Hotel executives exude confidence in US travel demand despite headwinds
Consumer sentiment hit three-year low this month
On recent earnings calls, public hotel company executives acknowledged the travel disruptions and macroeconomic factors at play, but asserted that U.S. travel demand has remained steady. (Getty Images)
https://www.costar.com/article/134051847/hotel-executives-exude-confidence-in-us-travel-demand-despite-headwinds
The shutdown of the U.S. federal government didn't do businesses any favors in terms of consumer sentiment, but hotel company executives seem to be holding out hope.
The University of Michigan's most recent survey of consumers showed the lowest sentiment in three and a half years amid worries about economic fallout from the shutdown. The university's Consumer Sentiment Index fell to 50.3 in early November, the lowest mark since June 2022.
But speaking during recent earnings calls, hotel brand and real estate investment trust leaders both expressed optimism in continued travel spend. Here's some highlights from that commentary.
Pat Pacious, president and CEO, Choice Hotels International
“As we look ahead, we're optimistic about the next phase of the U.S. lodging cycle and its impact on new construction openings. In the U.S., we expect last week's lowering of interest rates, continued investments in the build out of [artificial intelligence] infrastructure and a constructive regulatory environment will drive stronger demand, especially for our travelers.
“Combined with low industry supply growth, continued favorable demographic trends and significant demand catalysts such as the 2026 World Cup, the U.S 250th anniversary and the Route 66 centennial, these tailwinds are expected to generate incremental travel across our markets and set the stage for stronger RevPAR growth in the years ahead. Backed by the strength of our core travel base — retirees, road trippers and America's blue- and gray-collar workforce — our purpose-built hotel portfolio is well-positioned for sustained growth.
“As we look for signs as to when the cycle in the U.S. may turn positive for our business, two indicators are moving in the right direction. First, our economy transient segment occupancy performance has begun to improve year to date and has shown year-over-year growth in each of the last two quarters, excluding the impact of the third-quarter 2024 hurricane. This segment was also the first to recover after the last period of demand softening, followed by the midscale segment. Second, occupancy index across our entire U.S. portfolio is up slightly year to date, a constructive early indicator that in prior cycles has preceded broader U.S. RevPAR growth.”
Geoff Ballotti, president and CEO, Wyndham Hotels & Resorts
Asked if there's a structural problem with the economy segment: "We're moving into our slowest quarter of the year. And despite the softness that we talked about in Texas, California and Florida, we are seeing nothing structural that that concerns us in any of the leading indicators that we look at daily.
"Our booking lead times, they're up 2% to prior year. Our lengths of stay are consistent with last year. If we thought something structural was was happening, that would not be the case. And our cancellation rates have have actually improved over last year by 160 basis points in Q3 versus prior year. So on those indicators, we feel good. ... [This year] we're seeing occupancy down across all chain scales year over year, with the divergence of RevPAR really being driven by ADR, with the upscale segments taking rate, while the economy and midscale where we're concentrated are not.
"Occupancy, as we all know, is not recovered to pre-COVID levels in any segment, but it has more so in economy and midscale. ... So the question you ask in terms of, is there anything structural that we're seeing out there — aside from persistent inflation and consumer uncertainty and immigration and in some of those states that we mentioned that aren't helping — is the upscale hotels are able to price more aggressively to inflation than the lower chain scales are where the guest is obviously more price-sensitive. ... Luxury is the only segment, as we know, that's been able to outpace inflation growth at 26%, which is very good news for economy and midscale segments from a pricing power standpoint, moving longer term, especially as wage growth continues to outpace inflation, providing upside when that consumer confidence stabilizes and we get back to that 2% to 3% [compound annual growth rate]."
Briony Quinn, executive vice president and chief financial officer, DiamondRock Hospitality Company
"Despite the slight decline in RevPAR, our out-of-room revenues increased 5.1%, resulting in total RevPAR growth of 1.5%. Total RevPAR grew in both our urban and resort portfolios.
"Food and beverage was once again a bright spot, both on the top and bottom line. F&B revenues increased 4%, with banquets and catering up almost 8%, while outlets were down modestly. Last quarter, we highlighted that our food-and-beverage margins expanded by 105 basis points. This quarter was even stronger with F&B margins expanding by 180 basis points, aided by our continued efforts in reengineering menus and focused staffing.
"Other contributors to the increase in out-of-room revenues in the quarter included spa, parking and destination fees, which were each up over 10%."
