WEBVTT - Bloomberg Surveillance TV: June 3, 2024 0:00:00.120 --> 0:00:06.800 Bloomberg Audio Studios, Podcasts, radio News. 0:00:11.640 --> 0:00:15.440 This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 0:00:15.480 --> 0:00:18.680 with Lisa Bromwitz and Amrie Hordern. Join us each day 0:00:18.720 --> 0:00:22.280 for insight from the best in markets, economics, and geopolitics 0:00:22.400 --> 0:00:24.920 from our global headquarters in New York City. We are 0:00:24.920 --> 0:00:27.680 live on Bloomberg Television weekday mornings from six to nine 0:00:27.720 --> 0:00:31.240 am Eastern. Subscribe to the podcast on Apple, Spotify or 0:00:31.320 --> 0:00:33.960 anywhere else you listen, and as always on the Bloomberg 0:00:34.040 --> 0:00:37.360 Terminal and the Bloomberg Business app. We begin with deepig issue, 0:00:37.440 --> 0:00:40.280 kicking off June, following the best month for stock since February. 0:00:40.400 --> 0:00:43.319 Cameron Dawson of New Wegs Wealth remaining cautious, saying this, 0:00:43.400 --> 0:00:46.960 we've seen large cap equities experiencing volatility in the short term. 0:00:47.120 --> 0:00:50.200 Given fading momentum and breadth, there is plenty of room 0:00:50.240 --> 0:00:53.640 for investors to be disappointed or caught flat footed in 0:00:53.680 --> 0:00:55.680 the short run. Cameron, please to say, joined us now 0:00:55.720 --> 0:00:57.480 for more camera, go monitor, you come winning, It's going 0:00:57.520 --> 0:00:59.880 to see you. What are you advocating for this morning, 0:00:59.880 --> 0:01:00.600 for this quarter? 0:01:00.960 --> 0:01:01.480 Patience? 0:01:01.720 --> 0:01:03.920 I think patients in the very near term, just because 0:01:03.960 --> 0:01:08.040 you've had that deterioration and breadth deterioration momentum. It's not fatal. 0:01:08.160 --> 0:01:10.400 It's not to say that markets can't continue to rise. 0:01:10.480 --> 0:01:14.160 We know that liquidity and trend are still very positive things. 0:01:14.600 --> 0:01:17.800 But there has been this fraying under the surface enough 0:01:17.840 --> 0:01:21.279 to say expect a little volatility as long as growth 0:01:21.400 --> 0:01:24.080 estimates hold in which I think is the most important part, 0:01:24.319 --> 0:01:27.800 then that volatility is viable, meaning any kind of correction short, 0:01:27.840 --> 0:01:28.880 shallow and viable. 0:01:29.120 --> 0:01:32.280 You say, patients, there has been impatience for a rotation 0:01:32.360 --> 0:01:34.960 that's never come about. Now you've been quite in green day, 0:01:35.200 --> 0:01:36.800 over the weekend, or at least the team has What 0:01:36.920 --> 0:01:38.120 was it when I come around? Yeah? 0:01:38.240 --> 0:01:40.480 Is it coming around? No? Will it be a boulevard 0:01:40.480 --> 0:01:41.119 of broken dreams? 0:01:41.200 --> 0:01:41.320 Oh? 0:01:41.400 --> 0:01:43.840 I think probably? It seems like more of a very 0:01:43.920 --> 0:01:46.720 nice I feel like an American idiot. 0:01:46.800 --> 0:01:50.120 So the challenge with small caps is that they are 0:01:50.240 --> 0:01:53.840 so unloved and so under owned. Is that you could 0:01:53.880 --> 0:01:57.040 see a very sharp rally over the short period of 0:01:57.040 --> 0:01:59.080 time that can be ephemeral. Look at the November and 0:01:59.160 --> 0:02:03.040 December rallies. They were very short but very powerful. But 0:02:03.080 --> 0:02:05.760 if you look over the medium to longer term, you 0:02:05.840 --> 0:02:09.440 still have really weak fundamental conditions within small caps. So 0:02:09.480 --> 0:02:11.720 you have forty percent of debt in small caps is 0:02:11.720 --> 0:02:14.720 floating rate. They hate higher for longer. They have fifty 0:02:14.720 --> 0:02:17.280 percent more debt than large caps. So we know that 0:02:17.400 --> 0:02:20.639 higher rates are weighing on these small caps, but appreciate 0:02:20.720 --> 0:02:23.120 that small caps are trading at a new relative low 0:02:23.200 --> 0:02:25.720 versus the market. So don't be surprised if you have 0:02:25.760 --> 0:02:28.280 one of those face ripping kind of counter trend rallies. 