Editor’s Note: Connecting the Dots is a series of monthly conversations with Michael Dominguez, President and CEO of Associated Luxury Hotels International. The series examines issues in the global economy in 2024 that will “connect the dots” to be helpful not only in business but in life as well. In this conversation, we discuss supply and demand as it relates to travel, hotels and the meetings industry. 

 

Mede Nix: Overall, what are you seeing for supply and demand in 2024? 

 

Michael Dominguez: We don’t see much of a drop off in demand. It’s interesting in the latest STR data we’ve seen that our increases are on Tuesday, Wednesday and Thursday. All those markers are moving in the right direction. So, we're starting to see a lot of demand in the major metro areas. And that's the only place we were late in our recovery. So that's to me very, very encouraging across the board. Because as those areas tighten up, our second-tier cities will get even busier than they are today. 

 

Nix: What are the challenges relating to supply and the addition of hotel rooms? 

 

Dominguez: There are challenges. But from a forecast on the demand side, I think it is fantastic. We're well behind the supply curve of what we would normally have in an upcycle. And I don't see that changing in the current rate and borrowing environment we're seeing. It's not the easiest thing to get money to build a project at the moment or you'd wait because I think there's a great anticipation that interest rates will start to come down later.  

 

 

Nix: Where is the action happening? Second-tier cities like Louisville, Oklahoma City and St. Louis?  

 

Dominguez: We're starting to see a lot of demand in the major metro areas. And that's the only place we were light in our recovery. So that's to me very, very encouraging across the board. Because as those areas tighten up, our second-tier cities will get even busier than they are today. One of those is Raleigh. They're about to expand their center, they're going to have a new anchor hotel that's going to be there and they have new luxury product coming in. They've really worked on this. I think that there are going to be a lot of different emerging markets.  

 

Nix: Is there anything that could hold these second-tier cities back?  

 

Dominguez: The challenge we have is always going to be airlift into the second-tier cities because our airlines are still a little challenged with planes and what routes we can add because we're behind in plane delivery by Boeing. The pilots issue has actually resolved itself and they have a great pipeline now.  

 

Connecting the Dots January: Overall Outlook for 2024 

Connecting the Dots February: Global Economic Impact for Hotels 

 

Supply and Demand

 

Nix: We talked about supply and demand in the U.S. hotel industry. What does it look like in Europe and the rest of the world in 2024?  

 

Dominguez: The European pipeline looks strong with 115,000 rooms currently in construction and 64,000 scheduled to start in the next 12 months. The planning pipeline is strong as well, but it should be noted which cities have the strongest growth as it’s not your usual suspects. London, Istanbul, Lisbon, Dublin and Dusseldorf are leading the charge. 

 

Nix: What about U.S. air traffic controller shortages in 2024?  

 

Dominguez: This past summer you saw flights were actually being pulled because we don't have enough FAA people fully trained. By the way, we don’t want a partially trained air traffic controller. That’s the reason you saw those flight issues we had in New York. When you saw this past summer all those flights being pulled back, it had to do with air traffic control. And even when we shut down the airports when we had storms there that had to do with air traffic control, not the airlines. Will that resolve itself in 2024? It’s getting better every month but it’s not going to fully resolve itself.  But there is an emphasis on it and candidly, some good work by the U.S. Travel Association. There was an FAA reauthorization bill that just went through that was an important one because it provided funding around literally modernizing personnel and training, which is very, very necessary for us. 

 

Nix: Like the U.S., Europe also has an air traffic controller shortage. What does that mean for the travel industry this year? 

 

Dominguez: The issues are vastly different, but the encouraging news is an agreement was reached in early March that will reform the “Single European Sky” policy with an aim to tackle the air traffic control capabilities as we increase capacity. 

 

Olympics Paris

 

Nix: Finally, it’s an Olympic year. The Games will be in Paris this summer at the height of the European Union's holiday season. What does that mean for hotels and airlines trying to meet the demand? Will a crowded France mean that U.S. travelers might avoid Europe this summer and stay home? 

 

Dominguez: Current rates over the summer season have had a much higher jump already in Paris, almost doubling what we saw during the Super Bowl. The consensus is that this will push European holiday travel to other European cities, which will build compression and rates. Last summer we saw a dramatic increase in outbound U.S. travelers. You would hope that this will balance out a bit this year due to these demand influencers. 

In April: What does it mean when 60% of the world GDP has an election in 2024?