WEBVTT - Target’s Plunge Shows Inflation’s Risk to Margins 0:00:01.800 --> 0:00:04.400 This is Bloomberg Business Week. I'm Carol Masser and I'm 0:00:04.440 --> 0:00:07.280 Bloomberg Quick Takes Tim Stanovk. We're here every day bringing 0:00:07.280 --> 0:00:09.799 you the latest news from the worlds of business and finance, 0:00:09.840 --> 0:00:13.640 plus technology, politics, economics, all purtnising the power of Business 0:00:13.640 --> 0:00:17.119 Week reporters and editors, not to mention our journalists and 0:00:17.160 --> 0:00:19.640 analyst in more than one and twenty countries. You can 0:00:19.640 --> 0:00:23.239 download Bloomberg Business Week at iTunes, SoundCloud, or Bloomberg dot Com. 0:00:23.400 --> 0:00:25.160 You can also listen to our radio show at two 0:00:25.160 --> 0:00:27.840 pm Eastern Time on Bloomberg Radio or watch us on 0:00:27.880 --> 0:00:32.640 YouTube search Bloomberg Global News. Shares of Target are having 0:00:32.640 --> 0:00:37.839 their worst day since Monday, October nineteenth, nineteen seven. We 0:00:37.840 --> 0:00:40.360 all know what happened on that day. That was Black Monday, 0:00:40.400 --> 0:00:43.400 where the Dow fell more than five hundred points at 0:00:43.400 --> 0:00:45.440 the time it was more than twenty percent of its 0:00:45.479 --> 0:00:50.080 value was shed. Shares now down of Target. Uh. It's 0:00:50.080 --> 0:00:53.440 on pace for its worst stock drop since that time, 0:00:53.479 --> 0:00:57.040 after becoming just the second big retailer in just two 0:00:57.160 --> 0:01:00.800 days the other one was Walmart to trim its at forecast. 0:01:01.000 --> 0:01:03.520 Justin Zach's writes all about it. He writes a column 0:01:03.600 --> 0:01:06.280 for Bloomberg Taking Stock. Sign up to read it on 0:01:06.319 --> 0:01:09.360 the Bloomberg and at Bloomberg dot com as well, justin 0:01:09.520 --> 0:01:12.160 good to have you with us your Bloomberg New Equities Report. 0:01:12.200 --> 0:01:14.920 In addition to writing the taking Stock column, I want 0:01:14.920 --> 0:01:17.600 to talk a little bit about the effect that targets 0:01:17.720 --> 0:01:20.560 disastrous quarter and earnings report is having on on the 0:01:20.560 --> 0:01:23.640 rest of the market. Here, margins of the concern. Inflation 0:01:24.160 --> 0:01:26.840 is the concern, and we're seeing it just ripple out 0:01:26.880 --> 0:01:31.039 across Yeah. I think a lot of UH investors had 0:01:31.080 --> 0:01:34.880 been positioned in companies like Walmart, who who also had 0:01:34.920 --> 0:01:39.640 a horrible earnings report yesterday and saw their largest stock 0:01:39.720 --> 0:01:43.520 drop since n as well on the exact same issue 0:01:44.040 --> 0:01:47.800 margin problems. There was this idea that you know, consume 0:01:47.880 --> 0:01:52.240 went if inflation went up, then consumers in general may 0:01:52.280 --> 0:01:57.160 look to lower priced UH retailers like Target and Walmart UH, 0:01:57.200 --> 0:02:00.080 and that really hasn't happened because inflation really is a 0:02:00.080 --> 0:02:03.200 facting the lower income in the middle lower middle class 0:02:03.240 --> 0:02:06.960 the most. And so what has happened is those individuals 0:02:07.120 --> 0:02:11.800 end up shifting their spending UH to what they absolutely 0:02:11.800 --> 0:02:14.520 have to have, like groceries. In a way from Uh, 0:02:14.560 --> 0:02:17.560 their discretionary spending and some of their you know, big 0:02:17.600 --> 0:02:20.359 box purchases, they may have made a target and that 0:02:20.360 --> 0:02:23.919 that caught everyone by surprise. And you highlight the fact 0:02:23.960 --> 0:02:27.000 that you know, this inflation risk we see really saw 0:02:27.000 --> 0:02:30.960 it in margins this this earning season. Uh. If I 0:02:31.000 --> 0:02:33.840 look past over the past two years, it feels like 0:02:33.960 --> 0:02:36.720 margins were sort of this shining star. I mean at 0:02:36.720 --> 0:02:38.799 the index level, it felt like there was a new 0:02:38.840 --> 0:02:42.440 record hit every quarter in terms of profit margins. Uh, 0:02:42.520 --> 0:02:44.440 it feels like we're starting to see the tides