0:02:28.560 --> 0:02:30.280 So wake me up when September ends. 0:02:30.320 --> 0:02:32.000 I mean, this is basically what we're looking at at 0:02:32.040 --> 0:02:34.359 a time when we can't really game out when the 0:02:34.360 --> 0:02:36.560 Fed's going to start cutting rates and what the implication 0:02:36.639 --> 0:02:39.120 is going to be for risk acts. Are you saying 0:02:39.480 --> 0:02:42.200 that if there is weakness and. 0:02:42.160 --> 0:02:44.120 The FED does cut rates. 0:02:44.120 --> 0:02:46.920 That is a viable dip, particularly in small caps. 0:02:47.360 --> 0:02:51.080 It depends what you are doing with growth forecasts. We 0:02:51.160 --> 0:02:53.079 wonder if gone are the days of the world where 0:02:53.080 --> 0:02:55.960 we are having a FED that's cutting rates simply because 0:02:56.000 --> 0:02:59.160 inflation is moderating. If the FED moves to cut rates 0:02:59.200 --> 0:03:01.320 or we start pricing them in, is it because of 0:03:01.360 --> 0:03:03.920 a bad reason, Is it because growth is coming and weaker. 0:03:04.280 --> 0:03:07.880 Appreciate that economic surprises have plunged over the last month. 0:03:08.120 --> 0:03:10.880 Look at real personal spending last week coming in much 0:03:10.919 --> 0:03:14.600 weaker than expected. We're watching PMIS really closely. We were 0:03:14.639 --> 0:03:17.920 hoping to see some reacceleration in PMIS that did not 0:03:18.160 --> 0:03:20.960 happen in April. So if we continue to see this 0:03:21.000 --> 0:03:24.280 weakening of data, what it calls into question is consensus 0:03:24.280 --> 0:03:27.359 forecasts that have moved up materially. They're up two hundred 0:03:27.400 --> 0:03:29.639 basis points for twenty twenty four GDP. 0:03:29.400 --> 0:03:30.239 Over the last year. 0:03:30.560 --> 0:03:33.359 That means that nobody's pricing in a recession, which means 0:03:33.360 --> 0:03:34.880 we have to ask the question what. 0:03:34.840 --> 0:03:35.640 Could surprise us? 0:03:35.920 --> 0:03:38.600 So just to plug ism manufacturer coming out today at 0:03:38.640 --> 0:03:40.200 ten am, I am watching. 0:03:39.840 --> 0:03:42.200 That closely, as are you, as is John. Let's put 0:03:42.240 --> 0:03:42.960 some numbers on this. 0:03:43.240 --> 0:03:45.480 If Andrew Hollenhors over at City Group is correct and 0:03:45.480 --> 0:03:47.520 we get one hundred and forty thousand for the headline 0:03:47.600 --> 0:03:50.800 numbers on payrolls on Friday, will there be a sell 0:03:50.800 --> 0:03:53.240 off in the equity market in tandem with a rally 0:03:53.280 --> 0:03:54.040 in bonds. 0:03:54.480 --> 0:03:57.640 I think potentially we still think that bad news is 0:03:57.760 --> 0:04:00.720 bad news, simply because you have to have the context 0:04:00.760 --> 0:04:03.800 of the starting point of estimates. If estimates were expecting 0:04:03.840 --> 0:04:05.920 a recession, you could get bad news, and it still 0:04:05.960 --> 0:04:09.040 wouldn't be that bad because you're already pricing in weaker growth. 0:04:09.320 --> 0:04:12.560 You're not pricing in any weak growth in this economy 0:04:12.680 --> 0:04:15.800 or in the market. Gdpesmates again are at two point 0:04:15.840 --> 0:04:19.400 four percent, but consider EPs estimates for twenty twenty four. 0:04:19.640 --> 0:04:22.000 They're set to be up thirteen percent next year to 0:04:22.080 --> 0:04:24.640 two hundred and seventy seven dollars a share. 0:04:25.160 --> 0:04:26.440 If you start asking. 