Shift To Virtual Meetings Declines, Boosting Hotel Industry Outlook: Morgan Stanley
Morgan Stanley analyst Jamie Rollo conducted an online survey of 135 corporate travel managers responsible for about $8 billion in travel spend with a global spread of operations, and shared the findings.
The survey, which is Morgan Stanley’s 21st annual Global Hotel Corporate Travel Survey, has historically been a reasonable guide to future RevPAR growth, says the analyst.
Respondents expect their 2024 travel budgets to be, on average, ~8% above 2023, writes the analyst.
According to the analyst, it is encouraging that budgets appear to be holding up well given the growing macroeconomic uncertainty, and 8% is well above consensus expectations for just about 2% RevPAR growth in 2024.
About 40% of respondents said that their companies have returned to pre-COVID travel levels, a marked increase compared to the analyst’s May 23 / Oct 22 surveys.
Room rates are expected to increase by 5% YoY on average in 2024, ranging from 4-5% in the U.S./U.K. to -1% in China, notes the analyst.
Respondents expect 5-6% room rate growth next year for all major global chains like Marriott International (NASDAQ:MAR), Hilton Worldwide Holdings Inc (NYSE:HLT), InterContinental Hotels Group (NYSE:IHG) and Accor SA (OTC:ACCYY).
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Respondents expect to see ~12% of the meetings that would have been physical pre-pandemic to have shifted virtual, lower than the 18-20% shift in previous surveys. This suggests a degree of permanence in the shift to virtual, but the ongoing decline in expectations could provide a tailwind to spend, writes the analyst.
The shift to virtual meetings is bigger for European respondents than U.S. (13% versus 10% for 2024), and is expected to rise in Europe but fall in the U.S. in 2025 (16% versus 9%).
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The analyst notes budget hotels tend to outperform upscale in tough economic environments, and while the trend is negative for some of the U.S.listed companies that skew to higher chainscales like Hyatt Hotels Corporation (NYSE:H), Hilton and Marriott, it is positive for both the European-listed companies that skew midscale/economy and those in the U.S. focused on these segments like Wyndham Hotels & Resorts Inc (NYSE:WH) and Choice Hotels International, Inc. (NYSE:CHH).
Also, the analyst says that every major hotel company in the U.S. and Europe reported a stronger Q3 than Q2, in terms of RevPAR relative to 2019, further solidifying the positive outlook for hotels.
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