finally 0:02:44.480 --> 0:02:46.880 start to turn on that. Yeah, it's at some point 0:02:46.960 --> 0:02:50.040 it's gonna be hard for these companies to pass along 0:02:50.600 --> 0:02:54.519 their costs every time, especially with uh, the wage inflation 0:02:54.560 --> 0:02:58.520 we're seeing and really low rates of unemployment. The workers 0:02:58.520 --> 0:03:02.080 wages are now really catching up, and there's only so 0:03:02.160 --> 0:03:05.520 much savings left from the COVID stimulus that people have 0:03:06.000 --> 0:03:09.680 to spend. Uh. The other interesting part about this whole 0:03:09.720 --> 0:03:13.239 thing is, you know, the FED has really committed themselves 0:03:13.600 --> 0:03:17.400 to fighting inflation. And Jerome pop Pal, the chairman of 0:03:17.440 --> 0:03:20.880 the Federal Reserve Bank, spoke yesterday and said, basically, they're 0:03:20.880 --> 0:03:23.920 gonna do whatever it takes to tame inflation, and that 0:03:23.960 --> 0:03:28.799 could mean uh going past the neutral rate uh and 0:03:28.800 --> 0:03:31.320 and quite quickly. And so I think that is something 0:03:31.960 --> 0:03:35.600 that market participants have in mind when they see again 0:03:35.640 --> 0:03:38.840 this type of inflation popping up. Well, justin you take 0:03:38.880 --> 0:03:40.320 a look at the S and P five hundred, and 0:03:40.320 --> 0:03:42.320 you see what's moving lower today. Target by far the 0:03:42.360 --> 0:03:47.360 worst performer. That's followed by Dollar Tree, Tractor Supply, Costco, Wholesale, Uh, 0:03:47.480 --> 0:03:50.320 Dollar General. You got Best Buy in there. You got 0:03:50.440 --> 0:03:53.080 companies like Auto Zone and their Walgreens in there as well. 0:03:53.400 --> 0:03:55.760 I mean, it's pretty pretty ugly. These are companies though 0:03:55.800 --> 0:03:58.960 that people when they shop at these companies, when they 0:03:58.960 --> 0:04:01.920 shop at these stores, they shop there because they have to. 0:04:02.560 --> 0:04:05.880 And I'm wondering, you know, if if they're not necessarily 0:04:05.920 --> 0:04:10.280 gonna stop shopping there. But can't these companies pass along 0:04:10.320 --> 0:04:15.280 these higher costs to the consumers because well they have to? Well, 0:04:15.280 --> 0:04:18.320 and I think they have on food And so the 0:04:18.320 --> 0:04:21.200 food inflation for these companies is up double digits year 0:04:21.279 --> 0:04:24.000 on year, and so people are again shopping for the food. 0:04:24.080 --> 0:04:26.520 But when you when you're going in to buy your 0:04:26.560 --> 0:04:30.200 new furniture set or your new stereo, perhaps you're now 0:04:30.279 --> 0:04:33.359 gonna wait, or perhaps you're gonna buy one level down. 0:04:33.720 --> 0:04:38.000 You'll switch from your favorite uh, you know, brand name 0:04:38.120 --> 0:04:41.600 to something that is off label. Perhaps, so people are 0:04:41.600 --> 0:04:45.160 gonna make substitutions too, But you're right there going to 0:04:45.320 --> 0:04:49.800 continue to go to those stores. And when we think about, 0:04:49.839 --> 0:04:52.960 you know, what we learned in the past several weeks 0:04:53.000 --> 0:04:56.080 of earnings, I mean, clearly inflation, it's starting to bite 0:04:56.080 --> 0:04:58.920 for these companies, but it feels like we haven't necessarily 0:04:58.920 --> 0:05:03.000 seen demand to struction from consumers yet. Yeah, that's that's 0:05:03.080 --> 0:05:06.040 that's very true. And I think what I said before 0:05:06.120 --> 0:05:08.839 is we still have a pretty good savings from the 0:05:08.880 --> 0:05:11.760 consumer that they've saved up from from the stimulus. And 0:05:11.800 --> 0:05:14.360 the other thing is now we're having this reopening and 0:05:14.400 --> 0:05:16.520 I think a lot of people have really been wanting 0:05:16.560 --> 0:05:19.599 to get out and spend their money. And we have 0:05:19.839 --> 0:05:24.960 seen a little bit of demand destruction on the online side, 0:05:25.040 --> 0:05:27.760 and we've seen Amazon get hit. But I think people 0:05:27.800 --> 0:05:30.720 are going to finally get out this summer and spend 0:05:30.720 --> 0:05:33.960 