Robust small business bookings and steady weekend reservations are keeping Hilton afloat into the fall and winter.
Hilton CEO John Nassetta said on Tuesday that corporate business travel hasn’t caught up to 2019 levels but pent up demand across the hospitality industry is encouraging.
He says that he expects earnings to rebound at or above pre-covid levels, when the company posted some of its strongest gains in years. Hilton’s third quarter projections are due out Oct. 27.
“We had the best summer season we’ve had in 102 years [in 2021],” Nassetta said in an interview with CNBC’s Semma Moody. “If the trend follows the fall pattern, I think we’ll have a busy fall and winter season.”
Small business bookings are driving Hiltons recovery and have historically made up roughly 80% of Hilton’s revenue, although weekday bookings remain sluggish. Large businesses and corporations are still figuring out what the future of their workforce and travel will look like, which is visible from Hilton reservations. Hilton’s financials poised the hotel giant to weather the storm of the Covid-19 pandemic better than some of its competitors, Nassetta says.
“Small businesses don’t really have the option to not travel – they need to travel to run their business,” Nassetta said.
Nassetta expects pent up demand from still hesitant travelers to pick up reservations. An influx of liquidity in the economy combined with growing demand has already allowed Hilton to price weekend bookings above 2019 levels.
But the landscape may have changed more than Nassetta is willing to acknowledge. Corporate travel may not come back the way Hilton hopes because companies are e-evaluating their spending.
“I think that the corporate segment of travel will take a hit because companies can realize they don’t have to spend thousands and thousands of dollars to fly people around the country when we could just dial into [a] zoom meeting,” said Peter Florczak, Senior Lecturer in the College of Hospitality and Tourism Management Department at Niagara University.
Lockdowns and restrictions favored companies like Airbnb, which allowed consumers the privilege of traveling with more control of who they interact with in a smaller space before vaccines were widely available. Nassetta says that while often the two companies serve the same people, what each brings to consumers is completely different and will favor hotels as cases continually decline.
“[People] want consistently high products and amenities and services which are all of the things they get with us,” Nassetta said. “As we get into the new golden age of travel, I think we’re both going to do great.”
But Hilton hasn’t emerged from Covid-19 lockdowns and restrictions unscathed. Nassetta noted that even as Hilton offers increased benefits and pay to address the hospitality industry’s persisting labor shortage, worker retention is the biggest issue facing Hilton today. He remains hopeful that the cutback in federal supplemental unemployment and increased vaccinations will bring workers back.
“We’re doing more and we’re going to do more from a technology point of view to access different pools of labor,” Nassetta said. “We create a family-like environment where we take care of people.”
That “technology” is focused on training prospective employees virtually more often and allowing them to work a more flexible schedule. Employment data remains disappointing and worrisome as goods and services become harder to come by with less labor to deliver.
“It’s not as easy as you think to just say ‘we need to increase wages to get better staff,’ because what are all the other things that are going on to affect that decision?” Florczak said. “What other expenses do you have to cut? What other corners do you have to cut or are you just raising rates to increase your revenue?”
Hilton shares rose 21% from quarter one to quarter two, and Nassetta expects the growth to continue into the third quarter. Analysts’ average revenue estimate sits at $1.79 billion for quarter three.