Aurelia Butler

(Reuters) – U.S. hotel operators are expected to post a rise in first-quarter profit even as they pour in money to lure travelers to make bookings directly through their websites, instead of turning to travel agencies.While bookings have been getting a boost from increased business and leisure travel, the investments hotels have made to reduce their reliance on online travel agencies (OTAs), which tend to have higher marketing budgets, is eating into the gains.Last year, U.S. hotels received about $49 billion from online direct bookings and $57 billion from OTA bookings, according to travel market research firm Phocuswright.”During uncertain economic times, when travelers are looking to stretch their dollars as far as possible, OTAs can help drive demand,” Phocuswright’s senior analyst Madeline List said.THE CONTEXTIn recent years, hospitality giants like Marriott International (NASDAQ:MAR) Inc and Hilton Worldwide Holdings (NYSE:HLT) Inc have doubled down on their own loyalty programs as they attempt to spend less on commissions and other costs related to third party businesses.Through these programs, the hotels promise exclusive perks to customers in the form of redeemable points for stays at specific hotels in their franchise, among other travel benefits.However, in the face of an uncertain economy, travelers have increasingly relied on OTAs like Booking Holdings (NASDAQ:BKNG) Inc, which give them a wider range of choices and prices to book from, alongside incentives like advance cancellation, as opposed to upfront payment.”When the economy is weak and hotels may not be getting as much business from traditional sources such as corporate travel or meetings and conventions, they become that much more reliant on online travel agencies,” Atmosphere Research Group’s travel industry analyst Henry Harteveldt said. GRAPHIC: Hotel bookings through online intermediaries https://fingfx.thomsonreuters.com/gfx/buzz/akveqxqbwvr/Hotels.png THE FUNDAMENTALS* Analysts expect Marriott’s revenue to rise 28.8% to $5.4 billion when it reports results on May 2; earnings per share is estimated to be $1.84* Analysts expect Hilton’s revenue to rise 28% to $2.2 billion when it reports results on April 26; earnings per share is estimated to be $1.13* Analysts expect Booking’s revenue to rise 40% to $3.8 billion when it reports results on May 4; earnings per share is estimated to be $10.67 GRAPHIC: US travel operator’s stock performance https://fingfx.thomsonreuters.com/gfx/buzz/zjvqjoewkpx/US%20hotel%20operators%20stocks.png WALL STREET SENTIMENT* For Marriott, six of 23 brokerages rate the stock “buy” or higher, 16 “hold” and one “sell” or lower, as per Refinitiv data* For Hilton, nine of 22 brokerages rate the stock “buy” or higher and 13 “hold”, as per Refinitiv data* For Booking, 19 of 33 brokerages rate the stock “buy” or higher, 13 “hold” and one “sell” or lower, as per Refinitiv data More