Justin Leonard, president and chief operating officer, DiamondRock Hospitality Company
"We talk a lot about differentiation amongst our resorts, but our resort ADR over the course of the year in totality is roughly $400. We just don't have a lot of lower-end exposure to the resort space.
"I think seasonally, like we — our exposure to sort of the mid-price customer is like August and South Florida. It doesn't mean that those hotels are necessarily mid-priced hotels. It's just there's a moment in time where we kind of cater to a different part of the population. But I think in the aggregate, we kind of have a higher-end resort exposure, which has done better given what we've seen kind of the differentiation in economy."
..."We have a fairly significant spa business at three to four hotels. And so we saw a nice uptick double digit on our spa revenue and then the other that falls in there are just resort and destination fees.
"So I think the nice thing about all of those revenue streams [parking, spa and resort fees] is they tend to also be non-commissionable. The costs associated with them are pretty much fixed. So if we can move parking $5, for instance, or we can move the cost of a spa treatment up $10, most of that does flow to the bottom-line. It doesn't really change the cost model of providing the service."
Chris Nassetta, president and CEO, Hilton
"As I lift up and think about the opportunity ahead, I remain optimistic about the next few years. We continue to believe that in the U.S. lower interest rates, a more favorable regulatory environment, certainty on tax policy and a significant investment cycle will result in accelerated economic growth and meaningful increases in travel demand. This, when paired with limited industry supply growth, should drive stronger RevPAR growth over the next several years."
Mark Hoplamazian, president and CEO, Hyatt Hotels Corporation
"Leisure demand continues to be very strong. We've mentioned all of the various data points in our script, but just taking a real-time gauge of this, leisure demand in the U.S. was up 3%, globally up 7% in October. So this is not abating. I think there's been incessant questions about, 'Can leisure really hold up? Can you really maintain pricing levels?' Etc., etc. The answer is the data continues to prove it. I'm not sure what other proof is required. We're seeing it in all of our numbers. Yes, we do serve a different customer base, so I'm not making any comments about midscale and below. I am making a comment about us."
Hoteliers in the Baltics struggling to share Europe’s recent gains
Current metrics still have not reached pre-pandemic levels
Instead of large-scale new hotel openings, most investors in the Baltics are focusing on improving existing properties. Shown is the Grand Hotel Vilnius, Curio Collection by Hilton. (Hilton)
https://www.costar.com/article/871426015/hoteliers-in-the-baltics-struggling-to-share-europes-recent-gains?
Despite a solid rise in the number of foreign visitors, hoteliers in the three Baltic nations — Estonia, Latvia and Lithuania — have few reasons to celebrate this year, with the economic situation in its hospitality industry and region leaving much to be desired.
This year, its hotel industry’s performance has been mixed as the national continue to feel the effect of losing Russian and Belarusian travelers but enjoys the benefit of lower supply growth.
There was an impressive number of conferences, major events and concerts by international performers — particularly in the capital Tallinn — in Estonia this summer. It helped to boost occupancy and visibility, but not all regions benefited equally, said Külli Kraner, general manager of the Eesti Hotellide ja Restoranide Liit, or Estonian Hotels & Restaurants Association.
“In southeastern Estonia and some inland destinations, demand was more weather-dependent, and the start of the summer was relatively cool,” she said.
Beyond the weather, Kraner said, the main challenges remain rising operational costs, higher taxes and reduced domestic travel. Estonian consumers are more cautious with their spending, she said.
In Latvia, hotel performance has been equally discouraging, said Andris Kalnins, chairman of the 205-room Islande Hotel in capital Riga and president of the Latvijas Viesnīcu & Restorānu Asociācija, or Latvian Association of Hotels & Restaurants. Occupancy rates in several regions are lower than last year, and the weather has been cold, he said.
All three capitals, including Vilnius in Lithuania, saw occupancy rise to an exceptionally high level, said Césarine Calafell, analyst, hotel transactions, at business advisory Cushman & Wakefield.
She said that despite complaints about the weather, occupancy in July and August in Riga, Tallinn and Vilnius exceeded 85%, among the strongest in Europe, and fears that the general, challenging economic situation in Europe would have hampered tourism flow to the region have not fully materialized.
“The economic health of feeder markets is important, as Nordic, United Kingdom and Western European travelers supply the bulk of visitors. Demand has remained solid despite some macro pressures,” Calafell said.
A noise in the background over the past few years, Kalnins said, is the political situation in the wider region, notably in Ukraine.
He said the number of visitors to Latvia in 2025 is approximately 15% behind its pre-pandemic high.
