up 16.9% on the year around the world, up 42.8% in Asia Pacific (excluding China).
CFO Leeny Oberg said that “pent-up savings” were the hero we were all eager for and were keeping ADR up. She was eager not to forecast a recession – and who would be – but the company said it was keeping an eye on macro economic conditions. And the extraordinarily-short booking window of around three weeks meant, CEO Tony Capuano said: “Trends can change quickly”.
Oberg added that a recession might not be so bad for Marriott, commenting: “We could perform better to how we have in previous recessions. Unemployment rates are at historic lows and we are a far cry from the 9.5% interest rate we were at in the Great Recession. And people do not want to postpone travel. There looks to be extra room there that will help as we go into a potential recession”.
Marriott’s results came as we were recording our podcast with Javier Battle, managing partner, Okami Hotels and Battle had also seen these pent-up savings being deployed. He also thought there might be a limit to these and that this winter might be something of a drain on them and not just because we were spending our weekends in the nearest Four Seasons.
So Marriott was chipper, but analysts were interested in the mid-market purchase it made last month and Capuano confirmed that the group would indeed be looking at the suitability of the City Express brands for a global rollout. He added: “We are not in the midscale segment in the US, but this acquisition gives us the option to evaluate”. So, y’know, if the pipeline needs a cheaper product, Marriott is there for you.
The group was expecting the NUG to return to pre-2019 levels in the next couple of years and Capuano added that the strength of brands meant that, even with financing tight, its lovely flags meant that what debt was out there was heading to its owners. Asked about ‘backstopping’, the CEO said that he didn’t see the group’s approach to key money changing any time soon.
Oberg was more blunt: “We are not seeing that we are increasing our financing support for deals”.
One area where the two hospitality groups were most definitely diverse was loyalty. Airbnb has loyalty driven by brand (and price); a more traditional form of loyalty. Marriott reported that Marriott Bonvoy hit 173 million members at the end of September and that during the quarter, Bonvoy member penetration achieved record highs, reaching 60% in the US & Canada and 53% globally.
Chesky has fluttered his eyelashes in a coy way when asked about loyalty. The group has the homestay market sewn up, but if those nasty rates keep rising, it might need another lure for guests. Scones may not cut it.