56% of Americans expect to travel for leisure in 2021: AHLA

Yahoo Finance’s Alexis Christoforous and Chip Rogers, American Hotel and Lodging Association CEO, discuss hospitality outlook amid the coronavirus pandemic.

Video Transcript

ALEXIS CHRISTOFOROUS: Welcome back. The US hotel industry suffered its worst year on record in 2020. The coronavirus pandemic squashed business travel and people gave up on their vacations to stay at home. But what will 2021 hold for the industry, especially now that we have the vaccine rollout?

Joining me now is Chip Rogers. He is CEO of the American Hotel and Lodging Association. Chip, always good to see you. I know that you had this new survey where you talked to businesses and consumers about travel plans. So what are the expectations for the industry this year?

CHIP ROGERS: Well, there's only one way to go, and that's up. As you mentioned, 2020 was the worst year on record. We had occupancy that dipped down nationwide to about 42%. Keep in mind, for an industry like ours, the break-even point on occupancy is about 55%. And it's a lot higher in your urban city centers, where we're seeing really low occupancy levels, where all the jobs are. So that's a huge concern of ours.

But if you look at 2020, you compare it to what we expect in 2021, we think that occupancy rate will go up to about 52%, 53%, again, still below the break-even point for the nation. So the industry's going to struggle in 2021. The second half of the year is the key, because if we can come out of a strong leisure travel season in the summer and follow that up with some business travel in the fall, then I think the recovery begins.

ALEXIS CHRISTOFOROUS: You mentioned business travel. I know that's the bulk of the hotel revenue. And it's all but dried up since the pandemic. What are your expectations for business travel? And do you think it will ever go back to pre-pandemic levels?

CHIP ROGERS: Yeah, I think it will. I mean, look, the thing that often gets missed is that it's human nature for people to want to be around other people. And we saw a really nice run of about 10 straight years of dramatically increasing travel. I think that will continue. It may look a little different. But we'll get it-- we're going to get back to where we were.

The problem is right now is two things. First of all, psychological-- people don't want to fear the virus. And we've got to get past that hurdle first. We expect that's going to happen when a vast majority of people who want to get vaccinated, in fact, do get vaccinated. That should probably take place somewhere late May, early June.

Second problem, of course, is economic, and that is can these companies afford to send their people back out on the business road? And no one exactly knows when that's going to happen. We're really hoping for a September travel with respect to business travel. But the numbers that came out of our survey you referenced a moment ago is that 87% of companies right now have some form of restriction on business travel. And about a third of all companies have completely shut down business travel.

ALEXIS CHRISTOFOROUS: And just to bounce off that, earlier this week I had a EY CEO Carmine Di Sibio on. And he talked to us about his company's climate goals. Part of that, he said, is they're going to reduce their business travel by 35% going forward.

And you know that they have lots of big clients as well. They're going to be talking to their clients about pulling back on business travel. So how is the hotel industry planning for what may be this eventual reality?

CHIP ROGERS: Well, here's the way we look at it-- some of the silver linings that have come out of this pandemic is this idea that we were talking about for years called bleisure, the combination of business and leisure travel. And now that so many businesses, virtually all businesses have the infrastructure in place for you to be able to work from anywhere, then you can easily go on that business trip and have a day on either side or both sides of that business trip that is a leisure travel vacation time. And so we began seeing a little bit of that this summer. We think that it's going to explode as we move forward.

Again, as I mentioned earlier, it's just part of human nature that people do want to travel. They want to see the world. They want to enjoy both their work and their life balance. And travel is part of that.

So yeah, in the short term, there's going to be some struggles. Technology is going to replace some business travel. In the long term, though, I think the travel industry is going to be in great shape.

ALEXIS CHRISTOFOROUS: And so many lives upended because of this, right? Millions of jobs lost in the hospitality and leisure industry. Are there signs that hotel companies are going to start hiring workers back this year?

CHIP ROGERS: There are signs, but it's not shooting up. It's not like a GameStop stock right now, right? It is going to be a slow road back. We had 10 years of job growth wiped out during 2020. That's just stunning, 10 years of hotel job growth gone.

We expect that 2019 employment levels will return sometime in late 2023, if not early 2024. So that's kind of the road that we're on, because the real problem that we've seen, as I mentioned earlier, leisure travel has come back a little bit when you look at this summer compared to where we thought it was going to be. It's going to continue to come back.

Business travel will follow that. And then your large conventions and conferences will follow that. But if you think about where are conventions and conferences held, well, they're held in urban city centers. They're also the events and the type of travel that require all sorts of food and beverage along with it, which is where a lot of the jobs are.

And so as we look at where this pandemic has hit the worst, it's been in those urban city centers. It's been in those large hotels with lots of employees. And that's why the process for us to get back to where we were with respect to employment, it's going to take a while.

ALEXIS CHRISTOFOROUS: All right, do you have a number? I think your survey actually talked about an actual number of workers being able to be put back on the payroll.

CHIP ROGERS: Well, strictly hotel workers, we're expecting about 200,000 to be-- a net gain of about 200,000 during 2021. Unfortunately, you're probably going to see over the next few months more job loss. And then, as I mentioned earlier, around that June time frame, we really expect the industry to start taking off again. And that's when the job growth will come in the second half of the year. But net about 200,000 new jobs just in hotels. That doesn't include the larger hospitality and tourism industry.

ALEXIS CHRISTOFOROUS: Right, well, we wish you and your members a lot of luck here in what will hopefully be a rebuilding year, 2021. Chip Rogers, CEO of the American Hotel and Lodging Association, thanks for stopping by.

CHIP ROGERS: You bet.