The hotel sector largely decamped to Paris in early August, after Bloomberg dubbed it Summer Davos and turned it into a business expense. This presumably means the appearance of Snoop Dogg at the next Actual Davos, an event we await with slavering delight.
But between the Snoop spotting and working out how tall you were compared to Simone Biles, results season continued and one suspects that Zoom mostly took the strain.
This season’s debate saw the sector and its adjacent distributing chums moving ever closer in a manner which suggests we may be heading towards a replay of the LOOK OUT IT’S THE OTAS freakout we all enjoyed a few years back.
But first: what happened. At Accor – which is busy attending to one million pieces of bedlinen at the Olympic Village – CFO Martine Gerow reported that which was a common thread from those dragged away from the handball, namely; “we’re seeing softening in the US”.
Gerow also tossed in that, with 46 brands, it didn’t “have the appetite to pick up additional brands” which will come as a nasty shock to the ex-Accor staffers whose career strategy sees them set up brands for Accor to acquire. You’d think once you hit 46 you’d go for the full 50, but one cannot pander to people’s taste for round numbers.
Back in the US, and Marriott was able to add colour to that softening, with CFO Leeny Oberg reporting that ancillary spend “was a hair softer than we anticipated. And I think it does show that the consumer, in general, is perhaps being a bit more judicious about the fancy dinner or going on that extra trip when they’re on a vacation”. Upsetting not only to lovers of revenue, but also lovers of profit, who have been leaning on experiences and fancy dinners to offset the cost of teams and keeping the lights on.
At Hilton, Chris Nassetta chose to describe the fallback of the leisure spend as “normalising leisure growth”, elaborating on this with the comments: “if you break it apart, segments in the lower half of consumers, maybe even the lower three quarters …they had bank accounts, and checking accounts full of money coming out of Covid. They’ve spent all that money. They’re now borrowing more. And so they have less disposable income and capacity to do anything, including travel. You go up to the upper echelons and people still have pretty fat bank accounts”.
So to conclude: the leisure traveller, which the sector had to lean on during and immediately after the pandemic, is of waning interest. The good news is that the corporate traveller is coming back, so we can all return to our original positions.
But it’s not as simple as that. While hotels were thinking positive thoughts about the leisure traveller, analysts and shareholders were being all demanding about hotel pipelines, which forced companies to be more imaginative in the ways they thought about growth.
This has driven a combination of buying and selling brands, nicking hotels off each other (‘conversions’) and doing strategic deals with distributors. How much of this is real growth will come out in the wash, but Nassetta reassured analysts that, while its perky NUG of 7% to 7.5% for the full year was aided by “recent tuck-in acquisitions and strategic partnerships” next year it was going organic.
And that’s all great, but while hotels dance around the edge of getting more into distribution and less into hotelling, they’re not alone. Airbnb was also thinking about how it could expand, while also noting that people wanted to spend less money when they went away. They wanted cheaper ‘Experiences’ (it gets a capital letter because it’s a separate offering for Airbnb and the group is planning to relaunch it), turns out.
Airbnb was planning to extend its empire by eating the supporting companies who have grown up around it – the birds picking insects off the water buffalo, if you will – and launching a ‘co-hosting marketplace’ whereby even if you can’t be bothered to Airbnb your flat, maybe your neighbour can? We can look forward to more detail on that in October, said CEO Brian Chesky, adding; “Then next year we’re going to begin to expand Airbnb truly beyond our core business”.
Thus followed the usual chat about how Airbnb is a verb and Amazon used to just sell books and so on. Where this became troubling for hotels were comments such as “we’re not philosophically misaligned with adding hotels”. The group owns HotelTonight, regular readers will recall, but the vagaries of the platform have historically made it tedious for hotels to list.
There were addition mutterings about using hotels to fill in network gap and a cautionary babble about how hotels wouldn’t become the majority of the inventory, but where it became more troubling for hotels was when Chesky started talking about the group’s own experience of the Olympics.
Airbnb, he said, “increase excess capacity in cities all over the world” during these events. So successfully that the platform was “building a strategy for the top thousand events in the world”. For hotels, these big events are a chance to drive rates and make those tasty profits which encourage them to offer to deliver one million pieces of bedlinen in the first place.
Airbnb’s new strategy will see it actively seek to take the heat out of those markets, while also using its strong brand to take some of the distribution the loyalty schemes have been eyeing (and let’s not forget Chesky has mentioned launching one of his own).
With peak rates extracted by pop-up rooms, hotels will have to focus more on the grind and less on the medals. Is the balloon going up for the sector?