U.S. hotels spin travel demand into gold as airlines struggle
6:17 pm Friday, August 05th, 2022
By Gigi Zamora
(Reuters) – Staff shortages, airport chaos and higher fuel costs have caused earnings at U.S. airlines like JetBlue Airways to land below analysts’ expectations while hotel chains including Marriott International are reporting double-digit profit growth.
Despite cutbacks in other categories due to recession worries, consumers eager to travel after the pandemic continue to book flights and hotels. Hotels have been able to turn this demand into increased profitability far more effectively than airlines.
David Tarsh, spokesperson for travel data analytics company Forward Keys, said the problems faced by airlines and airports are harder to resolve than those in the lodging industry.
“In the case of labor in hospitality, your shortage is probably more with less-skilled workers than in the case of the aviation industry,” he said. “If you’re short of cabin crew and you’re short of security people in the airport, you can’t just increase wages and suddenly fill these roles. People also need to be trained.”
U.S. carriers are struggling to offset higher costs such as fuel even as booming travel demand has given them strong pricing power.
JetBlue Airways Corp on Tuesday reported a quarterly adjusted loss of 47 cents per share compared to analysts’ predictions of an 11-cent loss.
United Airlines Holdings Inc, American Airlines Group Inc and Delta Air Lines Inc last month reported quarterly profits below analysts’ expectations.
Meanwhile, hotel bookings are surging. Marriott International Inc on Tuesday topped Wall Street estimates for quarterly revenue and profits, helped by higher occupancy levels and room rates as travelers booked more group travel and longer stays.
Last month, Hilton Worldwide Holdings saw profit rise above pre-pandemic levels. On Wednesday, MGM Resorts International reported profit 25% higher than in the second quarter of 2019 and said staff shortage problems seemed to be easing.
“Generally speaking, we’re in decent shape. We are not running around with our hair on fire, if you will, anymore,” said MGM Resorts CEO Bill Hornbuckle in Wednesday’s earnings call.
Host Hotels & Resorts Inc, which operates hotels under the Four Seasons, Grand Hyatt and Ritz Carlton brands, reported profits of 36 cents per share, higher than analysts’ predictions.
“We’re up into the double digits in terms of total revenue (growth) for Thanksgiving. And actually, for Christmas, we are seeing a solid pickup as well,” said Host CEO Jim Risoleo on a call for analysts on Thursday.
(Reporting by Gigi Zamora; Editing by Anna Driver and Cynthia Osterman)