Editor’s Note: Welcome to the first installment of Connecting the Dots, a series of monthly conversations with Michael Dominguez, President and CEO of Associated Luxury Hotels International. The series will examine issues in the global economy in 2024 that will “connect the dots” to be helpful not only in business but in life as well. This first installment was reported by journalist Mede Nix.
In our first conversation, we’re taking a broad view of what 2024 may bring in the global economy. There’s continued economic strength not only in the U.S., but across the world. The Harvard Business Review said the global economy is doing better than expected. Their experts highlighted the strong U.S. employment picture – employers added a surprising 216,000 jobs in December alone – and inflation is easing across the world.
Nix: Economists have been predicting a recession for almost three years, but it’s looking like a soft landing. What does that mean for the economy?
Dominguez: It's all good news, but you still have chaos around the world. We're a global economy. It really does move so fast. What has changed is the expectation around rates and a soft landing. There is definitely uncertainty, but we are also now expecting some certainty around rates (to the fact that they won’t increase) and an expectation of slowdown. There's a lot we have to figure out, but in the first quarter I am pretty bullish and optimistic that things are lining up for a soft landing.
A soft landing in the simplest terms means we're going to be able to get inflation down without crushing employment. Most economists believed when this started, we were going to have to get to 7-8% unemployment before inflation would start to move negative. That's not the case. Inflation is actually moving not as fast as the Fed would like, but it is moving in the right direction. And labor has actually held and that has been surprising.
Nix: The gains in the U.S. stock market in the last two months of the year – especially at the end of 2023 – were striking. What does this mean for the economy in 2024?
Dominguez: What a difference a week makes. It is sometimes a little conflicting data. The “Magnificent 7” skewed the overall S&P and you have seen much of this start to rebalance at the beginning of 2024. I believe the overall market will be good, but growth will be much slower than what we have seen. It is important to remember that the market isn’t always an indicator of where we are now, but especially currently is a reaction to the rate (expected interest rate) environment.
Nix: What part has the consumer played in the soft landing?
Dominguez: We still find a resilient consumer. I am one that sometimes thinks that some of our behaviors and our buying patterns have changed dramatically since the pandemic and possibly forever. When I think about that, it's really one of those things that when something is taken away from you, you start to value it even more.
We understand we can and the interesting part is because unemployment hasn't skyrocketed and hasn't really moved, people have jobs, we have excess savings, the market is doing OK. So, we fill wealth. And by the way, housing is through the roof. So, the value of my home has gone through the roof, which makes me feel even wealthier. There's a whole bunch of things lining up making the consumer feel really good. That's positive for our economy across the board.
Nix: What does the resilient consumer mean for the travel industry?
Dominguez: We’ve talked about revenge travel coming out of this [the end of the pandemic]. Is it revenge or is this just our new pattern? We now understand we deserve it. It was taken away from us where we could not do it. There's that little bit of an innate fear as human beings that I don't know when it could be taken away again, so I need to be able to enjoy it and take advantage of it as much as possible.
Nix: Experts are saying that business uncertainty is now the norm. How does that play into the outlook for 2024?
Dominguez: Uncertainty is always the norm; we just tend to forget this during times of strong growth. Geopolitics is specifically an issue and even though it may be different as to what the issues are, it is always there.
Nix: Are you bullish on continued global economic growth in 2024?
Dominguez: I'm overly bullish and not in a Pollyanna way. I think we'd be remiss if we didn't mention there's challenges around the world. The geopolitical situations around the world do concern me. But we don't know what that means and what that looks like until we emerge with some resolution and either one of the wars that are currently being waged around the world and what that means to Chinese policy, trade, trade partners and allies. All of that's going to have to settle at some point to know exactly what it means, and I think anybody guessing right now would be guessing.
I talk about being bullish, but the caveat is everything stays status quo. Some things going even a little bit crazier around the world could change all of that.
In February: What the global economy in 2024 means for the hotel industry.