CEOs of big travel companies hope market turmoil won’t derail summer recovery

As economic pundits heighten fears about a recession, the most powerful names in travel and hospitality are pulling back, pointing to bookings that paint a positive picture of the American consumer.

“We think this summer is going to be a huge success for travel,” Marriott CEO Tony Capuano said last week.

Marriott saw an 81% increase in first-quarter revenue compared to the same quarter a year earlier, as more leisure and business travelers hit the road as Covid restrictions eased.

Despite concerns about inflation, Expedia CEO Peter Kern said he doesn’t see travelers canceling plans because there is so much pent-up demand after the pandemic.

That demand has pushed the average daily rate at US hotels up 40% from a year ago, according to hospitality analytics firm Smith Travel Research.

“We haven’t seen any signs of consumers being affected in terms of travel spending. We all know there was pent-up savings and under-spending during Covid,” Kern told CNBC.

Expedia saw its gross bookings rise 58% in the first quarter compared to a year ago, a significant jump but slightly below Wall Street estimates.

As travel recovers, publicly traded travel giants are starting to spend more on marketing and advertising, setting the stage for a competitive summer.

Kern hosted a travel conference last week in Las Vegas, where the online travel operator unveiled a series of new technology upgrades that give travelers new data they can use to make smarter decisions when booking travel. Those enhancements include a price tracking tool and personalized hotel scores based on guest reviews.

Booking Holdings CEO Glenn Fogel not only joined the chorus of hospitality executives reinforcing the uptick in travel as restrictions ease, he also shared a surprising number: Gross bookings for this summer are seeing a 15% above 2019 levels, before Covid shut down the world.

“Travel is coming back, we’re all happy. We went through a tough time for two and a half years of people not being able to travel the way they wanted to,” Fogel told CNBC.

The question now is whether the summer of 2022 will be as strong as CEOs envision, or whether consumers are rethinking travel due to economic constraints or prolonged stock market volatility.

The market turmoil could eventually hurt the “wealth effect,” Truist Securities accommodation and leisure analyst Patrick Scholes told CNBC. “Basically, if we see a sustained bear market, people feel more conservative about their ability to spend.”

Things aren’t too bad yet, thanks in part to the strength of the housing market, he said. “For example, personally, while my stock portfolio may be down this year, it will probably balance out as my home appreciates in value,” she added.

Previous economic downturns have led to a drop in travel bookings. STR data shows that after every economic downturn, Americans refrained from travel, leading to a decline in bookings.

Pebblebrook Hotel Trust Chairman and CEO Jon Bortz doesn’t think history will repeat itself. “There’s so much excitement associated with traveling right now… [that] people are not going to cancel a trip to see their family for the first time in two years”, he argued.

While higher interest rates could push consumers to cheaper options, executives don’t see any evidence of that at the moment.

Some industry insiders disagree, saying they are beginning to see concern peaking.

Beyond bookings, new hotel construction has slowed in recent months. More than 154,000 rooms were under construction in March, down 15.7% from a year ago, according to STR.

“Construction costs have risen substantially due in part to wage inflation, supply constraints and higher interest rates,” Jan Freitag, national director of real estate research group CoStar, told CNBC.