that money, particularly on on on services. We're gonna see 0:05:33.960 --> 0:05:37.080 a shift from goods to services, which also is hurting 0:05:37.520 --> 0:05:40.160 UH companies like Walmart and Target. Because people will start 0:05:40.160 --> 0:05:44.040 to shift some of their discretionary spent towards airfare and 0:05:44.120 --> 0:05:46.599 hotels and other types of travel because they haven't traveled 0:05:46.600 --> 0:05:48.680 in two or three years. Yeah, we're talking to UH 0:05:48.800 --> 0:05:51.960 Hyatt Hotel CEO Mark Hoppolympzanian in a just a minute, 0:05:52.279 --> 0:05:54.000 so we'll definitely ask him about that. Justin just in 0:05:54.000 --> 0:05:57.320 the last thirty seconds that we have with you, I'm 0:05:57.360 --> 0:05:59.960 wondering how Target got this so wrong and how Anna 0:06:00.080 --> 0:06:03.919 Us got this so wrong. I think the analysts in 0:06:03.920 --> 0:06:08.359 in perhaps Target everyone was so focused on UH supply 0:06:08.440 --> 0:06:11.679 chain problems being the only problem, and they didn't really 0:06:11.720 --> 0:06:18.120 realize that the ultimate UH customer is the is there 0:06:18.200 --> 0:06:20.839 is their customer. The ultimate demand comes from their customer, 0:06:20.920 --> 0:06:24.000 and how how that customer behaves and what they spend 0:06:24.040 --> 0:06:26.440 on is is going to be more important than any 0:06:26.480 --> 0:06:30.360 smaller UH supply chain snaffood. Justin Zach is Bloomberg News 0:06:30.400 --> 0:06:33.760 Equities reporter. You can check out his column taking Stock, 0:06:33.839 --> 0:06:35.719 sign up to read it at the Bloomberg Terminal and 0:06:35.839 --> 0:06:40.720 at Bloomberg dot com. This is Bloomberg Radio. You're listening 0:06:40.760 --> 0:06:44.599 to Bloomberg Business Week with Carol Messer and Bloomberg quick 0:06:44.640 --> 0:06:49.320 takes Tim Stinovic on Bloomberg Radio. Hid Hotels reported results 0:06:49.400 --> 0:06:51.479 last week. The company beat on the top line and 0:06:51.520 --> 0:06:54.120 the bottom line loss was narrower than expected thanks to 0:06:54.160 --> 0:06:57.360 strong demand for leisure travel. The company said that it's 0:06:57.360 --> 0:06:59.880 our record levels of leisure demand and that it expects 0:06:59.880 --> 0:07:03.600 the recovery abroaden and strengthen in the mots ahead. Joining 0:07:03.680 --> 0:07:06.560 us now is Mark hoplamaze In the President and CEO 0:07:06.640 --> 0:07:09.560 of Hyatt Hotels. Mark joins us via Zoom from Plaia 0:07:09.640 --> 0:07:12.360 del Carmen in Mexico. Mark, really good to have you 0:07:12.760 --> 0:07:17.080 with us. Uh, how are you well at the moment? 0:07:17.160 --> 0:07:19.880 I couldn't be better because I'm I'm sitting in the 0:07:19.920 --> 0:07:24.679 brand new Secrets Moche, which is just north of Plato Karmen. 0:07:24.720 --> 0:07:28.800 It's a magnificent new resort and it's a beautiful day. 0:07:28.840 --> 0:07:30.720 So I'm in good shape at the moment. Thank you. 0:07:30.760 --> 0:07:32.760 How are you doing? Yeah, we're okay, I mean, and look, 0:07:32.880 --> 0:07:34.880 usually when people are in Pla del Carmen, they're not 0:07:34.920 --> 0:07:36.720 working at least if they're you know, if they don't 0:07:36.720 --> 0:07:38.840 live there, they're just traveling there to uh to have 0:07:38.880 --> 0:07:41.200 a good time. Um, we're good, but you know we're 0:07:41.200 --> 0:07:44.160 focused on the volatility and the sell off and inflation 0:07:44.520 --> 0:07:46.480 and what we're seeing. And I know that you talked 0:07:46.520 --> 0:07:51.480 about summer bookings being higher by fifty from one levels 0:07:51.480 --> 0:07:56.000 for all inclusive results, a lot of good signs coming up. 0:07:56.440 --> 0:07:59.000 But that was last week and that was last quarter. 0:07:59.440 --> 0:08:01.720 I'm wondering what you're seeing right now on a day 0:08:01.720 --> 0:08:04.400 when the Nasdaq is down more than four point six percent, 0:08:04.480 --> 0:08:07.080 the S and P five hundred down three point seven percent. 