Over the last several weeks, many travel businesses released their Q3 earnings where CEOs made statements and shared trends, insights and more. This helps us understand how some of the largest corporate players are viewing the recession, the state of their sector’s recovery and the general economy.
An impending recession seems to be on most economists’ minds as the world recovers from a global pandemic. Yet for now, most industry CEOs are reporting positive growth and expectations of that to continue throughout the year and early into 2023.
Here’s a deeper dive into their perspectives.
Near-Term Outlook Remains Positive
- Reporting that global revenue per available room rose above 2019 levels for the first time since the pandemic started, Marriott CEO Tony Capuano said during the company’s third-quarter earnings call on November 3, “We have yet to see signs of a slowdown in global lodging demand. In fact, we've seen just the opposite. Booking trends remain very healthy. Given sustained high levels of employment, consumer trends prioritizing experiences versus goods, pent-up travel demand and a high level of consumer savings, travel spending has been incredibly resilient.”
- Despite high inflation and a slowing global economy, Hilton CEO Chris Nassetta remains optimistic about the company's continued progress, telling analysts that the hospitality sector's fundamentals remain "pretty strong."
- Hyatt’s CEO, Mark Hoplamazian remarked, “There's ample room for further growth of travel spend as the underlying behavioral drivers of travel demand are powerful and durable and will, in our opinion, propel travel back to its pre-pandemic share of wallet relative to the broader economy.”
- American Airlines CEO Robert Isom said “Demand remains strong, and it’s clear that customers continue to value air travel and the ability to reconnect post-pandemic.” On the company’s Q3 earnings call, Isom said he expects the airline to likely get back to 95% to 100% of its 2019 capacity next year, an expansion he said is limited by slower aircraft deliveries and a pilot shortage on regional airlines.
- Delta Airlines, CEO Ed Bastian, said, “Our crystal ball is good for 90 to 120 days…But from what we can see and what our big corporates are telling us is that the travel sector of the economy is going to be very strong through the quarter and into the new year.”
- NBCUniversal, which owns Universal Parks and Entertainment reported record theme park earnings. NBCUniversal CFO Jeff Shell said, "Despite the economic uncertainty that you see elsewhere in the economy, we're seeing no effects of that right now in the theme parks, either in terms of our performance or our bookings going forward."
- Carnival’s CFO, David Bernstein remarked that third quarter 2022 represented a significant milestone in the resumption of guest cruise operations with adjusted EBITDA turning positive for the first time. He said, “Prices are higher in all four quarters of 2023. Onboard revenue per diems are up significantly in 2022, and this puts us on track for a record year in 2023 for onboard revenue. All of this clearly sets the stage positively for 2023.”
- Avis Budget Group President and CEO, Joe Ferraro said "Despite growing concerns around an economic slowdown, our strong summer performance, driven by increased demand in both the commercial and leisure segments, carried through to September. We remain optimistic this will continue throughout the fall and into the holiday season."
Leisure Travel is Holding Strong
- After experiencing another record quarter of leisure transient revenue, the sustained strength of demand from leisure guests shows no signs of softening according to Hyatt CEO Mark Hoplamazian. He said, “It's clear that people are prioritizing experiences and connection as we see in the upcoming festive season where our resorts are pacing 30% ahead of 2019. Leisure transient revenue is pacing more than 20% ahead of 2019 for the remainder of 2022 and into the first quarter of 2023.”
- Leisure travel continued to underpin Hilton's pandemic-era rebound, as leisure RevPAR exceeded 2019 levels by more than 11% for the quarter. Hilton CEO Chris Nassetta also cited data indicating that consumers still have a relatively high level of excess savings accumulated since the start of the pandemic.
- During the quarter, leisure demand remained well above 2019 levels, Marriott CEO Tony Capuano said. In the U.S. and Canada, full-service hotel revenue showed continued growth by ending up 3% over the third quarter of 2019.
- IHG CFO Paul Edgecliffe-Johnson reported that “clearly, leisure has been an important factor in our strong quarter three performance with rooms revenue from this driver up 12% on 2019.”
Business Travel has More Potential for Growth
- When discussing business travel, Hyatt CEO Mark Hoplamazian said, “In summary, as we assess overall business trends, we maintain our optimistic outlook. Future bookings remain strong, and the performance of our hotels post-Labor Day has exceeded our expectations with group and business transient showing encouraging momentum. Conversations with corporate customers continue to suggest further recoveries ahead for group and business transient...”
- Business travel appeared to stage a solid comeback in the third quarter, with Hilton CEO, Chris Nassetta reporting that RevPAR from business travelers had reached 2019 levels, thanks in part to a "notable acceleration" in travel by large corporations. Additionally, a Hilton survey found that 85% of business travelers hope to travel as much or more next year than this year.
- IHG CEO Keith Barr said in a Q3 earnings statement, “Discretionary business travel, group bookings and international trips have also shown increasingly encouraging signs, on top of continuing good levels of essential business demand.”
- On business travel, United Airlines, CEO, Scott Kirby said, “The corporate business travel recovery in the quarter was about 80% of volume of 2019 and stable over the quarter. It’s our observation that a Zoom meeting is simply less practical in a global setting. We remain optimistic that business traffic will continue to get better from this point forward.”
- Delta Airlines reported that they expect corporate sales recovery in the December quarter in the low to mid-80s at a system level. They have growing confidence that while there will be changes, corporate travel will fully recover. And increased workplace flexibility is creating new travel patterns.
A New Normal is Shaping Travel Patterns
- United Airlines CEO, Scott Kirby described that “with hybrid work, every weekend can be a holiday weekend. That’s why September, a normally off-peak month was the third strongest month in our history. People want to travel and have experiences, and hybrid work environments untether them from the office and give them the newfound flexibility to travel far more often than before. This is not pent-up demand, it’s the new normal. I think this new normal actually really allows us to become more and more efficient…..holiday traffic is now spread out…And a less peak schedule, we think comes with really enormous efficiency gains.”
- American Airlines CEO Robert Isom said, “Demand for small- and medium-sized businesses and customers traveling for a combination of business and leisure continue to outpace the recovery of managed corporate travel. As that revenue continues to build, it will be additive to an already strong base of business demand, led by small and medium business and blended trips….The changing nature demand provides an opportunity to rework our commercial offerings to better meet the needs of our customers and create a more resilient and profitable business.”
- Third quarter day-of-the-week trends continue to suggest travelers are combining leisure and business trips, Marriott CEO Tony Capuano said during their earnings call. The average length of transient business trips has increased meaningfully and is up more than 15% year to date compared to 2019.
- Hilton CEO, Chris Nassetta pointedly summarizes the challenges and opportunities as we head into 2023, by saying: "We have headwinds and tailwinds. The headwinds are the macro. The world is slowing down, right? ... But we have tailwinds. The tailwinds are spending more on experiences, international travel, pent-up demand and the incremental demand associated with people having to run their businesses, gather, and meetings and events of all sorts — whether it's social or business. At the moment, those tailwinds are stronger than the headwinds."