0:04:26.160 --> 0:04:28.800 The question if that's too high, that's when bad news 0:04:28.839 --> 0:04:30.040 would become bad news. 0:04:30.200 --> 0:04:32.479 How relevant is the election this year to your call? 0:04:33.839 --> 0:04:37.400 I think that the election is relevant in the context 0:04:37.520 --> 0:04:40.920 of yields, mostly because of treasuries and the fact that 0:04:41.080 --> 0:04:45.040 neither party is talking about austerity. Neither party is talking 0:04:45.080 --> 0:04:48.440 about balanced budgets, which means that all this concern about 0:04:48.480 --> 0:04:52.440 treasury auctions likely continues given the fact that you aren't 0:04:52.480 --> 0:04:56.160 going to see any movement to pull back on deficit spending. 0:04:56.279 --> 0:04:58.520 So fiscal policy is a basket case regardless if he 0:04:58.560 --> 0:05:00.000 wins in November. 0:05:00.320 --> 0:05:01.320 We're still doing the Green Day. 0:05:01.320 --> 0:05:02.479 Thank just that what we're doing. 0:05:02.520 --> 0:05:06.440 Yeah, yeah, sure, I think yes, because you're not seeing 0:05:06.480 --> 0:05:09.640 any sign that you're going to move to more fiscal balance, 0:05:09.920 --> 0:05:12.760 which just means that we should get used to more deficits, 0:05:13.040 --> 0:05:15.920 more high high treasury auctions in the fact that yields 0:05:15.920 --> 0:05:18.040 could be pressured higher on the long end. 0:05:17.880 --> 0:05:18.400 Of the curve. 0:05:19.080 --> 0:05:21.240 At what point is it a computative for stocks, Because 0:05:21.240 --> 0:05:22.480 we've been able to live with it for a. 0:05:22.400 --> 0:05:26.440 While, it becomes punitive if you start questioning the growth story. 0:05:26.640 --> 0:05:28.360 You can forgive a lot of things. 0:05:28.400 --> 0:05:31.000 If growth is remaining resilient, you can shake off a 0:05:31.080 --> 0:05:33.839 tighter FED, you can shake off higher interest rates. But 0:05:34.080 --> 0:05:37.279 if you start cutting growth estimates, which really relies on 0:05:37.320 --> 0:05:40.480 the consumer at seventy percent of GDP, that's. 0:05:40.320 --> 0:05:43.880 When you have the punitive action. You said you advise patients. 0:05:44.320 --> 0:05:47.680 How receptive are people to that recommendation considering the fact 0:05:47.680 --> 0:05:50.560 that that doesn't really work for the DNA of most 0:05:50.560 --> 0:05:51.640 people on Wall Street. 0:05:51.880 --> 0:05:54.200 Yeah, I think that there's still is FOMO. I mean, 0:05:54.200 --> 0:05:57.360 look at GameStop this morning, and you've certainly seen a 0:05:57.400 --> 0:06:00.560 big appetite to Russian to risk. Think, when we think 0:06:00.560 --> 0:06:03.800 about patients, you have to consider positioning and sentiment. Sentiment 0:06:03.920 --> 0:06:07.840 is in the ninetieth percentile, meaning that bullishness is broad based, 0:06:08.120 --> 0:06:10.240 as well as the fact that when you look at positioning, 0:06:10.279 --> 0:06:13.320 you can see that aaii positioning is only about one 0:06:13.400 --> 0:06:16.480 hundred and fifty basis points off its twenty twenty two highs. 0:06:16.760 --> 0:06:19.760 People are positioned for strong equity markets. So what we 0:06:19.800 --> 0:06:22.039 look at with clients is we say, if you've enjoyed 0:06:22.080 --> 0:06:25.320 this rally, you need liquidity some kind of patients before 0:06:25.360 --> 0:06:28.200 adding back into the market is definitely warranted. 0:06:28.360 --> 0:06:29.159 You mentioned game stock. 0:06:29.200 --> 0:06:30.600 Can we just finish on that this stock is up 0:06:30.600 --> 0:06:32.200 in the pre market by seventy five percent? 0:06:32.240 --> 0:06:34.640 Speaking of relevancy, how relevant is this? 0:06:34.839 --> 0:06:36.240 I always hear a lot of people every time we 0:06:36.279 --> 0:06:38.479 get a move like this, they try and say this 0:06:38.560 --> 0:06:41.520 means this, This is a signal for whatever their boss 0:06:41.640 --> 0:06:43.760 was yesterday coming into this move. What does it mean 0:06:43.800 --> 0:06:47.039 to you? If anything, It probably means nothing. 