The National Business Travel Association’s Financial Forum held on March 30 was a one-day event filled with some useful information, but perhaps the most interesting discussions were the Luncheon featuring Frederic Mishkin, Professor of Banking and Financial Institutions at the Graduate School of Business, Columbia University and the Hotel Forecast featuring Jan Freitag, vice president of Smith Travel Research and Adam Weissenberg, US Tourism, Hospitality and Leisure leader for Deloitte & Touche, LLP.
Everyone is fixated on what’s next for this economy and economist Mishkin said that he “never imagined” a crisis like this, but once the credit market loosens up then the economy will begin to rebound. Although Mishkin was among many economists that day, he seemed to be the most realistic. Mishkin noted that despite the glitz and glam of the stimulus package, the United States has to watch out because the economy could eventually mimic that of Japan, where stimulus package after package results in an extremely weak economic environment.
Attributing most of the country’s decline to a lack of “political will,” Mishkin said that if President Barack Obama holds the AIG executives of the world responsible for their actions, the population will begin to restore confidence in the government and could be pulled out of the recession faster than anticipated. Mishkin said that he expects the recession could result in one of two scenarios: 1. The economic problems go unresolved and the U.S. becomes similar to Japan, where there is very slow economic growth or 2. There is government intervention and more regulation of the market and the recovery is quicker.
On the hotel forecast front, Weissenberg contested that the hotels will continue to suffer as long as the airlines do, but will bounce back by the end of 2010. Weissenberg said he is seeing many hotel developers and operators trying to get rid of some debt by selling or shutting down properties and by halting new builds. As a result of extensive cuts to hotel staff, service levels have begun to deteriorate, he said. Also, as for the 33 new brands that have been introduced into the market, Weissenberg attests that this is overkill for the current economic environment because customers may no longer be brand loyal, but more cost conscious.
Continuing the discussion, Freitag and Weissenberg agreed that the lodging decline has yet to bottom out, but now hoteliers are panicking and slashing rates without thinking it through. “If you take down the rate you cannot make it up in occupancy. From a hotel perspective the way to maximize your revenue is to leave you rate as is and to just close your eyes and not look at the empty rooms and just live with a 30 percent occupancy rate. There is no body who has the stamina to do that because they can't in the negotiation with the owner, that's what they should do, but are they doing it? No," Freitag said.