0:08:07.680 --> 0:08:10.440 Does this volatility do the results from Target, the results 0:08:10.480 --> 0:08:13.680 from Walmart? Does that concern you at all? Well? I 0:08:13.680 --> 0:08:17.400 think the connection point UH over a longer period of 0:08:17.440 --> 0:08:20.800 time to our consumer, which tends to be a higher 0:08:20.880 --> 0:08:24.320 end UH traveler at the higher end of each of 0:08:24.360 --> 0:08:28.160 the stegments that we serve UM is if there's a 0:08:28.840 --> 0:08:32.240 I guess, very long and persistent sell off in UH 0:08:32.360 --> 0:08:35.840 in public equities, because many of the customers that we 0:08:35.880 --> 0:08:38.680 serve are invested in the marketplace. But I don't think 0:08:39.120 --> 0:08:43.080 day day in and day out volatility actually changes UM 0:08:43.120 --> 0:08:46.880 the booking behaviors on a real time basis. Right now, 0:08:46.960 --> 0:08:49.240 I think that there's a scarcity issue. People want to 0:08:49.240 --> 0:08:52.839 make sure that they've got their bookings for the holiday periods. Um, 0:08:52.880 --> 0:08:56.120 we're seeing booking levels across all of our hotels, not 0:08:56.200 --> 0:09:00.439 just resorts now for the summer holidays up between twenty 0:09:01.280 --> 0:09:05.760 for um Labor Day, fourth of July and Memorial Day, 0:09:05.880 --> 0:09:08.240 and so I think that's one of the drivers. And 0:09:08.280 --> 0:09:12.040 the second thing is corporations and associations, which is a 0:09:12.080 --> 0:09:15.480 significant part of our business, are coming back to meetings 0:09:15.520 --> 0:09:18.520 in a meaningful way and the booking levels there are 0:09:18.559 --> 0:09:23.320 also rising. So UM, we do see booking levels maintaining 0:09:23.320 --> 0:09:26.200 at this point. And you know, I would say if 0:09:26.200 --> 0:09:29.719 there's a very long and drawn out bear market or 0:09:29.960 --> 0:09:33.040 or recession, then of course it's going to affect all businesses. 0:09:33.080 --> 0:09:37.200 But I think our customer base, being relative at the 0:09:37.240 --> 0:09:41.040 relatively higher end of of the you know, income scale, 0:09:41.840 --> 0:09:45.480 are more resilient and less subject to volatility in terms 0:09:45.559 --> 0:09:48.480 of their travel patterns, especially for leisure and mark. I 0:09:48.520 --> 0:09:51.000 want to dig into that final point because obviously after 0:09:51.040 --> 0:09:54.520 the week of earnings that we've had, the consumer is 0:09:54.600 --> 0:09:57.959 definitely in focus how they might be shifting their spending, 0:09:58.000 --> 0:10:02.079 spending more on staples, less on sort of discretionary purposes. 0:10:02.120 --> 0:10:04.920 And you mentioned that bookings obviously for the summer months 0:10:05.040 --> 0:10:07.440 up across the board. But I'm curious, have you seen 0:10:07.520 --> 0:10:11.880 any indications that revenue spending on vacations could be slowing 0:10:11.920 --> 0:10:17.000 down or shifting? No, Uh, not at all. On the contrary, 0:10:17.080 --> 0:10:20.559 I would say we've had, Um, we've had a significant 0:10:21.080 --> 0:10:25.400 increase in spend. Our rates are up significantly from twenty nine. 0:10:26.320 --> 0:10:29.360 A lot of this is really driven by pent up 0:10:29.440 --> 0:10:34.520 demand and by a really really strong human desire to 0:10:34.600 --> 0:10:38.000 reconnect with people. So um, I think it's you know, 0:10:38.040 --> 0:10:40.720 people are making their decisions based on what they're going 0:10:40.800 --> 0:10:44.760 to be most fulfilled by and what matters the most 0:10:44.800 --> 0:10:48.680 to them, and that is reconnecting with with friends and family. Mark. 0:10:48.720 --> 0:10:51.520 I know that you do serve a higher and clientele, 0:10:51.600 --> 0:10:54.280 but everybody has their limits when it comes to spending. 