0:06:47.240 --> 0:06:49.680 But if we can try to gain anything from it, 0:06:49.680 --> 0:06:52.599 it would be a measure of sentiment and risk appetite 0:06:52.920 --> 0:06:55.880 as well as liquidity, meaning that if you batch all 0:06:55.960 --> 0:06:59.920 of the mean kind of speculative things together, that is 0:07:00.200 --> 0:07:03.480 a reflection of risk appetite in the market. The thing, 0:07:03.520 --> 0:07:05.400 of course that's missing, though, is that some of your 0:07:05.480 --> 0:07:08.520 riskiest parts of the market, small caps have been completely 0:07:08.600 --> 0:07:11.080 sitting out of this rally, so there's a lot of 0:07:11.240 --> 0:07:12.560 conflicting data points. 0:07:12.680 --> 0:07:14.840 Cameron, this was great. Cameron Dawson at New h RAN. 0:07:24.360 --> 0:07:26.600 It's around the table in New York. Is the international 0:07:26.680 --> 0:07:29.240 president and CEO, Tony Capuano. 0:07:29.280 --> 0:07:30.560 Tony, good morning to here morning. 0:07:30.880 --> 0:07:33.040 We've heard from the airlines very mixed reviews and you 0:07:33.080 --> 0:07:37.080 welcome back anytime American having some problems executing United in 0:07:37.160 --> 0:07:39.600 down to say things are okay in the hotel business, 0:07:39.600 --> 0:07:41.880 summer travel. Just walk us through things and how they 0:07:41.880 --> 0:07:42.920 look regionally at the moment. 0:07:43.320 --> 0:07:46.440 Well, it's interesting listening to the airline CEOs because where 0:07:46.440 --> 0:07:49.480 they're consistent is about the strength of demand. And we 0:07:49.520 --> 0:07:51.960 see the same thing in our business. When we looked 0:07:51.960 --> 0:07:56.440 at Q one results across geographies and across segments, we 0:07:56.480 --> 0:07:59.280 saw strong and steady growth. Now Here in the US, 0:07:59.400 --> 0:08:02.560 our biggest mort we are seeing demands start to normalize 0:08:02.600 --> 0:08:05.320 a little bit. We had global RevPAR of about four 0:08:05.320 --> 0:08:07.680 point two percent. It was only about one and a 0:08:07.720 --> 0:08:11.880 half percent here in the US, eleven percent internationally and 0:08:11.960 --> 0:08:16.160 sixteen percent in Asia. Now there's still benefiting from some 0:08:16.320 --> 0:08:20.920 favorable comparisons, but we are seeing more rapid growth internationally today. 0:08:21.000 --> 0:08:22.720 See the same thing in the airline business that if 0:08:22.760 --> 0:08:25.200 you have this international exposure, you seem to be doing 0:08:25.280 --> 0:08:27.360 better right now. What is that about? Is that the 0:08:27.360 --> 0:08:28.800 affluent consumer traveling more? 0:08:28.840 --> 0:08:30.080 What is that? What explains that? 0:08:30.160 --> 0:08:30.280 Well? 0:08:30.320 --> 0:08:31.400 I think it's a few things. 0:08:31.480 --> 0:08:34.280 I think the strength of the dollar is driving lots 0:08:34.280 --> 0:08:36.920 of outbound US travel. In fact, we were looking at 0:08:36.960 --> 0:08:40.079 the numbers for this summer in Western Europe and this 0:08:40.160 --> 0:08:43.160 is off the back of a record twenty twenty three. 0:08:43.640 --> 0:08:47.480 Our forward booking revenue is up about seven percent going 0:08:47.480 --> 0:08:52.000 into destinations like France, Italy, Spain, Greece, and I think 0:08:52.000 --> 0:08:54.000 the same is true for Asia. There was a study 0:08:54.000 --> 0:08:57.439 that just came out that said, for outbound US travelers, 0:08:57.800 --> 0:09:02.000 among the most desirable destinations Tokyo. And I think you 0:09:02.080 --> 0:09:03.719 talked a little about exchange. 0:09:03.360 --> 0:09:05.840 Rates study en one to sixty house exactly. 0:09:05.920 --> 0:09:09.760 The strength of the dollar is certainly driving that travel pattern. 0:09:09.920 --> 0:09:12.880 I want to just sit on the idea of what 0:09:13.040 --> 0:09:17.079 the characteristics of some of these consumers are. Is there 0:09:17.120 --> 0:09:20.400 a feeling that wealthier consumers are going to keep traveling 0:09:20.440 --> 0:09:22.840 and keep spending and the more you can capture them 0:09:22.840 --> 0:09:26.600 with an international offering, the better you are versus say, 0:09:26.679 --> 0:09:27.920 mid and lower income. 