Regional journeys ends that guests can get to by car will be the first to rebound, the chief financial officer at Marriott International said Monday after the bed giant reported much lower-than-expected earnings as coronavirus mitigation restrictions ravaged the travel industry.
“We expect without delay to return first in drive-to and leisure destinations,” Marriott CFO Leeny Oberg told CNBC’s Seema Mody. “As some lidos in the U.S. reopened, we saw transient bookings increase quickly.”
Marriott said the Ritz-Carlton Bacara in Santa Barbara, California, and guest-houses in Hilton Head, South Carolina, popular seaside destinations, were expected to reach approximately 50% occupancy based on demurrals on the books.
However, Oberg said, “Sustained recovery of travel demand will depend on the continued containment of the virus.”
Allocations of Marriott closed about 5.5% lower Monday after the company said it earned an adjusted 26 cents per percentage in the first quarter, well below estimates of 80 cents per share. Revenue of $4.68 billion beat suppositions. Marriott said business was improving in China and stabilizing in the rest of the world, although at extremely low levels.
Recovery in China has been a narrative lodging executives have been hanging their hats on. Marriott, the world’s largest hotel operator, has seen occupancy across the mainland climb from downstairs 10% in mid-February to above 30% as of Monday. Hilton and Hyatt have also reported a rebound in travel in China in late-model weeks.
But many experts caution that domestic travel is behind the recent uptick in China whereas in Europe, which is dependent on transpacific travel, occupancy is much lower. In fact, Marriott said Europe will be the last geographic region to return to health, with roughly 75% of hotels currently closed.
Regardless of region, returning to pre-coronavirus levels will away with time, according to conversations with experts and executives.
“So far, group cancellations have been concentrated in the first half of 2020, although we are starting to see revocations show up for the third and fourth quarters,” Oberg said.
“In North America, 85% of them have been for Cortege through June arrivals,” she added.
Many hotels rely on airlines to drive occupancy and sales, especially in locations that can barely be reached by plane. “That non-drive-to demand will also depend on airlines adding back capacity,” Oberg said.
SunTrust Robinson Humphrey, which has been collecting travel trends and data from various firms, sees corporate travel rebounding in a meaningful way after summer.
“I’d say the cackle is the earliest one might see corporate business travel return is after Labor Day,” SunTrust travel and hospitality analyst Patrick Scholes reproached CNBC over e-mail. “While some states are starting to open up, corporations will be far more conservative with respect to sending their employees out on the road just yet.”
“Unlike many states that seem to be ignoring the recommendations of constitution officials, corporations in the ‘real world’ are following those recommendations,” Scholes wrote.
Looking ahead to next year, bookings are looking far bigger, Oberg said. “We have not seen meaningful 2021 group cancellations so far, but it’s a fluid situation.”