Strong Hotel Earnings Are Overshadowed by Downgrades, Cratering Consumer Environment, and Weaker Government Spending
Cruise lines might be weathering the storm, but the rest of the travel industry isn’t sailing quite so smoothly. Following the contrails of airlines, hotel giants are now waving red flags over weakening consumer demand — putting pressure on the $786B US hotel market.
Travel blues: In the weeks leading up to their earnings, Goldman Sachs downgraded hospitality heavyweights HiltonHLT, HyattH, and MarriottMAR over “increasingly muddied” travel demand. Then, in their own reports, the companies echoed the warning — lowering their forecasts thanks to cautious consumers and shrinking government travel budgets. Specifically, they’re taking scissors to their expected Revenue Per Available Room (RevPAR), essentially room revenue per room, a key hotel metric.
- Marriott now expects RevPAR to climb 1.5% to 3.5% (down from 2% to 4%).
- Hilton sees growth between flat and +2% (vs. 2% to 3% prior).
- Hyatt downgraded its range to 1% to 3% (from 2% to 4%).
- Wyndham took the sharpest cut, now projecting, 2% to +1% (from 2% to 3%).
No Free Upgrades
The lowered outlooks stole the spotlight from what were otherwise strong results from hoteliers. However, as consumer expectations are seen cratering, the cautious outlooks might continue in results from Choice HotelsCHH and InterContinental HotelsIHG. Thankfully, there’s still some consolation for travel brands abroad and in their construction pipeline.
- Hyatt said it expects international RevPAR growth to outpace the US, echoing strong results from French hospitality group AccorAC.
- Hotel development is still pushing forward, with Wyndham opening a record 15K new rooms this quarter and Hyatt opening 11.2K new rooms.
At the end of the tunnel: Hilton CEO Chris Nassetta noted, “Travelers are largely in a wait-and-see mode.” If that uncertainty fades, it could lead to a swift rebound in discretionary fields like travel. But Hyatt CEO Mark Hoplamazian cautions: “The GDP figures that just came out are not encouraging,” referring to the 0.3% decline in US GDP — its first decline since 2022. And as we warned weeks before the market’s April meltdown, it’s hard to turn a page when consumers expect things to get worse. The Dow Jones US Hotels Index is currently down 7%.