0:09:28.360 --> 0:09:30.840 Well, I think for us, we're trying to capture at 0:09:30.880 --> 0:09:33.560 both ends of that spectrum. So we're lucky enough to 0:09:33.600 --> 0:09:36.960 have the industry's largest luxury portfolio. We announced a few 0:09:37.000 --> 0:09:41.040 more conversions just this morning, resorts like Turtle Bay on 0:09:41.120 --> 0:09:45.800 Oahu and Pelican Hill out in California. So we continue 0:09:45.800 --> 0:09:48.760 to see really strong demand and pricing power in the 0:09:48.840 --> 0:09:51.240 luxury tier. At the same time, at the other end 0:09:51.280 --> 0:09:53.640 of the spectrum. Over the last year, we have for 0:09:53.679 --> 0:09:56.120 the first time in our ninety seven year history, moved 0:09:56.120 --> 0:09:58.400 into the mid scale tier, and that is a more 0:09:58.520 --> 0:10:02.440 value focused customer, and they are absolutely traveling. They're just 0:10:02.520 --> 0:10:04.920 looking for a better value proposition. 0:10:05.160 --> 0:10:08.480 You talk about international travel, there is this feeling that 0:10:08.720 --> 0:10:13.160 companies that go international struggle with respect to some of 0:10:13.400 --> 0:10:16.000 the international relations that have been fraying and some of 0:10:16.040 --> 0:10:17.840 the battles therein Are you. 0:10:17.920 --> 0:10:19.920 Finding that that that's become an issue. 0:10:20.080 --> 0:10:22.839 Well, I think we're a bit insulated for that from 0:10:22.920 --> 0:10:25.440 that because of our business model. We've got about nine 0:10:25.480 --> 0:10:29.160 thousand hotels globally and almost the entirety of the portfolio 0:10:29.280 --> 0:10:32.640 is owned by third party owners and franchisees, and so 0:10:32.760 --> 0:10:35.120 in most of those markets, our owner base is a 0:10:35.200 --> 0:10:39.360 local market base and they're based locally. So you go 0:10:39.360 --> 0:10:42.360 to China, for instance, where we're operating more than five 0:10:42.440 --> 0:10:46.320 hundred hotels today, almost the entirety of that portfolio is 0:10:46.360 --> 0:10:49.800 owned by Chinese ownership, and so that maybe insulates us 0:10:49.800 --> 0:10:51.800 a bit from some of the friction that you describe. 0:10:51.920 --> 0:10:54.359 Is that deliberate or is that just one of the outcomes. 0:10:54.679 --> 0:10:58.880 I think it's largely deliberate. The real estate at its 0:10:58.920 --> 0:11:02.280 core is a local business, and so aligning with partners 0:11:02.320 --> 0:11:06.040 that have deep connections both in the public and private sector, 0:11:06.280 --> 0:11:10.880 that understand local business practices, that have existing relationships with 0:11:11.040 --> 0:11:13.480 lenders in those markets has served us quite well. 0:11:13.600 --> 0:11:15.600 You remember the President in the last month, right I did? 0:11:15.679 --> 0:11:16.319 How did that go? 0:11:16.720 --> 0:11:17.000 Great? 0:11:17.400 --> 0:11:19.840 You know, I was lucky enough to be invited for 0:11:19.880 --> 0:11:23.840 a second time. I applaud the administration for engaging the 0:11:23.880 --> 0:11:27.440 business community, and it gave me a short window to 0:11:27.559 --> 0:11:31.800 describe what the administration can do to support the constituents. 0:11:31.840 --> 0:11:34.320 We can you share some of that with us, of course. 