I know all of my recession warnings can get a little tedious. So for a break from that, and a fresh and invigorating and more hopeful take on what's going on right now in the economy, I turn the microphone over today to Choice Hotels CEO Pat Pacious.
They've been seeing incredibly strong demand across their brands, from Quality Inn to Econolodge, and he joined me yesterday with a bunch of interesting nuggets about the consumer and the economy.
"We look at 2022, and our revenue per available room grew every quarter. We have seen it straight into January of this year," Pacious told me. "The consumer is prioritizing travel at the top of their list. Our fourth quarter numbers were exceptionally strong, up 20%."
In fact, his hotel demand was much stronger than usual in November and December, exactly when the retail sales reports were unusually weak. And that has continued so far this year. "Before the pandemic, the fourth quarter and the first quarter were generally lighter on leisure travel, more heavy on business...[but] we saw gains in both segments," he said.
"The consumer leisure travel demand segment, that entire pie is getting bigger because people have more money to spend with rising wages," Pacious emphasized. "We have folks who can work remotely. We have retirement occurring at higher rates than pre-pandemic." All of this means structurally higher travel demand, in other words.
And as for business travel, Pacious said, his hotel demographic is benefitting from "the reshoring of American manufacturing, and infrastructure projects that are starting to impact that blue-collar traveler who is traveling during the middle of the week."
It is fascinating to see a very long-term, big picture reshoring trend already affecting their business, while the infrastructure comment is a reminder that fiscal stimulus still continues to impact the economy in a big way--and is actually offsetting the Federal Reserve's tightening efforts.
Money Report
I joked he should have given the "State of the Union" address after I heard all of these comments, and I'm only half-kidding. The company's shares would be an at all-time high right now if we exclude the late 2021 pandemic spike. They also benefit from being a relatively labor-light, "limited service" operation without a lot of big restaurants, meeting spaces, or amenities, as Pacious noted, so they don't see as much of a headwind from rising wages.
"That being said, our housekeepers, our front desk folks have gotten a raise, as has most of the middle class, and those are the people who travel in our hotels as well, so it's good to see," he added.
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So yes, things might worsen from here in terms of the business cycle. But there are some bigger, longer-term things going right from a structural point of view, and I don't want to overlook them entirely.
Kelly
