By many accounts, travel was back with a vengeance in 2023, with brands reporting more demand among travelers and interest from owners and developers. Hotel Business spoke with Jolyon Bulley, CEO, Americas, IHG Hotels & Resorts; Kevin Jacobs, CFO/president, global development, Hilton; and Leeny Oberg, CFO/EVP, development, Marriott International, for their thoughts on the year and what to expect in 2024.
—Gregg Wallis
Has the year gone as expected for your company? Please explain why or why not.
Bulley: We’ve seen healthy demand across leisure, business and group travel, as well as continued confidence from owners as they sign up to build more IHG hotels. As a result, our global Q3 2023 ADR was up more than 4% vs. the same period in 2022, with global RevPAR also up nearly 11% year-over-year during the same window. Additionally, our portfolio of 19 brands is stronger than ever and accommodates any traveler’s desires across the midscale; extended-stay; premium; and luxury and lifestyle spaces. This includes our new Garner midscale conversion brand, which went on sale in the U.S. in September.
Jacobs: The year 2023 has been great for Hilton and our industry more broadly. Demand for travel and experiences over material things has continued, even improved, despite some economic uncertainty. We’ve seen strong results across all segments, with group travel in particular rebounding in a big way, especially toward the back end of the year, making the segment mix across leisure, business and group travel closer to pre-pandemic levels.
We’ve continued to deliver for both our guests and owners, driving strong revenue premiums across our brands. We launched two new brands—Spark by Hilton and Project H3—to meet the needs of economy and long-stay guests. Both brands are already showing strong momentum with hundreds of deals in development. For the system more broadly, we continued to open approximately one hotel per day and recently surpassed 700 hotels in Asia-Pacific. With a robust year of signings, we have also delivered the largest pipeline in our company’s history. There’s a lot to be proud of and excited about heading into 2024.
Oberg: This has been a terrific year for Marriott. We’re continuing to see the power of travel following the pandemic as consumers focus on choosing experiences. Our systemwide comparable RevPAR grew a strong 17.5% vs. 2022 through Sept. 30. We have expanded our portfolio offering more than 30 brands, reflecting the company’s approach to meeting the needs of guests with regionally relevant lodging products for every stay purpose.
In the affordable midscale segment, we completed our acquisition of City Express in the Caribbean and Latin America, and launched our new extended-stay offerings StudioRes in the U.S. and Canada and Four Points Express in Europe, the Middle East and Africa. Additionally, the launch of our MGM Collection with Marriott Bonvoy in 2024 will soon bring our customers substantially more Marriott Bonvoy hotel rooms on the Las Vegas Strip, as well as unrivaled culinary, entertainment, events and sports offerings across the U.S. We continue to grow our luxury portfolio with 500 open luxury hotels and more than 200 deals in the pipeline. With 24 luxury properties expected to open in 2024, we are the clear leader in luxury distribution globally. As Mr. Marriott says, success is never final, and we can’t wait to bring guests even more hospitality offerings throughout the new year.
Kevin Jacobs Hilton
Inflation, financing and labor issues have been among the biggest headwinds. How has your company helped its franchisees to overcome these challenges?
Bulley: Owners choose IHG because they trust our brands, our ability to drive returns and the strength of our entire enterprise. In turn, we leverage our scale to help our owners run more efficient businesses. This includes programs designed to reduce supply chain, labor and operational costs, such as an F&B procurement initiative that offers more competitive food and beverage pricing for nearly 4,100 participating Americas hotels. We additionally have lowered costs to build through more efficient design prototypes, namely across our Holiday Inn, EVEN Hotels and extended-stay brands. From a labor perspective, we strive to remain an employer of choice and offer wages that are fair, attractive and aligned to the markets where we operate.
Jacobs: We maintain very strong relationships with our owners and always do our best to ensure they’re set up for success. We listen intently to their needs and continue to roll out programs that drive greater cost efficiencies, better margins and, ultimately, a better bottom line. For example, we’re taking innovative approaches to hiring and recruiting, partnering with our hotels to support their needs through virtual hiring events, shortened application processes and a recruitment marketing campaign that benefits both managed and franchised hotels.
We continue to innovate for our guests and owners in other ways, too, from offering EV charging stations at 2,000 hotels to the launch of new brands like Spark by Hilton to provide a simple, reliable and comfortable stay for every guest, all powered by an innovative and cost-effective conversion model for owners.
Regarding the lending environment, capital is more expensive right now, but good deals and quality brands continue to get financed. We are on track for record signings in 2023, driven by the strong relationship we have with owners and the compelling brands we continue to offer and introduce.
Oberg: We have strengthened our relationships with our owners and franchisees, who have been complimentary of our frequent outreach and the many measures we have taken to lower hotel-level costs and maximize cash flow throughout the pandemic. While recovery of the hospitality industry has been strong globally, the financing environment, higher interest rates and inflation present challenges for hotel transactions in most parts of the world. We’ve been watching our costs closely and increasing productivity at our managed hotels, while also working closely with our franchisees to tackle these headwinds.
While the financing environment for new-build projects has been tighter in the current higher-interest-rate environment, conversions have been a successful part of our rooms growth strategy, and they remain an important driver of rooms growth for Marriott and our franchise community. As of Q3 2023, conversions accounted for 51% of room signings globally, including our deal with MGM. We are also working with our developers and franchisees to help leverage the efficiencies and advantages of renovating and rebranding converting properties.
Leeny Oberg Marriott International
What’s your forecast for 2024—for the industry and your company?
Bulley: We’re confident and optimistic for the year ahead, both in the Americas and across our entire enterprise. Travel demand remains strong, and while hospitality has come a long way in recent years, we still see opportunities for further recovery. For example, we witnessed a 6% year-over-year increase in Americas business travel in Q3 2023, and we expect this segment to attract even greater demand in 2024. We also plan to double down on growth within Luxury & Lifestyle—a collection of six IHG brands that currently account for more than 250 open and in pipeline Americas hotels—and capitalize on owners’ growing appetite for conversions, which the Garner brand already is poised to capture.
Jacobs: Industry forecasts indicate positive RevPAR growth in 2024. For Hilton, we said in our October earnings call that we expect RevPAR growth in the low- to mid-single-digit range and net unit growth of 5.5% to 6% in 2024, accelerating from this year. We expect continued growth from new brands like Tempo by Hilton and Spark by Hilton, and especially strong growth from focused-service brands like Hampton by Hilton, which should reach 3,000 hotels in the coming months, and Hilton Garden Inn, which recently opened its 1,000th hotel. Worldwide, we’re on track to surpass 7,500 hotels and achieve many other milestones in 2024. I’m looking forward to a big year.
Oberg: We’re very upbeat about the continued resilience of travel and believe consumers’ desire for and greater flexibility around travel remains positive for 2024, even in the face of an uncertain global macroeconomic environment. In today’s digital world, the necessity for innovation and excellence has never been more important. Our size and scale as the largest hospitality company in the world allows us to invest significantly in the power of Marriott Bonvoy while also staying true to our core values of putting people first, which is what give us a competitive advantage. I couldn’t be more excited about our future.