0:11:34.040 --> 0:11:38.160 So I started with our associates, our employees, and I 0:11:38.280 --> 0:11:44.240 talked about, particularly in seasonal destinations, the help we need 0:11:44.280 --> 0:11:47.600 from the administration to expand the number of temporary work 0:11:47.720 --> 0:11:50.360 visas to try and fill in some of the gaps 0:11:50.360 --> 0:11:53.120 in high demand markets. As it relates to our owners 0:11:53.160 --> 0:11:56.920 and franchisees. I really talked about some of the constriction 0:11:57.120 --> 0:12:00.640 we see in the debt markets today. Many of the 0:12:00.800 --> 0:12:04.040 regional banks who have been big, big lenders into the 0:12:04.040 --> 0:12:07.520 hospitality sector are kind of sitting on the sidelines waiting 0:12:07.559 --> 0:12:10.520 to see what BUSL III has to offer in mid 0:12:10.600 --> 0:12:14.160 twenty five and what sort of burden that will put 0:12:14.160 --> 0:12:16.600 on their balance sheets. And so I know in our 0:12:16.640 --> 0:12:20.400 pipeline we've got hundreds of shovel ready projects, which the 0:12:20.440 --> 0:12:23.920 Administration was keen to hear about because of both temporary 0:12:23.960 --> 0:12:28.640 construction job creation and permanent operating job creation. But we 0:12:28.720 --> 0:12:31.920 need some help loosening up the debt markets. And then 0:12:32.080 --> 0:12:35.319 for guests, we really spend a lot of time talking 0:12:35.360 --> 0:12:40.280 about visa weight times. And so you've got a market 0:12:40.320 --> 0:12:43.040 like India. I saw this morning their stock markets going 0:12:43.679 --> 0:12:46.559 to all time record highs. That growing middle class has 0:12:46.600 --> 0:12:49.880 a ravenous appetite for travel. But if you're an Indian 0:12:50.000 --> 0:12:53.280 national trying to get visa to come to the US. 0:12:53.679 --> 0:12:56.199 The current weight time is over four hundred days. 0:12:56.920 --> 0:12:58.400 Let's just dissect some of that. 0:12:58.480 --> 0:13:00.559 Let's start of the first part, the idea that you're 0:13:00.600 --> 0:13:03.880 looking for more workers to come to the US to 0:13:03.960 --> 0:13:06.600 help you out. How much does that change under what 0:13:06.640 --> 0:13:08.319 administration versus the other. 0:13:08.280 --> 0:13:12.800 After the election? Yeah, it's a great question. I'm not 0:13:12.840 --> 0:13:13.400 sure we know. 0:13:14.040 --> 0:13:14.240 Right. 0:13:15.120 --> 0:13:19.400 We have seen support from the Biden administration in terms 0:13:19.440 --> 0:13:22.920 of working with Department of Homeland Security to expand some 0:13:23.040 --> 0:13:26.240 of the temporary worker visas. We'll have to see if 0:13:26.280 --> 0:13:28.840 there's an administration change what their posture will be. 0:13:29.480 --> 0:13:32.040 Immigration has been actually one thing that a lot of 0:13:32.040 --> 0:13:34.000 economists who come on the show talk about. This has 0:13:34.000 --> 0:13:37.000 been the big surprise. Has kept wages down and sort 0:13:37.000 --> 0:13:40.840 of kept inflation from spiraling while continuing to allow growth 0:13:40.880 --> 0:13:43.880 to expand. How much have you seen that on a 0:13:43.920 --> 0:13:45.760 practical level in your own business? 0:13:46.200 --> 0:13:49.959 So coming out of the pandemic, obviously we saw very 0:13:50.000 --> 0:13:53.280 strong wage growth here in the US, our biggest market. 0:13:53.320 --> 0:13:56.199 We're starting to see that more normalize, kind of align 0:13:56.240 --> 0:13:58.040 a little better with inflation. 0:13:58.360 --> 0:14:00.760 But if there wasn't as much immigration, much more difficult 0:14:00.760 --> 0:14:02.000 would it be for your business? 0:14:02.080 --> 0:14:05.840 It would be challenging at this point going forward. 0:14:06.080 --> 0:14:08.839 How much are you seeing wage inflation continued to keep 0:14:08.880 --> 0:14:11.360 pace given the fact that it is challenging based on 0:14:11.400 --> 0:14:13.480 what you're saying to get the number of workers. 