0:10:54.320 --> 0:10:57.120 And I wonder about air fare prices. They are up 0:10:57.160 --> 0:11:01.360 double digits from last month, double digits from last year. Uh. 0:11:01.640 --> 0:11:04.400 I don't know if you our listeners are familiar with this. 0:11:04.520 --> 0:11:06.640 Checking the price of flights right now, it's kind of 0:11:06.679 --> 0:11:08.360 mind boggling to see how much it is to fly 0:11:08.400 --> 0:11:12.520 a short distance thanks to you know, huge demand, lack 0:11:12.559 --> 0:11:14.760 of supply, and then of course oil prices as well. 0:11:15.040 --> 0:11:17.040 How do you think about that in the context of 0:11:17.120 --> 0:11:19.520 what a consumer spends when they do visit one of 0:11:19.520 --> 0:11:23.680 your properties. Yeah. It. First of all, UM, I would 0:11:23.720 --> 0:11:27.480 just note that we UH we now own the largest 0:11:27.960 --> 0:11:32.760 tour operations tour operator platform in the UH in North America, 0:11:32.960 --> 0:11:36.200 so it's called a l G vacations UM. Back in 0:11:36.920 --> 0:11:40.360 they handled over three million passengers and it's mostly doing 0:11:40.480 --> 0:11:45.720 selling packaged UM travel, so airfare included UM and so 0:11:45.920 --> 0:11:49.679 we tracked we're tracking this extremely closely UM. And I 0:11:49.720 --> 0:11:52.520 would say that there's no question that we have seen 0:11:52.800 --> 0:11:56.400 a significant increase in airfares, and I think that will 0:11:56.440 --> 0:12:01.280 persist for some period of time until supply demand starts 0:12:01.320 --> 0:12:05.480 to balance out a bit. And the supply demand I'm 0:12:05.480 --> 0:12:08.120 talking about right now has to do with schedules, how 0:12:08.160 --> 0:12:12.559 many planes are in service UM. I would note that 0:12:13.000 --> 0:12:17.840 the air the air traffic, the total lift capacity into 0:12:17.920 --> 0:12:21.840 Cancoon and Punta Kana, which are too very large markets 0:12:21.880 --> 0:12:24.600 for US UM in a l G dcations are up 0:12:27.000 --> 0:12:31.360 UM as compared to levels. So it's clear that the 0:12:31.400 --> 0:12:36.640 airlines have have definitely clued in on where demand is 0:12:36.800 --> 0:12:39.760 and they've added capacity. UM. It is also true that 0:12:39.880 --> 0:12:43.280 air fares are up in that they're under some inflationary pressure. 0:12:43.360 --> 0:12:46.320 So I think that the dynamics for them have in 0:12:46.400 --> 0:12:49.200 part to do with energy prices or you know, get 0:12:49.840 --> 0:12:54.439 gas for their their aircraft aviation guests. And for US, 0:12:54.840 --> 0:12:58.880 UM we look at how total unit value or total 0:12:58.920 --> 0:13:02.520 package prices are increasing, and they are. But again I 0:13:02.559 --> 0:13:06.400 think UM, I think as things start to stabilize in 0:13:06.559 --> 0:13:09.400 the oil and gas markets, and as we see supply 0:13:10.040 --> 0:13:12.719 being brought back with more schedules, more aircraft and more 0:13:12.760 --> 0:13:16.520 pilots um UH back into the industry, we'll start to 0:13:16.520 --> 0:13:19.400 see a rebalancing. And that may that may take a 0:13:19.480 --> 0:13:21.400 number of months to do, but I think that that's 0:13:21.440 --> 0:13:24.320 the that's the inevitable outcome. And I want to talk 0:13:24.320 --> 0:13:29.280 about all inclusive resorts because you acquired one all reclusive 0:13:29.320 --> 0:13:33.400 result results can't talk today. UH. You acquired Apple Leisure 0:13:33.440 --> 0:13:36.760 Group last year and UH seems to be very popular, 0:13:36.880 --> 0:13:40.000 especially in UH the Caribbean. Do you have any plans 0:13:40.040 --> 0:13:44.840 to bring that model to your US hotels? Yeah? Actually 0:13:45.559 --> 0:13:48.440 right now, I would say that the focus remains in 0:13:48.520 --> 0:13:53.640 Mexico and the Caribbean. UM. We've and are some of 0:13:53.640 --> 0:13:56.760 our key markets are Mexico first and foremost UM, the 0:13:56.840 --> 0:14:00.920 Dominican Republican Jamaica. We also have a large operation in 0:14:00.960 --> 0:14:04.200 Europe in the Balieric Islands and in the Canary Islands 0:14:04.880 --> 0:14:09.560 and in the southern coastal areas of Europe. UM we 0:14:09.760 --> 0:14:14.800 just UM we're just now engaging with owners and developers 0:14:14.800 --> 0:14:17.160 in the Middle East and ultimately in Asia. We think 0:14:17.160 --> 0:14:20.720 that all inclusive is a great format and can be 0:14:20.760 --> 0:14:26.560 extended across the globe. UM. The the particular arena that 0:14:26.600 --> 0:14:29.800 we're playing in is luxurial