“The flow of Russian and Belarusian visitors, which used to account for around 30% of the country’s tourist flow, ground to a halt, and alternative feeder markets have not compensated for that loss,” Kalnins said.
Lithuania is performing noticeably better, with the Vilnius hospitality market surpassing pre-pandemic levels in 2023, according to Sigita Rudzeviciene, general manager of 93-room Grand Hotel Vilnius, Curio Collection by Hilton.
“Despite geopolitical threats, like the U.S. government’s strategy change, war in Ukraine and not many strong happenings this year, Lithuania has managed to grow in volume as well as in average daily rate,” Rudzeviciene added.
During the first eight months of 2025, occupancy of branded hotels was on an upward trajectory across all three countries, according to CoStar. In Estonia, occupancy inched up by 2% year over year to 70.4%. Lithuania registered a 2.6% rise in occupancy to 74.9%, and in Latvia, the figure increased 8.6% to 70.5%.
Among the three, Estonia was the only country where occupancy fell short of the overall 2019 levels. In Lithuania, occupancy was more than 10% above 2019.
Year to date through August, ADR in Estonia increased 2.5% year over year to €91.05 ($105.47). In Latvia, it increased 2.8% to €85.69, and in Lithuania, it increased 9.6% to €82.07.
Again, Estonia was the only country where ADR was lower in 2025 than it was in 2019.
Similarly, revenue per available room in Estonia was slightly below the pre-pandemic level, through it grew by 4.6% year over year to €64.13 during the first eight months of 2025. Latvia and Lithuania saw average RevPAR rise by 11.6% and 12.5% to €60.38 and €61.46, respectively.
Fragile profitability
Despite some positive shifts, rising costs and dwindling business profitability are a significant concern.
“Although average occupancy across [Estonia] improved slightly compared to last year, and ADR rose by about 3%, these gains are largely offset by the rapid increase in costs. Profitability, therefore, remains fragile,” Kraner said.
It's a similar story in Latvia.
“The industry continues to struggle with high costs driven by inflation — particularly energy, food and wages — as well as increased taxation,” Kalnins said.
High, and in some cases growing, hotel industry taxation has been an important part of the public discussion in the Baltic region during the past year.
“Domestic demand is also under pressure as households face declining purchasing power. Taken together, these factors create a fragile operating environment for many businesses,” Kalnins added.
Security risks that reportedly discouraged some visitors from coming to the region in 2022 and 2023 have largely wound down.
“Geopolitical risks related to proximity to Russia are noted, though their impact appears limited for the time being,” Calafell said.
The industry’s relatively weak financial performance also constrains investment activity.
“Compared to the pre-COVID years, the pace of new openings is lower, as rising construction costs, higher interest rates and increased value-added and sales taxes and input prices have made returns more modest,” Kraner said.
Kraner added investment activity remains regionally uneven, with the strongest momentum being in Tallinn, where several hotel renovation and expansion projects are underway.
“To truly improve operations, hotels need a stable tax and regulatory environment, plus measures that ease intense cost pressures so investment can resume,” Kraner said.
Investment activity in Latvia has also slowed compared to the pre-pandemic period, Kalnins said.
“Instead of large-scale new hotel openings, most investors are focusing on improving existing properties — renovations, energy efficiency and service quality,” he said. “Financing conditions have become more expensive, which also adds to the caution."
The short- to medium-term outlook remains wobbly, sources said.
Vilnius is facing an increase of supply due to a newly opened hotel that now makes up 9.5% of the city’s inventory in the four-star hotel segment, Rudzeviciene said, adding that it might translate into lowered ADR.
Another concern, Rudzeviciene said, is low-fare carrier Ryanair planning to decrease the number of flights into the city.
“Looking ahead, the outlook depends strongly on government policies and external factors. To improve performance, the industry requires a more predictable and fair tax framework, stronger tourism promotion and improved international connectivity.
“With the right policy support and strategic investment in destination marketing, the industry has good potential to return to sustainable growth,” Kalnins said.
The new rules of thumb in hotel design
Development costs pile up when designing guestrooms, public spaces
Warren Feldman (Nehmer)
https://www.costar.com/article/2065499867/the-new-rules-of-thumb-in-hotel-design?
The hospitality design and construction industry has always had standards and guidelines, “rules of thumb” if you will, that one could utilize when completing a project.
The traditional ways of doing things are evolving due to advancements in technology and changes to guests’ needs. Realizing what has changed and learning how to adapt is the key to continuing to create successful projects.
