Strong dollar not a drain on U.S. hotel demand

Published on : Friday, May 22, 2015

download (12)Inbound international travel to the United States is holding steady despite a strengthening U.S. dollar, according to first-quarter earnings reports from various global hotel companies.

Industry pundits had feared the dollar, which has appreciated against the euro as well as several other foreign currencies, would dissuade travelers from visiting comparatively pricier gateway markets such as New York City.

The U.S. Dollar Index (DXY) was 94.92 as of press time, which was more than the 52-week low of 78.91 but less than the 100.39 52-week high.

“You have to believe that it’s impacting business at least somewhat,” said Chris Nassetta, president and CEO of Hilton Worldwide Holdings, during an earnings call with analysts on 29 April.

But the first-quarter data, both empirical and anecdotal, showed otherwise, he said.

“Our GMs in the big markets, they were not really indicating any material shift other than maybe in New York where you have a little bit heavier component where I think they were feeling it a little bit. So anecdotally, I would say people didn’t think there is much,” Nassetta said.

“When you get the hard data at the end of the quarter, which we now have, actually ironically international business was up in the quarter by a little less—by better than half a point. So not meaningfully, but it was up,” he added.

Demand from Europe, particularly Germany and France, was down. Offsetting those numbers was business from China, Nassetta explained.

“A number of us worked really hard in the industry to work with the U.S. government and the Chinese government to make it easier and more efficient to get visas, and that is having a dramatic positive impact on what has been the largest outbound customer base, which is now China in the world,” he said.

Occupancy in Hilton’s Americas portfolio, which includes North, Central and South America, was up 1.8 percentage points to 72% during the quarter.

Arne Sorenson, president and CEO of Marriott International, noted a similar dynamic in the company’s earnings call on 30 April.
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