Inclusive UM, which a LG, 0:14:29.920 --> 0:14:34.640 the Apple Leisure Group actually really created from schooch about 0:14:34.720 --> 0:14:37.880 twenty years ago, and so we are now the largest 0:14:37.920 --> 0:14:42.800 player in the world in luxurial inclusive and the the 0:14:42.920 --> 0:14:47.560 guest proposition is very very compelling because UM, you take 0:14:47.600 --> 0:14:50.560 a lot of the transactional elements that you might experience 0:14:50.640 --> 0:14:54.120 in a European plan hotel where everything is all a 0:14:54.200 --> 0:14:58.160 cart Um, You're you're taking a bunch of transactional friction 0:14:58.200 --> 0:15:01.080 out of the equation and it's serves its purpose when 0:15:01.080 --> 0:15:03.480 you're on holiday. I do think that there's a that 0:15:03.800 --> 0:15:08.000 we can actually apply this format in the US. UM. 0:15:08.040 --> 0:15:10.360 We are not. I can't tell you that we've got 0:15:10.360 --> 0:15:12.920 a pipeline of such deals. But I think there are 0:15:12.920 --> 0:15:16.400 probably specific markets that would be really well suited to 0:15:16.480 --> 0:15:20.320 it at certain markets in in Florida and and probably 0:15:20.320 --> 0:15:23.640 in Hawaii as well. And UM so we're we will 0:15:23.680 --> 0:15:26.200 investigate this, but right now we have a lot on 0:15:26.240 --> 0:15:29.720 our plate with respect to just growing um fulfilling up 0:15:29.720 --> 0:15:33.080 the pipeline that we already have to build more hotels 0:15:33.080 --> 0:15:35.600 in Mexico, the Caribbean. Mark just ten seconds left. You 0:15:35.640 --> 0:15:37.400 have all the employees you need? Do you have all 0:15:37.400 --> 0:15:40.240 the employees that you'll need this summer? You know that. 0:15:40.400 --> 0:15:43.040 I'll tell you the American Hotel Lodging Association did a 0:15:43.480 --> 0:15:48.440 great benefit to the entire industry by working and successfully 0:15:48.480 --> 0:15:51.840 getting an increase in h two V visas UM these 0:15:51.840 --> 0:15:54.880 are temporary work visas for the summer that that is critical. 0:15:55.160 --> 0:15:58.080 So we're going to benefit from that, and we've we've 0:15:58.120 --> 0:16:00.960 made some changes in our hiring practices and we're seeing 0:16:00.960 --> 0:16:02.760 more success than being able to bring people back to 0:16:02.800 --> 0:16:05.920 the hospitality industry. Mark Hoplmaze and President and CEO of 0:16:06.000 --> 0:16:09.000 Hiatt Hotels, joining us via zoom from Plaia del Carmen, Mexico. 0:16:09.120 --> 0:16:12.200 Not on vacation. I promise he's working. Well, he's there. Mark, 0:16:12.240 --> 0:16:14.040 Thanks so much for taking the time and joining us. 0:16:15.240 --> 0:16:19.280 This is Bloomberg Business Week with Carol Messer and Bloomberg 0:16:19.320 --> 0:16:23.360 Quick Takes Tim Stinovic on Bloomberg Radio. It's been nearly 0:16:23.360 --> 0:16:27.160 fourteen years since Lehman Brothers collapsed and declared bankruptcy, marking 0:16:27.160 --> 0:16:29.880 the beginning of the two thousand eight financial crisis. But 0:16:30.600 --> 0:16:33.880 it's not completely dead and just in a nod to 0:16:33.920 --> 0:16:37.720 the Princess Bride, just mostly dead. It's the cover story 0:16:37.760 --> 0:16:40.800 for the upcoming edition of Bloomberg Business Week. Jeremy Hill 0:16:40.840 --> 0:16:43.440 is the co author. He's bankruptcy and distress debt reporter 0:16:43.520 --> 0:16:46.680 for Bloomberg News, also with us as Joel Webber. Webber, 0:16:46.720 --> 0:16:49.640 he's the editor of Bloomberg Business Week. Both of them 0:16:49.640 --> 0:16:52.680 are with Katie Greifeld and me and the Bloomberg Interactive 0:16:52.680 --> 0:16:55.200 Broker's studio in New York. Joel, I gotta tell you 0:16:55.200 --> 0:16:58.320 a little behind the scenes. Yesterday after our interview, you 0:16:58.320 --> 0:17:00.800 showed me the cover story. You shall be the cover 0:17:01.520 --> 0:17:04.919 of this, you know. I think because we're in the 0:17:04.960 --> 0:17:09.800 building it Joel can do anything he wants, and I 0:17:09.840 --> 0:17:12.720 saw that it was Lehman Brothers, and I'm thinking to myself, Joel, 0:17:13.400 --> 0:17:16.040 We're we're done with a financial crisis. We're in a 0:17:16.080 --> 0:17:19.920 different crisis right now. Why a cover story on Lehman Brothers. Well, 0:17:20.480 --> 0:17:22.520 you know you had that great Princess Brad reference to 0:17:22.960 --> 0:17:27.280 something being mostly dead. Lehman is actually nearly dead, which 0:17:27.320 --> 0:17:31.080 is more than mostly I think. Uh. And and Jeremy 0:17:31.200 --> 0:17:34.040 who is on the Jeremy Hill who's on the Code violence. 