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Travel industry seeing ‘V-shaped post-Omicron recovery’: Kimpton Hotels & Restaurants CEO

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Kimpton Hotels & Restaurants CEO Mike DeFrino joins Yahoo Finance Live to discuss recovery from the pandemic and recent Omicron variant, wage growth, the impact of home-share companies on hotels, and outlook as Americans are eager to travel again.

Video Transcript

RACHELLE AKUFFO: Now as COVID restrictions ease and businesses edge closer to pre-pandemic levels, as parent company IHG says, there's still an unevenness in the recovery internationally. Now with over 60 hotels and restaurants globally, what are Kimpton's priorities right now? And which areas do you see the most opportunity for growth?

MIKE DEFRINO: Well, Rachelle, we're seeing a great deal of growth in the leisure segment, like everybody else is right now. But we do see a lot of pent-up demand and a potential quick recovery in the corporate business, corporate individual business, as well as corporate group business, which seems to be coming back within the first quarter. We're seeing a V-shaped post-Omicron recovery, which has been very encouraging for us. And heading into the rest of the first quarter, things are looking pretty positive.

RACHELLE AKUFFO: Now I want to talk about inflation. Obviously, we've seen how much that's affected goods, but also companies are now having to compete for labor, which is also pushing wages up, trying to retain talent. So how is Kimpton managing inflation hitting the goods and service sector? And how much could that potentially weigh on your operating costs?

MIKE DEFRINO: Yeah, well, there certainly is a great deal of pressure on the employee front right now. The pent-up demand for hotel employees is really reaching a crescendo. However, we're finding that our pricing power is remaining strong, and we're able to compensate for a lot of that or overcome a lot of those downward pressures on labor with our pricing strategies.

So we've been able to maintain fairly strong margins through the pandemic and into the first quarter in this post-pandemic period. But there is certainly a hiring crisis in our business. And we're doing a lot of things to attract employees and also to retain new employees, retain existing employees. And sometimes that does translate to higher wages and richer benefits.

RACHELLE AKUFFO: Now I want to talk about another area of lodging, which is obviously the homeshare industry. We see vacation rental companies like Airbnb, Vrbo, really thriving in the pandemic, as well as people perhaps didn't want to be in some of these bigger hotels with crowds, and they wanted sort of a more confined experience, perhaps less exposure to other people. Now they have the luxury of not having to worry about things like staffing shortages. How do investors want to see Kimpton positioning itself against some of these homeshare companies and newcomers to the market?

MIKE DEFRINO: Well, I think with the leisure traveler, which is primarily who the homeshare companies are attracting, we're seeing a great deal of positive news coming in our numbers on the leisure traveler. So our hotels in leisure destinations are outperforming competitors and running virtually full through the pandemic periods. Hotels in Florida and Southern California and Arizona are doing as well or better, in some cases, than 2019. So we see there's an ability for the Airbnbs and Vrbos and boutique hotels to exist together. There's a lot of demand right now for those sort of locations.

RACHELLE AKUFFO: And as we talked about leisure travelers, I want to talk about these so-called leisure travelers. I did not invent the phrase. But that's that combination of business and leisure, where you see people choosing to perhaps either vary some of their work from home options or perhaps as part of a business stay then extended into a personal stay. How does this hybrid-- how does this hybrid version affect perhaps your more particular business travel sector?

MIKE DEFRINO: Well, as the business traveler's coming back, especially into those locations where there is a leisure element, whether there's a beach or a mountain or the right weather or golf or what have you, we are definitely seeing extended stays, people staying more than the typical two-night corporate business stay. We're seeing them tag on days in the beginning and at the end. So it's been a great uptick for us over the pandemic to drive some additional occupancy into those hotels.

Where we're also seeing that is in some of our urban locations which are not traditionally considered to be leisure. But in places like New York and Chicago and Washington, we're seeing more of that business starting to come back, though more slowly than other markets that have that leisure bend to them.

RACHELLE AKUFFO: And I want to talk about luxury spending, which we did see across multiple sectors during the pandemic, but especially in travel. According to American Express's global travel trends report, we're seeing personalized experiences being the top priority for people, and that's over things like cleanliness and privacy. What is Kimpton doing to really tap into the changing needs of consumers, while also making sure there is-- they're also affordable and good quality experiences for those perhaps who were struggling during this pandemic?

MIKE DEFRINO: Yeah, I think there's a lot of things to unpack there. One of the things we've recently done is a partnership with Talkspace, the online mental health care program, to provide therapy services, online therapy services, to our guests and to our employees, as a way to make them feel comfortable when they start to travel again. We're also doing-- do a lot around socializing with our own guests, so bringing our guests together in our restaurants, in our lobbies, in our meeting spaces, to have them sort of share experiences, have a sense of community in the hotels.

We really think it's important for guests to have sort of a strong sense of being in our properties and highly activated spaces, as well as we think there's a lot to be said right now for the trauma, in some cases, and the anxiety around travel. We think our partnership with Talkspace is really going to help address that and sort of destigmatize some of that stress that comes with traveling, as a lot of people are starting to travel just for the first time this year. And it's been a quick uptick.

RACHELLE AKUFFO: And certainly been a very long three years. I know a lot of people could use some stress relief. Thank you so much for your insights. Mike Defrino, Kimpton Hotels and Restaurants CEO, thank you for your time today.

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