The American Hotel & Lodging Association recently predicted a shortfall for the hotel industry due to decreased business travel. Though tourism is expected to rebound this summer, it's too early to say how rising fuel costs will affect the price of air travel and impact traveling decisions across the board.
Marriott International surprised the financial world with its higher-than-expected fourth quarter 2021 earnings. Their annual statement attributed the company's recovery to increased demand for their higher-priced luxury and resort brands. For perspective, other major public hotel brands like Hilton and Choice Hotels also reported gains—but modest ones—in Q4.
All hotels appear optimistic about continued 2022 growth, but they cite ongoing unpredictability due to factors like COVID-19. Believe it or not, the first quarter of 2022 is over already, and a new earnings season is upon us. Financial analysts are undoubtedly targeting winners and losers for the season. They may not be using foot traffic as part of their predictive toolbox, but they should!
Foot traffic is a strong indicator of quarterly revenue. This is true especially for industries where consumer transactions are tied to physical brand locations. Just like hotels.
Here's a snapshot of linear trend models for five major public hotel brands. The R-Squared values indicate the strength of the relationship between foot traffic at brand locations and quarterly revenue:
This data includes quarterly revenue and traffic up through fourth quarter 2021. For every model, foot traffic was closely tied to quarterly revenue.
What does foot traffic for the first quarter of 2022 tell us about upcoming financial results?
Looking at percentage traffic changes between the fourth and first quarter tells us Choice Hotels, Hilton, Hyatt, and Wyndham are on track for repeat quarterly performances compared to last year. Hilton had the largest change of the four with a 4% reduction.
Marriott is the outlier. They experienced a 16% traffic drop in the new year, which will undoubtedly impact their quarterly report.
It may be significant that the two brands with larger changes are also on the higher end of the price spectrum compared to more budget brands like Choice Hotels. Is this an early sign of a 2022 turn-away from luxury stays?
The business travel factor will remain an important bellwether for overall economic recovery. Tracking industry health using location data offers timely insights into changing consumer behavior long before quarterly reports hit the news. Traffic data can be derived only four days after quarter's end.
Does Marriott's 16% dip mean a catastrophic first quarter report? No. But it certainly implies a shift in behavior toward the brand compared to its competitors, an important distinction Marriott should keep an eye on for 2022 strategy.