Nothing’s certain about hotel demand in 2019, but 2018’s Q3 results do offer helpful insights.
Supply and hotel demand in 2019 are inextricably linked as your company creates a budget and forecast for its travel spend. While it’s difficult to know how demand will change, we can take a look back at 2018 and what key people in the industry have predicted for this year.
For example, Marriott International President and CEO Arne Sorenson predicted a “steady as she goes” shift in hotel demand in 2019 during a Q3 earnings call. Here’s more on what Sorenson shared as well as what you and your company can expect in 2019 based on Marriott’s 2018 performance.
Using Q3 Numbers to Look Ahead
How did Marriott perform in 2018’s Q3? It was a mixed bag. The company experienced a lower-than-expected revenue per available room (or “RevPAR”), which Sorenson attributed to “weaker than expected transient demand in the U.S.”
So-called “transient demand” is a calculation that hotels use that includes mostly leisure travelers, though it may include some business travelers depending on how a specific hotel chain makes its calculations.
The good news is that Marriott experienced a “reassuring” performance in October 2018, the first month of Q4. Based on Marriott’s 2018 performance and exterior factors like the American economy, Marriott expects demand to remain steady and for its RevPar to grow 2–3% globally in 2019.
What Will the U.S. Economy Do?
Of course, the U.S. economy will have a tremendous influence on hotel demand in 2019. If there’s a sharp downturn in economic growth, it’s likely to dim both transient demand and demand from purely business travelers.
But Sorenson expressed guarded optimism in regard to the economy. “We do not see an economic downturn on the horizon,” Sorenson said, “but given recent stock market volatility, there is clearly uncertainty about the direction of the U.S. economy.”
Cutting Out the Middlemen
Marriott did make a 2018 decision that may benefit a sub-section of business travelers. It cut from 10% to 7% the commission it pays to middlemen like group and meeting planners. It’s possible that a portion of the savings that come from the commission cut may be passed along to business travelers attending meetings or staying in groups.
Rate Negotiations are Ongoing
As of 2018’s Q4, Marriott’s negotiations with corporate customers were still ongoing. During the Q3 earnings call, Sorenson reported that initial demand reinforced the sense that hotel demand in 2019 would remain steady, though that could change.
Sorenson’s comments echoed those made by Hilton President and CEO Christopher Nassetta during his own Q3 earnings call. Across the hospitality industry, leading providers are expecting steady hotel demand in 2019 — which should mean relatively steady pricing.
Are You Negotiating the Best Rates?
Negotiating favorable rates is one of the best ways for your company to save money on business travel. At JTB Business Travel, we offer a series of cost savings programs, including negotiations with your preferred hotels, rental car companies and airlines.
Make sure you’re enjoying the lowest possible rates when you get support for your negotiations. And contact us to learn more about how we can help manage your travel spend.