0:14:13.520 --> 0:14:16.720 Yeah, as I said, it's sort of moderated a bit. 0:14:17.960 --> 0:14:21.200 We're never fully staffed at the hotel level in a 0:14:21.200 --> 0:14:24.440 pre pandemic world. In any given time in the US, 0:14:24.520 --> 0:14:27.280 we might have had four or five thousand open positions 0:14:27.760 --> 0:14:30.440 during the pandemic and the early days of the recovery 0:14:30.440 --> 0:14:34.200 that swelled to twelve fourteen thousand. It's back down to 0:14:34.240 --> 0:14:37.040 around four or five thousand, and as a result of 0:14:37.120 --> 0:14:40.560 feeling as fully staffed as we might be, some of 0:14:40.600 --> 0:14:43.200 that wage pressure has been moderated. 0:14:43.320 --> 0:14:45.560 You mentioned the debt markets. Let's talk about a debt market. Sure, 0:14:45.600 --> 0:14:47.720 or it depends who you are. If you're a big 0:14:47.720 --> 0:14:51.200 company right now, it is wide open for financing issue. 0:14:51.240 --> 0:14:53.480 Debt will street will eat it up. It doesn't matter 0:14:53.480 --> 0:14:55.560 where you are pounding here right now. But if you're 0:14:55.560 --> 0:14:57.400 at the bottom of stacks. To your point, if you're 0:14:57.440 --> 0:15:00.560 local and you're trying to get financing from a medium 0:15:00.600 --> 0:15:03.160 sized regional lender and you've got a couple of hot hoels, 0:15:03.200 --> 0:15:05.720 whatever your business might be, it's a struggle. How are 0:15:05.720 --> 0:15:06.440 you going to help them? 0:15:06.600 --> 0:15:10.160 How do you so it's again, it's not corporate debt, 0:15:10.200 --> 0:15:14.720 it is project specific construction financing debt. We actually see 0:15:14.760 --> 0:15:18.600 plentiful debt available for existing assets, but if you're trying 0:15:18.600 --> 0:15:20.160 to put a shovel on the ground and get a 0:15:20.160 --> 0:15:23.920 construction mini perm loan, that is quite challenging. And the 0:15:23.960 --> 0:15:26.760 irony is when you talk to many of the lenders 0:15:26.760 --> 0:15:30.680 and they look across their commercial real estate portfolios, they say, 0:15:30.720 --> 0:15:35.000 our hospitality loans are the best performing sector. But because 0:15:35.040 --> 0:15:38.360 we've got this uncertainty into mid twenty five about what 0:15:38.480 --> 0:15:42.360 balance sheet requirements we might have, often unfortunately they're saying 0:15:42.440 --> 0:15:44.040 call us middle of next year. 0:15:44.280 --> 0:15:47.160 What I find fascinating is it seems like your business 0:15:47.200 --> 0:15:49.560 is thriving. You're still seeing a lot of travel. It's 0:15:49.560 --> 0:15:52.240 not like people aren't traveling, but that it could be 0:15:52.280 --> 0:15:56.440 even better if rates were lower. Are you basically saying 0:15:56.800 --> 0:15:58.880 that the economy would just be growing at a much 0:15:58.920 --> 0:16:01.160 faster clip, that you would see that much more expansion 0:16:01.560 --> 0:16:04.680 if rates for lower, But that it's not necessarily hampering 0:16:04.720 --> 0:16:06.440 your business and you're a billion pro Now. 0:16:06.720 --> 0:16:09.880 It's a great question, I think for when you look 0:16:09.880 --> 0:16:12.520 at our owner community, the vast majority of them are 0:16:12.600 --> 0:16:15.960 long term investors in the sector, and so they understand 0:16:16.000 --> 0:16:19.440 they've chosen a real estate sector that is cyclical by 0:16:19.480 --> 0:16:23.880 its nature. They are less impeded by the current interest 0:16:23.920 --> 0:16:27.800 rate environment and more impeded by just the sheer availability 0:16:27.800 --> 0:16:30.160 of new origination for construction depth. 0:16:30.960 --> 0:16:32.680 I want to get to these three hotels, sure and 0:16:32.880 --> 0:16:35.000 us this morning? Can I just cite Razilla Pelican Hill. 0:16:35.040 --> 0:16:36.920 There's going to be a whole team over at PIMCO 0:16:37.040 --> 0:16:39.200 waking up this morning and know that hotel very well 0:16:39.520 --> 0:16:42.120 over in Newport Beach. How exciting you about these three 0:16:42.200 --> 0:16:43.720 names this morning you've announced. 0:16:43.400 --> 0:16:44.040 Yeah, all three. 