When the COVID-19 pandemic hit, worldwide travel saw a sharp decline.
But the tourism industry is seeing a big recovery, with international tourism levels expected to be upwards of 80% of pre-pandemic levels by 2023, according to the UN World Tourism Organization.
And Marriott International ( MAR ) is among the many hospitality companies benefiting from the increase in travel.
“I think the psychological effect of being locked up for part of the pandemic has only accelerated the trend that had already started,” Marriott International CEO Anthony Capuano told Yahoo Finance Live in an interview this week. “I think people were reminded how much they love to travel, explore new places, try new foods, immerse themselves in new cultures and some of the events that were postponed.”
Marriott’s latest earnings report showed that revenue per average room increased 29% year-over-year in the fourth quarter of 2022.
Capuano said demand remains strong so far in 2023, amid a growing increase in leisure travel.
According to an Ipsos survey published earlier this month, nearly a quarter of Americans plan to travel more for leisure in 2023 than they did in 2022. Capuano notes that Marriott saw demand this quarter increase 10% compared to the same quarter in 2019.
“Leisure outpaced business travel before the pandemic. We have seen this trend accelerate in recent quarters as well,” Capuano said.
Capuano also noted that Marriott has begun to see increased booking activity from China as the country begins to open its borders.
“When we came out of the pandemic, it was fascinating to see the data. Every time a destination opened its borders or eased travel in and out of the country, we saw immediate spikes in search activity on Marriott.com. We saw booking activity start to build,” Capuano said. “China has obviously just started to open its borders. But we are already seeing similar trends.”
Nevertheless, the tourism industry has seen obstacles, especially in hotel development.
Capuano, who used to be a hotel developer, cited several obstacles to growth, including supply chain issues, the construction cost environment and interest rates.
“I think our developers understand that they’re developing in a cyclical sector. They understand that interest rates ebb and flow,” Capuano said.
“It might squeeze margins and returns on their projects, but it’s the availability of debt that’s the biggest challenge right now. There’s plenty of debt for acquisition of existing assets, more limited for new builds.”
Dylan Croll is a reporter and researcher at Yahoo Finance. Follow him on Twitter at @CrollonPatrol.
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