Today’s top storiesThe UK’s competition regulator blocked Microsoft’s $75bn acquisition of Call of Duty maker Activision Blizzard in a possibly fatal blow to the software giant’s biggest-ever deal. China’s president Xi Jinping spoke on the phone with Ukrainian president Volodymyr Zelenskyy, the first conversation between the leaders since Russia’s invasion of Ukraine. Zelenskyy described the call as “long and meaningful”. US regulators and financiers scrambled to stabilise First Republic bank after it revealed customers had withdrawn $100bn of deposits during last month’s banking turmoil.For up-to-the-minute news updates, visit our live blogGood evening.One in five cars sold this year will be electric — and those vehicles are increasingly likely to be Chinese.Global sales for 2023, including battery-only and hybrid models, look set to pass 14mn, according to today’s projections from the International Energy Agency. The market has been turbocharged by drives to decarbonise the car market, such as the EU’s plan to ban the sale of all combustion-driven models by 2035.The IEA now projects that 35 per cent of global car sales will be electric in 2030, compared with a forecast of just 25 per cent a year ago. China accounted for almost two-thirds of all electric car sales in 2022, thanks to subsidies, with the Europe and the US, which also offer incentives, the second and third-largest markets.Brian Gu, vice-chair of Guangzhou-headquartered XPeng, told the FT this week that intense global competition meant the global car industry could shrink to just 10 companies in a decade. China’s domestic manufacturers are increasingly expanding overseas, with the country set to overtake Japan as the world’s biggest exporter of cars by volume, having already leapfrogged Germany.As Alan Beattie writes in his Trade Secrets newsletter (for premium subscribers), China is doing with cars what it has failed to do with previous products — develop its own brands capable of competing on the world stage. This could lead to trade disputes involving anti-dumping and anti-subsidy duties of the type that often occur after the introduction of new technologies, Beattie writes, as companies race to establish market share.The need for batteries to power the new generation of electric vehicles is also driving a surge in investment. In the US, the battery market is dominated by South Korea’s LG Energy Solution, SK On and Samsung SDI, which yesterday announced plans with GM for a new $3bn plant. Companies are increasingly taking advantage of subsidies on offer in Joe Biden’s Inflation Reduction Act: LG Energy Solution today reported a 145 per cent surge in first-quarter profit thanks to the incentives and strong sales of electric vehicles in the US and Europe.The South Korean groups’ nickel-manganese-cobalt (NMC) batteries are, however, facing increasing competition from Chinese companies such as CATL, the world’s largest maker of electric car batteries, which has licensed its technology for cheaper lithium iron phosphate (LFP) batteries to Ford.Price wars for vehicles are brewing as competition heats up. Tesla this week raised US prices on its two most expensive models following investors’ concerns that recent reductions were eating into profits. The cuts were also criticised by Tesla’s rivals. The big story, however, remains China’s dominant position. As one industry expert put it at last week’s Shanghai motor show, the world’s carmakers face a “moment of truth”. Although some have begun to appreciate the existential threat from Chinese manufacturers, many are in danger of simply being too slow to react.Join us for the Future of the Car summit on May 9-11 in London for an objective analysis of the industry’s toughest challenges. Register here. Need to know: UK and Europe economy“We’re all worse off.” That’s the view of Bank of England chief economist Huw Pill on how energy price rises have made Brits poorer. Former chancellor George Osborne warned of the risk to BoE independence from “political vandals”.The European Central Bank is asking lenders about their exposure to rising interest rates and Silicon Valley Bank-style losses. Christian Lindner, Germany’s finance minister, wrote in the FT that EU fiscal rules needed to be strengthened, rather than diluted, as proposals for reform have suggested.Russia’s oil export revenue fell almost a third in the first quarter of 2023, highlighting the impact of western price caps. The EU and Japan rebuffed US proposals for G7 countries to ban all exports to Russia ahead of next month’s summit.Need to know: Global economyUS president Joe Biden confirmed he would run for a second term, hoping he can set aside worries about his age and lacklustre polling. He is sticking with Kamala Harris as his deputy. One of the biggest challenges for the next US president will be how to handle China. As chief economics commentator Martin Wolf explains in his latest column, the relationship between the two countries will probably determine humanity’s fate in the 21st century. No pressure, then. Colombia’s eight-month-old coalition government is teetering after president Gustavo Petro lost his majority over health reforms.Climate change will keep inflation at elevated levels, according to the head of Norway’s $1.3tn oil fund, the world’s largest sovereign wealth fund. Contributory factors include rising food costs and the price tag for the green energy transition as well as a reversal of the globalisation that had held down manufacturing costs for decades. The World Bank said economies with ageing populations would need to do much more to attract foreign workers over the next decade. Its warning follows UN projections highlighting how countries needed to rethink their growth models as their populations age. The UN this week confirmed India had passed China as the world’s most populous country.

