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Big travel company CEOs hope market turmoil won’t derail summer rebound

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As economic pundits raise fears a few recession, probably the most powerful names in travel and hospitality are pushing back, pointing to bookings that illustrate a positive picture of the American consumer.

“We predict this summer goes to be gangbusters for travel,” Marriott CEO Tony Capuano told last week.

Marriott saw an 81% rise in first quarter revenue in comparison with the identical quarter a 12 months ago as more leisure and business travelers got back on the road as Covid restrictions eased.

Despite concerns around inflation, Expedia CEO Peter Kern said he doesn’t see travelers cancelling plans because there’s a lot pent up demand following the pandemic.

That demand has driven the typical every day rate at U.S. hotels up 40% in comparison with a 12 months ago, in accordance with hospitality analytics firm Smith Travel Research.

“We’ve not seen any signs of consumers being impacted by way of travel spend. Everyone knows there have been pent up savings and underspend during Covid,” said Kern to CNBC.

Expedia saw its gross bookings jump 58% in the primary quarter in comparison with a 12 months ago, a big jump but barely below Wall Street estimates.

As travel rebounds, publicly listed travel giants are beginning to spend more on marketing and promoting – setting the stage for a competitive summer.

Kern hosted a travel conference last week in Las Vegas, where the web travel operator unveiled quite a lot of latest technology updates that empower travelers with latest data they’ll use to make smarter selections when booking a visit. Those enhancements include a price tracking tool and customised hotel scores based on guest reviews.

Booking Holdings CEO Glenn Fogel not only joined the chorus of hospitality executives reinforcing the pick-up in travel as restrictions ease, but additionally shared an eye-popping number: Gross bookings for this summer are tracking 15% above 2019 levels, before Covid shutdown the world.

“Travel is coming back, we’re all pleased. We went through a tough time for 2 and half years of individuals not having the ability to travel the best way they desired to,” Fogel told CNBC.

Could market, economy play spoiler?

The query now could be if summer 2022 might be as strong as CEOs are envisioning — or, if consumers rethink travel because of economic constraints or the prolonged volatility within the stock market.

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

Things aren’t that bad yet, thanks partly to the strength within the housing market, he said. “For instance, personally while my stock portfolio could also be down this 12 months, it’s probably balanced out by appreciating in the worth of my home,” he added.

Prior economic slowdowns have led to a drop in travel bookings. Data from STR shows that following every economic recession, Americans held back on travel resulting in a decline in bookings.

Pebblebrook Hotel Trust Chairman and CEO Jon Bortz doesn’t think history will repeat itself. “There’s a lot emotion attached to travel straight away… [that] people usually are not going to cancel a visit to see their family for the primary time in two years,” he argued.

While higher rates of interest could push consumers to go for cheaper options, executives usually are not seeing any evidence of that straight away.

Some industry experts disagree, saying they’re beginning to see concern to peak through.

Looking beyond bookings, construction of recent hotels has fallen in recent months. Over 154,000 rooms were in construction in March, which was down 15.7% from a 12 months ago, in accordance with STR.

“Construction costs have gone up substantially due partly to wage inflation, supply constraints and better rates of interest,” Jan Freitag, national director at the true estate research CoStar group, told CNBC.

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