Hotels projected to end 2021 down $59B in business travel revenue: RPT

American Hotel & Lodging Association President and CEO Chip Rogers joins the Yahoo Finance Live panel to discuss the latest hospitality trends amid COVID-19.

Video transcript

- We've got about 17 minutes to go until the closing bell. And a couple of stocks that are on our radar here. Movers in the final couple of minutes of trading. First up is FedEx.

Now UBS today slashing their earnings estimate on the stock. You can see the stock slipping as a result of that with shares off just around 1%. Now UBS is saying that rising wages, and also the tough hiring environment right now will hurt FedEx's bottom line in their fiscal Q1 results are expected next week.

Now the stock has been under pressure at least more recently over the past month. It's down just around 7%. When I flip over to some of those reopening plays that are catching a bit today, Carnival Royal, Caribbean, Norwegian among the winners today.

And you can see the outperformer is Norwegian with that stock up just over 2%. Some optimism here that the worst fear of COVID scenarios for the fall may not come true. So we're seeing some investors buying some of these names.

Airlines. Some of the airlines today are also among those moving to the upside. But again, you're looking at gains here of the three major cruise lines today. Carnival up just over 1 and 1/2 as well as Royal Caribbean Norwegian Dow performer today up just over 2%.

Now the resurgence of COVID cases is slowing the rebound that we have been seeing in travel. A new report out from the American Hotel and Lodging Association showing that hotels projected to end the year down $59 billion in business travel revenue. So we want to talk about what this means for the industry.

And for that, we want to bring in Chip Rogers. He's American Hotel and Lodging Association, president, and CEO. Chip, it's good to see you some alarming numbers here from your most recent report and certainly a reminder that the hotel business has a long way to go and its road to recovery. But I guess, how significantly has the Delta variant slowed the rebound that we had been seeing in the travel sector?

CHIP ROGERS: It has hurt. No question about it. And it's important to remember that in our industry, more than half of all the revenue is generated from what you would consider to be business related travel, whether it's an actual business meeting a conference or a convention. And those are the things that have really been hurt most by the Delta variant.

Because once those business trips are canceled and particularly the conventions and conferences are canceled, oftentimes, they're not rescheduled until next year. So unlike leisure travel, when a business trip goes away, it goes away for quite some time.

- When do you expect the business sector, the business travel sector to come back is this something that could see a large uptick within the next year. Is it something that maybe will take a couple of years or something that will navigate to those pre-pandemic levels likely again?

CHIP ROGERS: No, we'll get back to the pre-pandemic levels. We expect it to be back looking like 2019 by the end of 2023. And so that's clearly a long ways away. But that's the normal path if we don't have significant ups and downs with variants.

It's the variants of course, as you mentioned a moment ago that really caused this fourth quarter collapse that we're seeing right now. And if we have another major variant hit sometime during 2022, we'll probably see another retraction. And that is very damaging for this industry.

- It certainly is very damaging we know the business travel sector is so important. When it comes to hotels, those that are navigating this well or doing so successfully, what are they doing?

CHIP ROGERS: Well, first and foremost, they're in a location that is catering to leisure and outdoor activities. If you look at places like Florida, even places like Texas and Arizona are doing exceptionally well. You know, from a policymaker standpoint, one thing to keep in mind is that when people plan travel, they're looking up oftentimes months in advance.

So if you're sending signals about I'm open, I'm closed, I'm up, I'm down. Oftentimes they just won't plan that trip. And that's really why Florida has done such a good job in this recovery. If you look at the hotels in Florida whether it be Miami or Tampa, and even to a lesser extent Orlando, they've really outpaced the rest of the country in most places.

- Does this actor need more help than from or help I guess in general because the hotels largely haven't really received too much funding from the federal government? Do they need assistance at this point? And what would that look like?

CHIP ROGERS: No question about it. And really the assistance that we're advocating for is assistance that would go directly to hotel employees. The Save Hotel Jobs Act, which we've had introduced for quite some time now could really save a lot of the industry if it were to pass. And so we're certainly pushing for that.

But if you think about kind of the-- the pace of what has happened. Early on, there was PPP funding. There was a lot of flexibility from lenders. And hoteliers just kind of limped along.

But if we go back to a point where there's no PPP funding, there's very little flexibility from lenders, and there's no direct assistance. You could see a lot of hotels closed for good. And many of those will be in your urban city centers where most of the jobs are generated.

- Speaking of jobs, though, I guess some hotels are seeing a demand for their business. We have read time and time again that many of these companies are having a hard time finding the workers that they do need at this point in the recovery from the CEOs, from the executives that you were speaking with. Are they having a tough time finding the workers that they need?

CHIP ROGERS: No question about it. Now it's felt more in places like Florida vacation spots than it is in places like New York City that rely on that business travel, that international travel. But it is across the board.

I mean, this labor situation it's quite difficult. We've never seen anything like this before. That's probably going to change as hotel demand begins to wane in the fourth quarter.

But-- but the problem will still exist. It was here before the pandemic. It'll be here after the pandemic.

- Chip, you mentioned some of the strength that you're seeing in a state like Florida, outside of Florida though when you look across the US. Where some of the other areas where hotels are actually doing OK?

CHIP ROGERS: Anything that's not attractive-- not attached to what would be considered an urban setting is actually doing pretty well. So you're limited service hotels clearly your resorts in places that offer outdoor activities. Those are doing well.

But what's interesting have been an enormous separation between the top 25 markets in the rest of the industry. In fact, just last week's STR data, the top 25 markets in the US were down about 32% in revenue and the rest of the markets outside the top 25 really flat and even. And that's compared to 2019 numbers. So it is those urban settings that have been hurt a lot.

- Chip Rogers, great to speak with you American Hotel and Lodging Association, president, and CEO.