Carpet vs. LVT
Carpet used to be a given in hotel guestrooms. Today, more brands are requiring the use of luxury vinyl tile (LVT) in guestrooms. However, there are hidden added costs to installing LVT instead of carpet.
Carpet, in addition to its low price, has great acoustical value. That acoustic value is due not only to the carpet but also the pad hidden below. LVT transmits sounds at a much higher level. The use an acoustical underlayment is a hidden additional cost.
The cost of LVT was supposed to be offset by its durability. In some locations, the scratches on the LVT are causing the need to replace it after just one renovation cycle.
Further, many owners and brands are adding an area rug over the LVT. The area rug cost is usually not accounted for the in cost of LVT.
Virtual reality has transformed the way one can experience things. With the advancements of BIM software, people may be tempted to create a virtual Model Room instead of an actual Model Room buildout. In the virtual Model Room, you can walk through the space and experience the design of the room. It may appear to be more cost-effective than an actual buildout.
However, there are nuances in an actual Model Room that one might not experience in a virtual room such as cord management, plug placement, comfortability of furniture and light levels. These may seem minor but not uncovering them until the full rollout can add more money to the project’s bottom line.
Master switches
Hotel guestrooms can have between six and eight individual light sources throughout the room. As a code-related, energy-savings effort, master switches are being installed at the entry to each room. In a new-build project, there are a variety of ways to comply with this requirement. In a renovation, the options are either expensive or complex or even downright unachievable. Alternatives such as occupancy sensors, motion sensors and just using plug-in lighting may be your best bet to minimize costs.
Technology changes/plugs
With each passing year, there are more advances in technology that need to be taken into consideration when designing a hotel guestroom.
Guests require more strategically placed power outlets. The great idea of having USB outlets built into furniture that is designed to last multiple cycles now means that the USB-A plugs make the project look dated. Power at a nightstand, which years ago needed to power a clock radio, is now supporting the transformer for your cordless house phone, the radio — if you are still providing one — the headboard lighting, and still trying to provide outlets for your guest to use.
In addition, some upper-upscale and luxury properties provide Smart Room controls that allow you to change the lighting, temperature, and television. Those come with two added complications: (1) coordinating across multiple vendors to provide a sole source for your guest to use; (2) the need to hide the power control modules in electrical J-Boxes or other areas that are not currently designed to hold them.
Installation cost
Guestroom installation costs for furniture, fixtures and equipment used to be fairly consistent. Many FF&E pieces consist of multiple components now. A headboard, nightstand and dresser unit used to cost $400 to $500 per room to install. Now, because the headboard is also connected to a platform bed with integrated lighting and the desk/dresser has an integrated TV panel, it can cost up to $1,500 to $2,000 per room. Installation costs can also creep up on complex public space FF&E like ballroom light fixtures. A beautiful chandelier that is made up of 400 individual pieces can cost four times the cost of the actual fixture to install.
Data usage
Wi-Fi bandwidth used to be a small item, but with the advent of 5G and the ability to stream everything, guests’ usage has increased dramatically. The use of video meetings has also affected Wi-Fi demand.
Wi-Fi repeaters are now located to serve approximately four guestrooms. That means extra cabling, extra power loads and a lot of access points. In public areas, guests need even better Wi-Fi connections for meeting rooms, restaurants and bars. This means higher demands on your incoming service.
In addition to the guest demands, hotel operations are using Wi-Fi to adjust thermostats, monitor mini bar usage and operate POS systems. The combination of these demands is not likely to decrease as time progresses but rather to increase. Low voltage system design is now more important than ever.
The rules of thumb are ever changing to accommodate the hotel guest and the best final product. Staying on top of these changes and accounting for them in each project budget can lead to a successful hotel with happy guests.
Warren G. Feldman, AIA, ISHC is Chief Executive Officer of Nehmer, a leading architecture, interior design, and project management firm specializing in the hospitality industry.
This column is part of ISHC Global Insights, a partnership between CoStar News and the International Society of Hospitality Consultants.
The opinions expressed in this column do not necessarily reflect the opinions of CoStar News or CoStar Group and its affiliated companies. Bloggers published on this site are given the freedom to express views that may be controversial, but our goal is to provoke thought and constructive discussion within our reader community. Please feel free to contact an editor with any questions or concern.
https://www.mckinsey.com/capabilities/strategy-and-corporate-finance/our-insights/nail-your-firsts-a-new-ceos-guide-to-stakeholder-impact?
