The Travel Industry Is Betting on a ‘Normal’ 2024, but Growth Expectations Are Lower
Travel companies such as Hilton Worldwide, Marriott International, and Expedia are pinning their hopes on a return to “normal” in 2024 following the devastating impact of the pandemic on the tourism industry. However, these companies are forecasting slower growth and lower profits for the full year.
Lower Growth Expectations for the Travel Industry
Expedia’s CEO, Peter Kern, acknowledged that while travel demand is expected to remain robust, growth rates around the world are expected to decelerate. This outlook aligns with Hilton’s and Marriott’s cautious expectations. Marriott projects a modest 3% to 5% increase in revenue per available room in 2024, following a strong 15% growth in 2023. Hilton, on the other hand, anticipates a 2% to 4% rise in room revenue, compared to a noteworthy 12.6% increase last year.
Investors Remain Optimistic
Despite these projections, investors seem optimistic about the returns from Marriott and Hilton. Both companies’ shares have seen year-to-date gains, with Marriott’s stock rising 3.4% and Hilton’s climbing 3.3%. In 2023, these hotel giants experienced significant growth, with Marriott’s shares soaring 51.46% and Hilton’s jumping 44.10%.
Challenges Ahead
While the U.S. hotel industry achieved record-breaking figures for average daily room rates and revenue per available room in 2023, experts suggest this trend may not continue into 2024. According to commercial real estate analytics firm CoStar, average revenue per available room in the United States reached $97.97 last year, up 4.9% from 2022. Average daily rates also increased by 4.3% to $155.62. However, with the market in China still playing catch-up, 2024 is expected to be the first year that resembles pre-pandemic normalcy.
Profit Forecasts Fall Short of Expectations
Hilton and Marriott’s profit forecasts fall short of Wall Street analysts’ expectations. Hilton expects adjusted profit for 2024 to range between $6.80 and $6.94 per share, below the consensus estimate of $7.07 per share. Marriott’s range is projected at $9.18 to $9.52 per share, compared to the expected $9.69 per share. This, coupled with the weakening pricing power of air carriers due to excess domestic capacity, indicates the expectation of softer airfares. January data shows that domestic airfare averaged $273 per round-trip ticket, a slight increase of 1.8% from 2023 but still down 2.2% from 2019.
Outlook for Expedia
Expedia, the online travel agency, anticipates mid-single-digit revenue growth in 2024 following a 10% increase in revenue during 2023. The company also expects pricing to be soft across various categories this year. Expedia’s outlook was partially influenced by lower average ticket prices and continued pressure on car rental rates, impacting their gross air bookings.
Adapting and Innovating
As the industry sets its sights on a return to normalcy, travel companies are aware of the challenges that lie ahead. Lower growth expectations highlight the cautious approach towards a full recovery, emphasizing the need to adapt and innovate as travel resumes on a more stable footing.
Analyst comment
Neutral news. The travel industry expects a return to “normal” in 2024. However, growth expectations for global hotel operators and online booking platforms are lower, indicating a cautious recovery. Hilton and Marriott’s profit forecasts fall short, and airfares are expected to be softer. Expedia anticipates mid-single-digit revenue growth but expects pricing to be soft. Overall, the industry acknowledges the challenges ahead and emphasizes the need to adapt and innovate. Market may experience slower growth and lower profits in the near term.