0:16:44.800 --> 0:16:47.360 Early in my career I ran development in the West 0:16:47.400 --> 0:16:50.280 and so I was in Newport Beach when that hotel 0:16:50.480 --> 0:16:54.080 was developed. As you point out, it is an iconic asset. 0:16:54.640 --> 0:16:58.440 Donald Brinn and the Irvine Company have built a generational 0:16:58.480 --> 0:17:03.200 asset there and we are extraordinarily proud that they've selected 0:17:03.280 --> 0:17:05.920 us and the Saint Regis brand for that hotel. It'll 0:17:05.920 --> 0:17:08.040 be a terrific addition to the portfolio. 0:17:08.080 --> 0:17:10.120 How do things change when you do things like this 0:17:10.560 --> 0:17:14.320 incredibly successful resort, very much loved in the area. Do 0:17:14.359 --> 0:17:16.119 you put us in Regis brand on it and it 0:17:16.200 --> 0:17:17.760 changes overnight? What does that look like? 0:17:18.000 --> 0:17:21.360 Yeah, I mean we're still working through some of those specifics. 0:17:21.400 --> 0:17:24.520 I think the Saint Regis brand will maybe be kind 0:17:24.560 --> 0:17:27.480 of underneath the Pelican Hill Resort name. It is such 0:17:27.520 --> 0:17:30.000 an iconic name and there's so much equity in that name. 0:17:31.400 --> 0:17:33.159 This would be a good question for the folks at 0:17:33.200 --> 0:17:36.639 Irvine Company, But I think from their perspective, among the 0:17:36.720 --> 0:17:39.760 things that attracted them to us, the power of our 0:17:39.800 --> 0:17:44.160 revenue engines, the reach of our global loyalty program, and 0:17:44.240 --> 0:17:46.760 the strength we're seeing in the group segment, which is 0:17:46.760 --> 0:17:48.439 an important part of the demand picture. 0:17:48.480 --> 0:17:50.359 There are you going to tell me which luxury hotown 0:17:50.400 --> 0:17:51.920 in New York on Friday? 0:17:52.000 --> 0:17:52.520 On Friday? 0:17:52.560 --> 0:17:54.480 If you have me back, I'll be happy to all right. 0:17:54.359 --> 0:17:56.040 You give us a cool Tony. It's good to see you. 0:17:56.119 --> 0:17:56.600 Nice to see it. 0:17:56.680 --> 0:17:59.959 Thank you, Let's catch up soon. Tony Kawakuana, the Internet 0:18:00.080 --> 0:18:01.840 nor President and c e O. 0:18:12.080 --> 0:18:13.840 John, thank you very much. Indeed, if you look at 0:18:13.840 --> 0:18:16.000 the ir for data, what it will tell you is 0:18:16.000 --> 0:18:18.919 that a lot of the profitability in this sector is 0:18:18.960 --> 0:18:22.200 coming from the United States, and within the United States, 0:18:22.280 --> 0:18:24.440 it's coming from the big carriers. As you say, we're 0:18:24.520 --> 0:18:27.440 joined by one of those now, the CEO of United 0:18:27.520 --> 0:18:31.520 Scott Kirby. Nice to see, sir, Thanks for eving. We 0:18:31.600 --> 0:18:34.080 saw a little hiccup a few days back. American comes out, 0:18:34.359 --> 0:18:37.800 it changes its guidance, the industry reacts, share prices go down. 0:18:37.840 --> 0:18:41.159 You're very quick, very quick to come out and reconfirm 0:18:41.200 --> 0:18:42.639 your guidance on the back of that. 0:18:43.000 --> 0:18:44.040 But are you seeing. 0:18:43.840 --> 0:18:46.480 Any indication that the consumer is softening at the moment? 0:18:46.560 --> 0:18:49.240 You know, it's demand for us is steady as she 0:18:49.320 --> 0:18:51.800 goes in a way kind of boring over the last 0:18:51.840 --> 0:18:52.280 couple of years. 0:18:52.320 --> 0:18:53.359 I think boring is good. 0:18:53.400 --> 0:18:55.639 But it really is not getting a lot stronger, but 0:18:55.760 --> 0:18:56.520 not getting weaker. 0:18:56.560 --> 0:18:57.679 It really is pretty steady. 0:18:58.240 --> 0:19:02.399 And what changes that? Does anything change that? Does the 0:19:02.400 --> 0:19:04.679 fact that the labor market maybe started to show a 0:19:04.680 --> 0:19:07.760 few little cracks, the fact that maybe rates stay higher 0:19:07.800 --> 0:19:10.760 for longer. Do any of these factors impact that that 0:19:11.040 --> 0:19:13.879