Blair Epstein is a partner in McKinsey’s Bay Area office, where Carolyn Dewar is a senior partner; Richard Steele is a partner in the New York office, where Kate Freeland is a consultant; and Eric Sherman is a consultant in the London office.
New and incoming CEOs are often unprepared for the intensity of internal and external stakeholder engagement. The right mindset, communication skills, and actions can make all the difference.
Dear new CEO,
First, congratulations on your new role. This is a true unfreezing moment for you and the organization at large. It’s a personal achievement and—when done the right way—a public good. But the path ahead is unlike what many CEOs have faced before, and it will demand new levels of adaptability, resilience, and communication. New and incoming CEOs like you are being asked to take on the job at an increasingly accelerated pace, partly because of new time pressures: CEO tenure is now at an all-time low of 6.8 years.1 And there’s real value at stake—research shows that poorly managed C-suite transitions in the S&P 1500 wipe out nearly $1 trillion in market value annually.2
As Allianz CEO Oliver Bäte has said, “Nothing prepares you for becoming the face of a company. Nothing.”3 New and incoming CEOs tell us that one of their most common hurdles is engaging a whole new range of stakeholders, including investors, regulators, media, employees, board members, and broader communities. You’ll be shifting (seemingly overnight) from a private leader within the four walls of a company to a much more public profile. This shift, compounded by social media and a proliferation of new technologies and channels, can make for a steep learning curve, particularly given that only 1 percent of Fortune 100 CEOs have a formal background in communications or public affairs, according to McKinsey analysis.
That’s why we’ve put this article together for you. Think of it as a handbook to help you proactively and sustainably engage your stakeholders. We drew on research from our newly released book, A CEO for All Seasons,4 which features insights from more than 80 interviews, and from our New York Times best-selling book CEO Excellence.5 We also held targeted conversations with more than 20 CEOs, heads of marketing and communications, leaders at public relations agencies, and CEO counselors, and conducted proprietary research on CEO readiness across Fortune 100 companies.
Here, we’ll share our EDGE approach to stakeholder communications: an expanded view of the CEO as a bridge to the external world, a distinctive narrative that sees the CEO as storyteller in chief, a growth-oriented mindset that empowers a team of ambassadors to cascade the company’s vision, and an engaged posture to strengthen stakeholder connections.6 And to help you “nail your firsts,” we have included examples, reflection exercises, and a checklist to put your plans into motion.
Expanded: Shift from private- to public-facing platforms
Developing strong relationships with stakeholders will be critical to your agenda, and we hope you are off to a running start. Our research for A CEO for All Seasons showed that 30 percent of CEO respondents felt more successful in the role if they strengthened relationships with external stakeholders in the two years before becoming CEO.7
As you step into the role, critically assess how to best engage stakeholders. Use your transition to recalibrate existing relationships and forge new ones, creating a through line from strategy to engagement using proactive communication. This is your chance to demonstrate your priorities.
Being public facing also means investing more heavily in building coalition around your vision and new ideas, taking the time to see where your stakeholders are relative to your strategy. For example, one new CEO brought rigor to her engagement approach by categorizing stakeholder groups into archetypes—resisters, champions, allies, and mavericks—that were each treated differently and reassessed regularly. She asked two questions about each group: How would a given decision affect them, and how could she best work with them? Resisters were engaged early to surface concerns, champions to build momentum, allies to expand influence, and mavericks to challenge assumptions. This exercise, originally intended to be internally focused, also helped her identify external ambassadors. This disciplined approach became a playbook to coalesce and mobilize teams around a common vision.
As you step into the role, the following techniques can help you identify your priorities early on: ensure a smooth transition, take listening tours, conduct “stakeholder teardowns,” and access and convene newly available networks.
Ensure a smooth transition, whether you are an insider or outsider CEO
To determine where to start, study how the former CEO approached stakeholder engagement. This can be a source of inspiration—or a lesson in what not to do. If possible, use the transition period to gain warm introductions and jointly survey the landscape.
It’s important to remember that there are two transitions happening concurrently: As you’re stepping into your new role as CEO, your predecessor is stepping out. Pass the baton smoothly, moving together with grace and humility to protect and propel the institution forward.
Your transition is also an opportunity to disarm critics and potentially reset relationships. Meet with stakeholders who wouldn’t expect to be met with (such as critical investors and journalists) on their own terms, not necessarily with the intent of winning them over. Instead, express genuine interest in their concerns, collect feedback, and begin building bridges.
