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Gas prices ‘may change the pattern’ in how people travel: AHLA President

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American Hotel and Lodging Association (AHLA) President and CEO Chip Rogers sits down with Yahoo Finance Live to talk about how rising gas prices may impact the outlook on summer travel, inflation, and the labor shortages in the leisure and travel industry.

Video transcript

[MUSIC PLAYING]

- Pain at the pump has some travelers rethinking summer vacation plans with gas prices soaring-- hovering at an all-time high. Heading into the holiday weekend, there's a new survey out that shows high pump prices are a bigger factor for traveling this year than COVID. 90% taking gas prices into consideration when deciding if and where to travel this summer. Let's talk about this with Chip Rogers, he's the president and CEO of American Hotel and Lodging Association. Chip, it's great to see you again. Digging into the survey that you just put out, 25% of Americans appear-- or are likely to travel this weekend, a third for July 4th, 27% for Labor Day. If we don't see any relief at the pump, what do you think those numbers are going to look like?

CHIP ROGERS: Well, best case scenario, they still travel, but they travel a little bit closer to home, so that they can stay in a hotel either way. But our big fear is as that both inflation starts crowding out that spending that you normally would do on travel or you intend to do on travel and then gas prices just become so high, you can't afford to do so. So those are our concerns. But the demand is certainly there.

We are seeing a leisure travel demand boom. Business travel not back yet, meetings and conferences not back fully yet, but the demand for leisure travel is significant.

- So, Chip, Rochelle here. I want to ask you about, sort of, the domino effect. When you do have the high inflation and the gas prices, how does that then affect things like demand for hotels, and the, sort of, staffing, and the other things that come with this perhaps demand destruction?

CHIP ROGERS: Yeah, I mean, it's problematic. First and foremost, we have never seen gas prices like this before. So, historically, when we look back, gas prices themselves don't dictate the number of people who travel. It may change the pattern in which they travel, and we are hoping that that's the case this time. But we've reached historic highs. And we're looking at gas prices more than 50% above the same time last year. And if continue to rise throughout the summer, that will cause some people to make the decision not to travel, which is the last thing we need coming off two terribly bad years where hotels were devastated.

- So, Chip, you talked to the big hotel chains, you talk to smaller mom and pop shop-type of hotels, what is the overall sentiment out there right now, given the fact that we are facing high inflation? Are they so pretty positive over the next couple of months?

CHIP ROGERS: Yeah, I think so. Everyone is still very positive. I mean, look, we're coming off 2020, what was the worst year in history for the hotel industry. And 2021 was one of the worst years. And so pretty much anything looks better right now and there still is some optimism out there, but growing concern over these gas prices that continue to go up, and up, and up and the impact it might have on travelers. Again, right now, we're living off of almost exclusively leisure travelers. The business travelers are not back yet because people aren't fully back in the offices. And the meetings and conferences, it's going to take a couple of years to fully get back to where they were in 2019.

- And obviously with COVID a lot of international travel was having issues in terms of people being able to come from country to country, different rules, what are you seeing in terms of overseas travelers coming to the US and wanting to travel and spend here as well?

CHIP ROGERS: Well, they want to, you know, the US-- we don't necessarily make it that easy. We're still the last country on earth for people to get back into the country without taking a test-- or I should-- the last developed country. And so we don't even make it easy on our own citizens who go across the pond and decide to come back to here.

But where you're seeing it manifest itself are really on those gateway markets. If you look back the last two years, the three worst cities almost every single week have been New York, San Francisco, and Washington, DC. And just last week, again, San Francisco, the worst in the country compared to 2019. And that's because the Asian air travelers can't get in.

Flip side of that is places that have been open the entire time, especially in Florida-- Miami, Tampa-- and then Phoenix in Arizona, those have been the three best markets. And so domestic travel booming, international travel still hitting key markets in a bad way.

- Chip, the big roadblock here, a big challenge for the industry, as in a number of industries, is just simply finding the workers. We've had this massive labor shortage, obviously having a huge impact on hotels and really the travel industry at large. What are you hearing from the hotel owners? Are they able to find the workers that they need?

CHIP ROGERS: Boy, this is the biggest challenge we've had in quite some time, had a large group of owners and management companies in my office recently. I asked them what the three biggest challenges were. First gentleman that spoke up said three biggest challenges-- labor, labor, labor. And all of them agreed. The problem that we're facing right now is at a time where hotels need to recoup all those massive losses over the last two years, they're actually having to shut down rooms because there are not enough employees.

So think about a situation. You're a small business owner, a hotelier. You have the demand to maybe even sell out your hotel over a weekend, but you have to shut down a portions of the-- a portion of the rooms because you don't have enough people. That's a terrible position to be in. We're working through this. Everybody needs more workers but our industry especially.

- And how are you finding that some of these smaller hotel companies are able to adapt versus some of the large ones who perhaps have a bigger budget to work with, everything sort of managed to be able to do things like close down rooms?

CHIP ROGERS: Yeah, well, they're relying a lot more on technology, being able to determine when people are showing up and when they're leaving, certainly helps you determine when a room needs to be cleaned, and that's going to help you manage your staff better. Second part of that, most of the food and beverage outlets in hotels have shut down. You're not going to see as much room service anymore. People are comfortable using food delivery apps. And right now for hotels, that's fine because we don't have the personnel to service those guests food and beverage at this moment anyway.

And so they're really trying everything. But the reality is if you go to a hotel right now, the experience is going to be very similar to what you saw prior to the pandemic. So hotels are doing everything they can to focus on that guest experience but recognizing they may not be able to sell out 100% of the rooms at this time.

- Chip, what about the business traveler because we certainly have seen the business traveler come back a bit. It's still not at levels that we saw in 2019. Will we ever get back to those pre-pandemic levels. Do you think so Good news and bad news on that front you're absolutely correct I'm sitting right here in Washington, DC in an office Park I might be the only person in this entire building right now because it's a Friday and that's the trend we're beginning to see.

Now, the flip side of that is even though most people aren't back in the office five days a week. What's happening with many business travelers, and we surveyed this, 90% of business travelers say that they're adding extra time on for leisure travel. We call that bleisure. So they may be going somewhere for a two-day trip that they now turn into a three-day trip. And the reason is because they know they can work remotely from their room and yet still avail themselves to the leisure activities of that location where they've traveled to. And so good side is this bleisure travel concept is beginning to expand. The bad part of it is that because of remote work, people just aren't in the office five days a week.

- Indeed. Well, I hope you do have a pleasant holiday weekend there. Thank you for joining us. Chip Rogers, the American Hotel and Lodging Association President and CEO.

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