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Need to know: BusinessThe EU, in the first overhaul of pharmaceutical legislation in 20 years, aims to create a “single market for medicines”. The revamp would cut drugmakers’ period of exclusivity, prompting fierce criticism from the sector.Microsoft and Google parent Alphabet got the Big Tech reporting season off to a strong start, with core businesses holding up better than expected in the first three months of 2023.Nestlé, the world’s biggest food company, increased prices at the fastest pace in more than three decades last quarter but appears to have encountered little resistance from customers. Like other consumer goods companies, Nestlé has been grappling with the dilemma of how far to pass on increased costs for raw materials.A new Big Read examines why Europe’s stock markets are failing to challenge the US. European hopes of building a comparable equity investment scene is strewn with practical, political and cultural obstacles, investors say.The payment of almost $800mn to halt a trial over Fox News’s role in peddling election conspiracy theories and the dismissal of the channel’s biggest star Tucker Carlson are just the latest pieces of bad news in a difficult 12 months for media mogul Rupert Murdoch.Young shoppers are increasingly cool with counterfeits. That seems to be the message from TikTok trends, which show fake luxury products gaining a life of their own.The World of Work Columnist Sarah O’Connor reports on the woeful state of labour market enforcement in the UK, whether it’s workers underpaid the minimum wage, missing holiday pay or failing to be enrolled in company pension schemes.The departure of Dominic Raab as deputy prime minister last week has highlighted the dysfunctional nature of political workspaces, writes columnist Stephen Bush. Some good newsUS researchers have come up with a tabletop vaccine printer that produces shots on patches that can be stored at room temperatures and applied to the skin without the need for injections.The printer produces patches with hundreds of microneedles containing vaccine. The patch can be attached to the skin, allowing the vaccine to dissolve without the need for a traditional injection. Image courtesy of researchers More

Brussels faced objections from the three biggest EU member states after proposing a sweeping overhaul of its debt and deficit rules on Wednesday, as capitals questioned its attempt to strike a balance between strengthening public finances and boosting investment. Christian Lindner, Germany’s finance minister, warned that the European Commission’s legislative proposals did not go far enough in tackling high public debt in the EU, saying “significant modifications” were needed to make the rules sufficiently sound, binding and transparent. France took an opposing view, complaining that aspects of the budget regime were too rigid, while Italy said it gave too little scope for investments in growth and the green transition. The commission’s draft legislation proposes radical changes to the way the body oversees countries’ budget plans, creating a simpler framework with more space for public investment, while attempting to contain fiscal profligacy. Valdis Dombrovskis, commission executive vice-president, said the reforms would give countries greater flexibility and ownership of their fiscal objectives, while putting in place safeguards to ensure equal treatment. He added that the EU was “stepping up enforcement so that countries stick to their commitments”. The draft, which will now need to be thrashed out by the Council of the European Union and the parliament, comes after a surge in debt burdens worldwide during the Covid-19 crisis. The demands of combating climate change and war in Ukraine are now placing additional demands on government spending. Under the new regime, member states would agree fiscal adjustment paths with the commission over a four-year period, extendable to seven years if matched with credible reforms. The commission added extra “safeguards” to its regime in a bid to reassure Berlin that there would be minimum standards that member states must meet. However, Lindner, who has long been sceptical about the commission’s push for bespoke debt-reduction deals, warned that safeguards in the proposals were not strong enough. The greater flexibility represented a shift from Berlin’s desire for a common compact covering the entire region to “bilateralising” fiscal rules. The rules needed “more work”, he said, adding: “No one should labour under the misconception that Germany’s consent is automatic.” Both Paris and Rome regard the proposals as a step forward in offering countries more say on their debt reduction trajectories, but they also expressed reservations about aspects of the proposals. Italy’s finance minister, Giancarlo Giorgetti, was disappointed that Brussels had not heeded Rome’s call to exclude investment expenses — especially those linked to the Covid recovery plan and the green transition — from the calculation of deficit targets that countries would have to meet. Paris believes the commission has gone too far to accommodate Berlin’s demands. France’s finance minister Bruno Le Maire said some parts of the plan “must be reworked” and said Paris was “opposed to uniform automatic deficit and debt reduction rules”, arguing that they were ineffective and widely criticised by academics.The draft legislation requires countries with budget deficits above the Stability and Growth Pact threshold of 3 per cent will have to push through a minimum fiscal adjustment of 0.5 per cent of GDP a year — even if they are not yet formally in a so-called excessive deficit procedure.

Another French official said it might make sense to have common rules for countries whose deficits were higher than 3 per cent of GDP level, but those below should be given more leeway to set the pace of their debt reduction. France is trying to bring its deficit from 4.7 per cent of GDP to below the 3 per cent target by the end of President Emmanuel Macron’s second term in 2027.The commission’s enforcement regime would be strengthened by lowering the size of the fines for countries that breach the rules, making it more likely that they will be levied. Further safeguards would ensure that spending grows at a slower pace than medium-term economic growth, and that fiscal reforms are not backloaded to the end of a multiyear planning period. More