For insider CEOs, it’s important to think like an outsider. Internal appointments bring deep knowledge and continuity, but they can also make it harder to challenge the status quo. The best internal appointees honor the past while signaling that “what got us here won’t get us there.” Some incoming CEOs have even partnered with their predecessors to reinforce this pivot—for example, running joint sessions to field employee questions and acknowledge what will remain (such as culture and talent) and where new emphasis is needed (for example, R&D and technology). Adopt an outsider’s lens by listening to dissenting voices, studying admired peers to uncover blind spots, and mining exit interviews for insights that reveal how experiences and perceptions differ across the organization.
For outsider CEOs, be a student of the organization. Visit the organization’s archives early, and honor the organization by drawing out themes from its past and using the insights you’ve gleaned to help drive toward an even brighter future. Further, maintain objectivity. This is one of your greatest gifts as an outsider and will enable you to set the pace early, make bold moves, and create a sustained performance edge.
Finally, transition periods have a need for speed. Given the pace of business today, new CEOs do not have a “honeymoon period.” People in other roles may have six months or even a year to find their footing, but as CEO, you will be expected to be ready from day one.
It’s important to remember that there are two transitions happening concurrently: As you’re stepping into your new role as CEO, your predecessor is stepping out. Pass the baton smoothly, moving together with grace and humility to protect and propel the institution forward.
Take a listening tour with the stakeholders who matter most
A listening tour is your chance to deeply understand what’s on the minds of your most important stakeholders. Take the time to engage them one-on-one to hear their perspectives and find out where they envision the company going. These conversations can help you identify strengths and risks in your vision, understand what’s working and what needs to be fixed, and become open and adaptive. During these forums, it’s OK to say, “I don’t know.”8 This doesn’t take away from your core objective; it ultimately enhances your approach by demonstrating your honesty and openness.
Conducting a listening tour early is important because people are more willing to share things at the start of your tenure than after you’ve become established in your role. Craft your questions thoughtfully and invite stakeholders to share constructive, collaborative feedback (see sidebar, “Guiding questions for listening tours”). Listening tours also provide opportunities to test and refine your personal narrative (similar to a “stump speech” in politics),9 which we explore in more detail below.
A “listening tour” involves more than just listening—it’s about learning and, perhaps most important, signaling intent. Every question a CEO asks (or chooses not to ask) communicates priorities.
One CEO who was determined to spark a culture of innovation and renewal opened every meeting with the prompt: “Tell me one thing you’re experimenting with.” Over time, employees began shifting their behavior to ensure they had better answers, creating momentum for experimentation across the organization. Another CEO, intent on strengthening customer centricity, routinely asked, “What’s the last thing you heard from a customer that changed how you’re doing something?” In both cases, the questions themselves became powerful catalysts for change.
Conduct a ‘stakeholder teardown’
A stakeholder teardown is a structured assessment designed to provide an outsider’s perspective on a company’s strategy and performance. These teardowns are a critical exercise, especially if you are stepping into the role from a different organization.
To conduct a teardown, work with your communications, investor relations, and marketing teams to collect and analyze relevant data that can help you understand where the organization stands regarding stakeholder interests, influence, and expectations. You can use generative AI to enable and accelerate this process. Use both internal and external lenses to holistically diagnose and solve issues and benchmark your performance against peers.
Ultimately, the goal is to understand your stakeholders and their motivations and reasoning (Reflection exercise 1), ensuring that your vision resonates with their short- and long-term expectations. Once the teardown is complete, you and your leadership teams will clearly understand what winning looks like.
Access and convene new networks that are now available to you
The CEO role can be lonely. Time and again in our conversations with CEOs, we hear about the importance of establishing strong peer networks. As a new CEO, consider actively engaging with your peer CEOs. Peers who are grappling with similar issues—or former CEOs who navigated parallel journeys—can be a valuable source of guidance. In fact, some new CEOs even think of this group as part of their “personal board.”
Exhibit 1.
Distinctive: Develop your personal narrative and meet stakeholders where they are
With many new demands competing for your attention, focus on what only you can do. Start building a “trust bank” and connecting with stakeholders with an authentic, personalized narrative. Think of it as a political candidate’s stump speech that engages stakeholders and rallies them around your vision and strategy.