0:17:34.160 --> 0:17:37.120 The story with Luca de Paula. Luca actually called me, 0:17:37.680 --> 0:17:39.800 I don't know, six months ago and he's like, hey, 0:17:39.840 --> 0:17:43.320 I met this guy who's like caring for the state 0:17:43.400 --> 0:17:46.399 of Lehman and he's basically like working himself out of 0:17:46.400 --> 0:17:49.000 a job. He's been there for like fourteen years, ever 0:17:49.080 --> 0:17:52.560 since the bank went down, and you know, he's basically 0:17:52.680 --> 0:17:55.439 been tasked with like eking every last pinion out of 0:17:55.480 --> 0:17:58.000 this corpse. And I was like, you had me at Lehman, 0:17:58.040 --> 0:18:01.640 But okay, tell me the most of the story. Uh So, So, Jeremy, 0:18:01.680 --> 0:18:04.320 who are these people? And you know the great iron here, 0:18:04.520 --> 0:18:06.800 Tam that you mentioned is like, you know, we're we're 0:18:06.800 --> 0:18:09.120 in some version of a of a sell off. Now, 0:18:09.240 --> 0:18:11.919 everyone's fearful that you know, the bottom could fall out 0:18:11.920 --> 0:18:14.080 at any moment and things get much worse. And here 0:18:14.200 --> 0:18:16.480 we are talking about, you know, the thing that kicked 0:18:16.520 --> 0:18:19.720 off a financial crisis all those years ago. Um, Jeremy, 0:18:19.760 --> 0:18:24.960 how did how did you find a role in this story? Um? Yeah? So, 0:18:25.160 --> 0:18:28.639 as a bankruptcy and distress debt reporter, I'm always pouring 0:18:28.640 --> 0:18:32.680 through legal documents and looking for wonky court fights about 0:18:32.680 --> 0:18:34.679 this and that, who is old one and why they 0:18:34.720 --> 0:18:38.199 are owded? And as you said, Luke actually got in 0:18:38.240 --> 0:18:40.320 touch with me about this, this case going on in 0:18:40.359 --> 0:18:46.520 the UK over these weird subordinated notes called e caps, 0:18:46.640 --> 0:18:48.919 and he's like sending me stories about how it's so 0:18:49.040 --> 0:18:52.840 interesting that you know, these guys they got these they 0:18:52.880 --> 0:18:54.760 got these scraps of debt for almost free, and they 0:18:54.840 --> 0:18:57.080 might get a bunch of money. It's very complicated. But 0:18:57.160 --> 0:19:00.240 underneath all of this are these people that are ill 0:19:00.359 --> 0:19:03.960 in what are now small offices in the US and 0:19:03.960 --> 0:19:06.800 in the UK that are kind of overseeing the corps 0:19:06.800 --> 0:19:10.239 of Lehman Brothers. They're they're pushing paper, they're looking for 0:19:10.720 --> 0:19:14.360 good times to sell their remaining assets and uh, as 0:19:14.359 --> 0:19:16.719 you said, kind of eking out those those last pennies 0:19:16.720 --> 0:19:18.919 from the estate and Jeremy. You have a lot of 0:19:18.960 --> 0:19:22.480 great characters in here. Let's start with Darryl Radigan. Who 0:19:22.520 --> 0:19:26.520 is he? Daryl Radigan? That was Luca spoke a lot 0:19:26.600 --> 0:19:31.520 with him. He has been in charge of UM some 0:19:31.640 --> 0:19:35.440 property assets in the UK and has done a fantastic 0:19:35.520 --> 0:19:38.919 job from what we can tell, because creditors there have 0:19:39.080 --> 0:19:43.400 done much much better than anybody expected. UM. So he 0:19:43.560 --> 0:19:47.280 was basically one of the people that was tasked with, 0:19:47.400 --> 0:19:50.840 rather than dumping all of the bad property assets when 0:19:50.840 --> 0:19:54.399 we went bankrupt, kind of waiting, letting those mature like 0:19:54.440 --> 0:19:56.720 a fine wine and then finding a good time to 0:19:56.760 --> 0:20:00.000 sell them. So obviously there are a ton of bankrupts 0:20:00.000 --> 0:20:03.879 these every year, uh, none as big as Lehman. But 0:20:03.920 --> 0:20:10.119 what what else has distinguished Lehman's long, slow death. The 0:20:10.200 --> 0:20:14.360 size is, of course important, The length is extremely notable, 0:20:14.480 --> 0:20:17.840 because I mean we're talking about nearly fourteen years here. 0:20:18.040 --> 0:20:21.000 Bankruptcy is often you know, even when they fade away 0:20:21.000 --> 0:20:22.680 from the headlines, there's a lot of clean up work 0:20:22.720 --> 0:20:25.080 to do UM But you know, mostly we're talking a 0:20:25.080 --> 0:20:28.480 few years, five years something sears for example, still going 0:20:28.480 --> 0:20:30.920 on in the background. There's things to sort out there. 0:20:31.000 --> 0:20:33.000 But I mean, this is more than a decade we're 0:20:33.040 --> 0:20:36.000 talking about. Everybody has not forgotten about Lehman. But I'm 0:20:36.000 --> 0:20:38.440 sure I wasn't aware that they still have an office 0:20:38.440 --> 0:20:42.240 space in the Bowery Savings Bank building in Midtown. People 0:20:42.280 --> 0:20:44.680 so so kicking. It's their their whole life. They're living 0:20:44.720 --> 0:20:47.359 and breathing Lehman Brothers to this day. It is the 0:20:47.400 --> 0:20:50.440 cover story of the upcoming issue of Bloomberg Business weeken. 0:20:50.480 --> 0:20:52.800 It's a great read when you're actually reading it in 0:20:52.800 --> 0:20:55.320 the magazine, but it's also a really good read if 0:20:55.320 --> 0:20:58.480 you're reading it online because it's an interactive presentation, and 0:20:58.520 --> 0:21:00.760 I think it gives a really good ex planation of 0:21:00.760 --> 0:21:03.840 of how creditors are repaid Jeremy, for people who aren't 0:21:03.840 --> 0:21:05.159 familiar with it. Can you kind of sort of go 0:21:05.200 --> 0:21:08.600 through that waterfall? Sure? Yes, when we talk about a 0:21:08.600 --> 0:21:12.720 waterfall in bankruptcy, uh, you wanna sort of imagine a 0:21:12.760 --> 0:21:18.200 stack of champagne flutes? Um that? By the way, Sorry 0:21:18.280 --> 0:21:20.560 about that, jo Joel? Did you hold on, hold on, 0:21:20.600 --> 0:21:22.719 hold on, Joel? Did you know that before you were 0:21:22.800 --> 0:21:26.879 ordering the art and doing the graphics. I like champagne, 0:21:26.960 --> 0:21:31.080 you know, and I like my champagne and more than yeah, 0:21:31.119 --> 0:21:33.000 you know, just so you're gonna drink it, drink it 0:21:33.119 --> 0:21:37.160 right right? Sorry, go ahead, Well that's that's that's very okay. UM. 0:21:37.200 --> 0:21:41.600 So imagine a waiter pouring the champagne um into the glasses. 0:21:41.640 --> 0:21:44.280 I'm not even going to try to pronounce the correct 0:21:44.320 --> 0:21:47.240 word um. The people with the most senior debt we're 0:21:47.280 --> 0:21:52.040 talking about like secured loans, like a mortgage. UM on 0:21:52.080 --> 0:21:54.840 the house is secured by the house itself. People who 0:21:54.880 --> 0:21:57.359 actually have claims to the assets, they get their cups 0:21:57.359 --> 0:22:01.000 filled up first, and then below the those their cups 0:22:01.080 --> 0:22:04.119 that have weaker claims to the estate or none at all, 0:22:04.160 --> 0:22:07.720 so they just get whatever is overflowing um. In the UK, 0:22:08.080 --> 0:22:10.760 there was way more champagne than anybody anticipated, so people 0:22:10.800 --> 0:22:13.560 at the very bottom ended up getting their fill um. 0:22:13.640 --> 0:22:18.280 And that's very unusual. I don't know. I'm still stuck on, Darryl. 0:22:18.320 --> 0:22:21.400 I mean, how many people are You're still stuck on champagne? 0:22:21.520 --> 0:22:23.680 I mean, thank you. I hate I hate coop glasses. 0:22:23.680 --> 0:22:25.359 I have to say, they're so hard to drink out 0:22:25.400 --> 0:22:27.920 of it. But anyway, Darryl Radigan, how many just makes 0:22:27.960 --> 0:22:31.120 you drink it? Quicker. I don't know, just to get 0:22:31.119 --> 0:22:32.919 it at a level where you can actually use the glass. 0:22:33.200 --> 0:22:37.160 Then you guys are where it's my birthday tempt Yeah, 0:22:37.160 --> 0:22:41.480