Recall from our March review of real personal consumption expenditures (PCE) that non-QSR restaurant dining was slightly above the overall growth in PCE from its pre-pandemic base, lodging was slightly below, taxi & ride-hailing was in-line, and air transportation was well above (+17% above pre-pandemic levels, and thus why it's called “revenge travel.”) As you will read in our summary of the earnings reports from different segments of travel and in-person experiences, Q1 2023 was likely the peak growth for the year (on a YoY basis) with the remainder of the year settling into a more pre-pandemic normalized rate.
- Caesars Entertainment reported a whopper revenue increase of +24% for its Las Vegas region with its hotel revenue and food & beverage results all hitting records. CEO Tom Reeg said, “We feel very good about business into April and through the rest of this quarter in Vegas. And as you look forward with the group business that's on the books going forward.” Senior Vice President of Investor Relations Brian Agnew said, “All the KPIs in the group and convention business are up the last year versus 2019. Rooms, ADRs, and banquet revenues are pacing ahead for the rest of the year. We expect the group business to have another record year in 2023.” Reeg continued, “I think you've seen Vegas as a market do a fantastic job of continuing to add events. And in the case of sports franchises or Formula One, that bring a significantly more valuable customer to the market. If I look at Vegas now, all of us are pretty full…Occupancy rates are quite high. And so yes, it's natural to say, how do you get better? Well, you get better by up-tiering the average customer that is coming to the market…And you see the Raiders come to town....The people that come to see those, to see Formula One tend to be a better average customer. You're bringing in higher-value customers and we're already full, so you're kicking out the lowest end. I see no reason that, that needs to stop or would stop. This market has done great job over the 30 years I've been involved in and around gaming. And continuing to add reasons for people to come, continuing to add capacity and continuing to add to the average customer that shows up here. We all know that back in our parents' day, it was a very different market, low value, you’d get a stake and lobster for a couple of bucks. Now you're talking about one of the best food and beverage teams in the world, among the best sports and entertainment experiences in the world and continually adding to that.”
- In terms of big events, Live Nation spoke to an epic year for 2023, with growth from there. Global concert event revenue for the year is expected to reach $15.2B, compared to $9.4B in 2019. (The U.S. is about two-thirds of the company's revenue mix). Concerts and attendance in the U.S. should near 40K and 72M, respectively, compared to 28K and 63M in 2019. With an average ticket price of $116 per entry, that’s $8.4B in spend in the U.S. for 2023. The comparable figure for 2022 was $7.8B, and so 2023 will be up $600M YoY. Live Nation CEO Mike Rapino shared, “Demand has been growing for a long time and is showing no signs of letting up. Talking to fans, they say that live experiences are the #1 leisure activity where they expect to spend more in the future. Naturally, this is leading to record levels of activity in both our concerts and ticketing business. In concerts, we sold nearly 90M tickets for shows this year, tracking more than 20% ahead of this point last year. Looking at even our festivals--Lollapalooza and others are the easy ones, but we have over 200 festivals onerous to one-day festivals in smaller markets to our U.S. and international businesses. And all of it seems to be doing really, really well. Whether it's a middle of a road festival in a smaller market, whether it's a club act at all levels, there seems to be incredible demand and on a global basis. We haven't seen just the top stuff selling and they're not coming to the other stuff. The demand seems to be uniformed from clubs to stadiums from Pittsburgh to Milan…And we think, 2024 and going forward…we've been a high single industry growth business and a high single-digit revenue AOI business year after year for many years. And we look at going forward, we think we're back to being a great strong growth business year-over-year off this foundation of business. We think the industry is back bigger than ever.”
- Marriott’s CEO Anthony Capuano stated in its Q1 2023 earnings release, “While the global economic picture is uncertain, demand remains strong, and we are not seeing signs of a slowdown. With the faster than expected recovery in international markets and continued solid booking trends globally to date in the second quarter, we are raising our RevPAR guidance for the full year.” On the call, he said, “Global leisure demand and ADR are still incredibly robust, following a year with leisure demand already well above pre-pandemic levels.” In terms of business travel, room nights are down only about 1% compared to 2019. North American occupancy and room rate were 66% and $257, respectively, versus 72% and $203 in Q1 2019. That higher room rate along with cost-outs (expense per room are down 9%-10%) produced a 19.6% EBITDA margin compared to 16.4% in 2019.
- Expedia and Bookings Holdings, which work the whole swath of lodging types, also reported robust results this week. Expedia CEO Peter Kern said, “Throughout the quarter, we saw strong consumer demand with acceleration in international and big city travel and more of Asia reopening. The re-emergence of major international cities has meant increased hotel demand, offset in part by flattening demand in vacation rentals as travel demand mix to shorter stay urban destinations over extended beach and mountain trips (which put pressure on its VRBO business). Similarly, air has continued to mix towards international travel and away from COVID-era concentration in domestic. By and large, prices have held up quite well after several years of inflation. We've seen lodging ADRs hold fairly steady across geos. Air ticket prices, however, continued to increase as strong demand continues to outstrip capacity. The only area where we have seen any meaningful decline in average daily rate is in the car rental space, where larger inventories have allowed rental companies to drive more volume at the expense of price. Overall, we are pleased to see broad travel demand remains strong in what appears to be a more structural post-pandemic environment of people prioritizing travel above most other categories of spend. This has held up despite inflation in recession worries and even more recently, bank system concerns.” Management expects mid-single-digit revenue growth where nights booked will be above that and average rate and yield down YoY on the business shift to urban locations relative to beach/mountain and increased discounts. 2H 2023 is expected to be stronger (building international travel) and 2023 nights-booked should end at around 95% of 2019’s level. Bookings (which has a larger European mix) has been faster on the recovery; its nights-booked should end the year at 120% of 2019's`level, and its YoY rate of growth should moderate to mid-single-digits over the next few quarters following the final “catch-up quarter” of Q1 where nights-booked increase +23% YoY. (Bookings is adding a lot of short-term rental properties to its platform to better compete with VRBO’s and Airbnb’s offering, as such, Bookings is outgrowing the market because it is expanding where it plays.)
- In terms of metrics for mobility, Uber trips were up +32%, fares booked increased +40%, revenue +39%, and profits increased from $618M to $1.1B. In the U.S., trips grew 40% YoY in Q1 2023 with management noting that an improving marketplace balance (more drivers) is yielding lower fares (less surge pricing). Recall that Uber had a different strategy involving delivery (of product, meals, and alcohol) than Lyft, which allows its “earners” (their word for drivers) more opportunities to earn. That strategy was successful, and Lyft has seen its market share, profits, and headcount get crushed. (Last week, Lyft made a second and more severe HQ headcount reduction of -26%). Monthly active users of the Uber platform of services increased to 130M, up +40% from Q1 2019. Average monthly uses of the platform per user increased to 5.4X, nearly equal to the 2019 level of 5.5X and up from 5.0X in Q1 2022.