Master the four W’s
An effective narrative helps you articulate your key messages with conviction and elegance, and it can be adapted and enriched over time. Craft your narrative using the “four W’s” (who, why, what, and when) to capture and hold the imagination of stakeholders (Reflection exercise 2):
*- Who you are. Provide insight into your identity, personality, and values. As Doug Parker, former CEO and chair of American Airlines, shared with us, “You need to figure out what you believe are the right things to do and show people that you are in charge. They want someone to follow, and they want to know who you are.”10
*- Why you are here. Reflect on your purpose, core mission, and beliefs. This is an opportunity to connect your personal mission to the organization, creating a clear link for stakeholders.
*- What you will achieve. Lay out your agenda to convey a sense of ownership and accountability. You can do this by both showing and telling your plans. For example, David Ellison of Paramount wrote in his 2025 CEO letter that “sports serve as a powerful engine for deep audience engagement.”11 Less than a week after taking over, he secured a seven-year media rights agreement with the UFC for a record $7.7 billion.12
*- When you will execute plans. Share what you plan to do right now for stakeholders and plant the seeds for future actions. For example, one financial-services CEO unveiled a new employee experience program by illustrating how it fit in with a broader redesign of the entire employee journey.
An effective narrative helps you articulate your key messages with conviction and elegance, and it can be adapted and enriched over time.
Exhibit 2.
Build storytelling muscle
Storytelling may come more naturally to some than to others, but it is also a muscle that can be strengthened over time through repetition and refinement.13 Judy Marks, CEO of elevator and escalator manufacturer Otis, said she was neither comfortable in the public spotlight nor trained for it, but she actively cultivated this skill over time to become the company’s “chief storyteller.” Now, she says it’s a central part of her job: “I can’t tell the story enough.”14
A few best practices can fortify your storytelling abilities. We find that the best leaders do the following:
*- Balance the paradoxes of the role. As CEO, you must constantly balance paradoxes such as delivering short-term results while investing for the long term, respecting the past while disrupting the future, and more. Recognize and embrace this dynamic, and understand that your narrative shouldn’t be a fixed script. It must evolve continuously, shaped by stakeholder interactions, strategic priorities, and learnings.
*- Make the message stick with proprietary language and themes. Figurative language can bring unlikely images together and unfreeze the mind to think about new possibilities. To that end, some CEOs embrace the power of analogies and metaphors. Stay curious and look for patterns using your unique perspective. For example, Microsoft CEO Satya Nadella created the concept of a “learn it all,” rather than a “know it all,” to inspire a growth mindset and help make the message stick.15
*- Focus on profound simplicity. Less is more when it comes to powerful messages. Strive to make your statement in six words or fewer. Seemingly simple messages can provide clear purpose and strategic direction, affecting everything from R&D to marketing campaigns—but remember that it takes work to achieve this level of profound simplicity. Take inspiration from Nike’s mission to “bring inspiration and innovation to every athlete” or DBS Bank’s goal to “make banking joyful.”
*- Repeat and reinforce the message. In the words of Procter & Gamble’s former CEO A. G. Lafley, you’ll need to endure “excruciating repetition” to spread your message.16 Our research shows growth leaders are 80 percent more likely to repeat their story internally and externally than their peers.17
*- Put the story to the test. Proactively bring in objective external voices to play “challenger” roles. One CEO brings in investigative journalists and reporters to critically dissect, break down, and ultimately rebuild her narrative ahead of critical engagements with media, analysts, and customers.
*- Make your platform proprietary and fit for purpose. You are leading a multigenerational workforce.18 The message and the method of distribution go hand in hand. We find that CEOs are increasingly investing in and building campaigns around their narratives, weaving together social media, public speaking, and media engagements programmatically to best serve the organization and its stakeholders. When done successfully, this orchestration is both CEO led and stakeholder backed, creating points of intersection to meet audiences on their terms and in ways that facilitate two-way dialogue.
Growth oriented: Empower multiple voices to carry and cascade messaging
In the previous section, we looked at what only you can do in the context of stakeholder communication and engagement, but you shouldn’t act alone. Set the tone early with your team regarding how you want them to engage stakeholders.
Take a balcony view to connect the dots between your leadership bench and the full spectrum of internal and external stakeholders you want to engage. We find the best CEOs take a systematic approach, enrolling (and reenrolling) the top team, scaling the reach of their message through ambassadors, and serving as both teachers and students of the craft of storytelling.
Take a balcony view to connect the dots between your leadership bench and the full spectrum of internal and external stakeholders you want to engage. We find the best CEOs take a systematic approach, enrolling (and reenrolling) the top team, scaling the reach of their message through ambassadors, and serving as both teachers and students of the craft of storytelling.
