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First-Quarter Earnings Calls Uncover Health of Hotel Industry

by Ed Watkins, Contributing Editor |

Many hotel executives approached 2017 with apprehension. A new president in the White House, a growing but sluggish economy, potential hotel overbuilding, world tensions and other issues threatened to end the hotel industry’s seven-year streak of prosperity. Well, the numbers are in for the first quarter, and most public hotel companies fared well and in some instances, better than expected.

Marriott International posted a 3.1% systemwide increase in RevPAR, a solid accomplishment considering the issues the company had to deal with as it integrated newly acquired Starwood Hotels and Resorts into its system. Likewise, other brand companies reported solid, sometimes spectacular, RevPAR increases in the first-quarter: Hyatt Hotels Corporation (+4.7%), Hilton Worldwide Holdings (+3%), InterContinental Hotels Group (+2.7%) and Choice Hotels (+3.8%). Other, smaller brand companies and ownership groups reported similarly upbeat numbers.

Brands are defying the odds with their ability to continue occupancy-based RevPAR growth. Click To Tweet

While quarterly earnings press releases from public companies are helpful in gauging the health of the industry, they don’t tell the whole story. That’s often found in reading the transcripts of companies’ calls with stock analysts following their earnings releases. Reviewing the most recent calls uncovered some interesting insights about hotel distribution, revenue management and marketing.

Marriott International

Group bookings are proving to be a strong suit for Marriott International this year. Through the first quarter the company had 86% of its anticipated 2017 group business already on the books. One surprise was the strength of group business at Marriott’s limited-service brands, where group RevPAR is up 10%.

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CEO Arne Sorenson said growth in group business at limited-service hotels is a double-edged sword. While he termed it “good growth,” he also said it’s a sign that some meeting planners are “a little reticent” to make commitments for big meetings.

Sorenson said by the end of the quarter all U.S Starwood properties had migrated to Marriott’s online travel agency contracts, with global migration coming “sometime soon.”

LaSalle Hotel Properties

While group business from citywide conventions was down in the first quarter for the REIT, revenues from corporate negotiated rooms were up 3%. Company executives said the volume rose due to a shift in marketing focus toward increased sales over higher rates.

As a result, corporate negotiated business increased for the first time since the first quarter of 2014.

Like other companies with properties in San Francisco, LaSalle’s business in the city is in a slump due to a months-long renovation of the city’s Moscone Convention Center. For the balance of the year, group booking pace is down about 3.5%, or flat if San Francisco is excluded.

Extended Stay America

The company relied on OTAs in the first quarter to fill rooms from non-extended stay guests. CEO Gerry Lopez attributed the company’s 2.1% increase in first-quarter RevPAR to business generated from OTAs, which he said more than offset small declines in the company’s core business from 30-plus-night strays and corporate travelers.

He said nimble and disciplined revenue management practices enabled properties in the system to open OTA distribution channels to positively affect their bottom lines and to introduce the company’s products to new consumers.

“OTAs are our friend,” Lopez told analysts. “Even after commissions are paid, OTA business winds up being net accretive to us and our P&L, particularly when you think of the OTAs as not just a distribution channel but as a marketing channel.” 

Hilton Worldwide Holdings

Hilton CEO Chris Nassetta is very bullish on the company’s efforts to bolster its Hilton Honors loyalty program and by extension, increase direct bookings. During the call with analysts, Nassetta said every eight seconds someone downloads the Honors app and that Honors members accounted for 57% of the company’s first-quarter occupancy, up nearly two percentage points over the same period last year.

He added that web direct channels accounted for nearly 30% of the company’s distribution mix during the quarter. Web direct is Hilton’s fastest growing channel, increasing more than two percentage points during the quarter.

Hyatt Hotels Corporation

For Hyatt Hotels, the emphasis is on market share. During the first quarter, the company increased its systemwide RevPAR Index ranking and it increased share in every global region and across both managed and franchised hotels.

In the U.S., market share gains for full-service hotels in the top 10 markets were double the company’s overall increase, with nearly 60% of hotels in the top markets gaining share during the quarter.

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Ed Watkins, Contributing Editor

Ed Watkins, Contributing Editor

Contributing editor at Duetto
Ed has been covering the hotel industry for more than 40 years. He was editor-in-chief of Lodging Hospitality from 1980 to 2012. He then joined Hotel News Now as an Editor at Large, until his retirement at the end of 2014. Ed still contributes to several publications and is a member of the advisory boards for the hotels schools at Michigan State and Penn State.
Ed Watkins, Contributing Editor
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Ed Watkins, Contributing Editor

Ed has been covering the hotel industry for more than 40 years. He was editor-in-chief of Lodging Hospitality from 1980 to 2012. He then joined Hotel News Now as an Editor at Large, until his retirement at the end of 2014. Ed still contributes to several publications and is a member of the advisory boards for the hotels schools at Michigan State and Penn State.