Despite current U.S. political turmoil and the most rapid room-supply expansion since the recession, the CEOs of the two largest U.S. hotel companies are forecasting continued steady demand growth.
Both said that more leisure demand will offset flatter corporate travel spending, while higher overseas-travel spending will boost results.
Marriott International CEO Arne Sorenson and Hilton CEO Chris Nassetta each used the term "steady as she goes" in their respective companies' earnings calls, suggesting that many of the concerns expressed by the companies before last year's presidential election might have been unfounded.
Challenges this year included July 4 falling midweek, the shift of the Jewish high holidays to the third quarter from last year's fourth quarter and year-earlier travel-spending increases stemming from election campaign events.
Even so, Marriott forecasted that third-quarter RevPAR would be about even with last year in the U.S. and up about 4% overseas.
Hilton forecasted global third-quarter revenue would advance about 1% from a year earlier.
"Everybody would like to see a little more clarity in public policy on things they care about the most, but people are cautiously optimistic," Nassetta said on Hilton's July 26 call.
On Marriott's Aug. 7 call, Sorenson said that he worried about a dip in top-line performance during the quarters following the acquisition of Starwood Hotels & Resorts last September, "but what we've seen is that we're performing right through that. We are very optimistic about the long term."
Both companies appeared to benefit from a growing presence overseas, specifically in Europe and Asia. Hilton's second-quarter global RevPAR growth of 1.8% was "better than our forecast," JP Morgan analyst Joseph Greff wrote in a July 26 note to clients, largely because of better demand in countries such as the Netherlands, Germany, Spain and the U.K.
Meanwhile, Sorenson said Marriott's second-quarter RevPAR in London and Spain both jumped 12% from a year earlier, while greater China's RevPAR advanced about 8%.
In an Aug. 7 note to clients, SunTrust Robinson Humphrey analyst Patrick Scholes wrote, "Marriott's performance this quarter certainly benefited from strong RevPAR in Europe and Asia. Overall, we think the geographic diversification will be very advantageous long term, even if Marriott is less tied to the historical stability of the U.S. economy."
Still, the companies' U.S. performances during the second quarter suggest that while corporate-based demand remains lackluster, tourists continue to travel, especially on the higher end.
Ritz-Carlton and JW Marriott luxury brands represented the fastest demand-growth among Marriott brands by RevPAR.
Likewise, Hilton's fastest-growing brand by room demand last quarter was its Waldorf Astoria luxury group.
Both Greff and Scholes suggested scenarios that may derail room-demand growth. Scholes said Marriott's domestic group booking pace is "less encouraging," while Greff wrote that the "further erosion in corporate transient demand trends in the U.S." could further slow hotel spending.
Still, both Sorenson and Nassetta said they expected U.S. occupancy to stay at or near its record high of more than 65% while touting their companies' increased market share both domestically and abroad.
"Don't underappreciate the optimism [that] still seems to exist in the market and in corporate America these days," Sorenson said. "And compare it to the point of view last August, September and October. You're talking about a pre-election time. I think there was not a sort of robust optimism."