Enroll (and reenroll) your top team
The best CEOs can gain leverage through their top teams to activate stakeholder communications with greater speed, reach, and potential impact (Reflection exercise 3).19
Proactively create space to bring communication and engagement to the forefront of your top team’s mind. For example, at a two-day strategy off-site, a new CEO hosted a session entirely dedicated to narrative development. As a group, the top team refined their collective organizational narrative, resetting their vision and strategy for the future. Each team member then developed a personal narrative. They presented these narratives to one another, provided feedback, and ultimately built shared understanding and teamwide unity. Following the session, the top team kept communications and stakeholder engagement on the recurring agenda.
Exhibit 3.
Another CEO added rigor to their approach by developing an executive dashboard that tracks both quantitative and qualitative KPIs to measure each leader’s internal and external stakeholder engagement, such as share of voice, customer or employee feedback, town halls hosted, customer sessions attended, and participation on panels. These exercises demonstrate how leading CEOs treat the “soft stuff”—areas such as culture, talent, and communications—with the same level of rigor as the “hard stuff.”
Reach further into the organization and identify ‘ambassadors’
Deepen your bench of storytellers even further by identifying “ambassadors” who can authentically project and cascade key messages throughout your organization. Ambassadors can be found at all levels of the company but are typically rising or next-generation leaders embedded at the second or third level of the organization who share three characteristics. First, they are unifiers who can bring together disparate viewpoints and mobilize a team around a shared vision. Second, they have a deep following across the organization among both people who report to them and those who don’t. And third, they’re the people who leaders call on to help solve the toughest issues.
Actively teach and continually learn the craft of storytelling
The best CEOs don’t just tell stories; they teach others how to tell them, too. They recognize the importance of proprietary language and themes in building shared understanding and conviction. These soft skills are critical differentiators in today’s AI-powered world. As Matt Prince, CEO of Cloudflare, put it: “I have a BA in English Literature, a minor in Computer Science, a JD, and an MBA. As CEO of Cloudflare, a fairly technical company, the most important has always been that English Literature degree. To be able to write and communicate effectively, easily, and quickly is the job.”20 Chief human resources officers also cite soft skills as the most important area for future leaders to develop.21
By role modeling and actively teaching the craft of communication and stakeholder engagement, CEOs can unlock latent potential in their teams and build sustained capacity. This method enables CEOs to deepen their bench and accelerate the growth of next-generation leaders. Over time, this creates a virtuous cycle of individual and institutional development, creating a “leadership factory” filled with outstanding individuals who continually renew the institution and sustain impact across cycles.
One CEO recognized that he needed to give his team exposure to stakeholders they wouldn’t otherwise meet, so he brought a designated “copilot” to the sessions he led. For example, his CFO would join him for relevant media interviews, and his chief administrative officer (often a functional role) would join him for customer sessions. Soon, this practice cascaded down and across the organization as the CEO’s direct reports began bringing copilots (often previously identified ambassadors) to sessions they were leading. It allowed them to apprentice future leaders in real time, broaden their worldview to see “the whole chessboard,” and improve cross-team collaboration.22
Similarly, when Peter Orszag became CEO of Lazard, he launched a “salon” series, inviting critical stakeholders to the office or his home to discuss current events. He encouraged his leadership team to adopt this initiative, even converting a conference room into a fine-dining space for hosting leaders.23
Engaged: Activate your campaign and maintain a consistent, sustainable rhythm
Being a modern leader is an endurance sport. Too many of the best managers set out with the best intentions but end up suffering from burnout—more than 50 percent, in fact.24 Don’t fall into this trap.
Think and perform like an elite athlete in your stakeholder engagements, maintaining a laser focus on how you manage your time and energy.25
The following practices can help you engage your stakeholders: Manage your energy, not your calendar; invest in crisis readiness and response; and embed stakeholder engagement in your daily operating model.
Manage your energy, not your calendar
As CEO, you are the primary ambassador of the organization, so it’s essential to optimize your time—going beyond calendar maintenance and thinking more strategically about holistic energy expenditure (Reflection exercise 4).
The key is to establish a proactive, not reactive, mindset to ruthlessly prioritize who you could—and should—spend time with.
Constantly ask yourself, “Is this something I should lead myself, or would it be better to lead this through others?” In other words, are you better off as the protagonist or the architect of a particular engagement? This will help you delegate more effectively and triage incoming requests, while also sending the signal that you’re actively engaged.
At the same time, don’t let the pendulum swing too far internally or externally. For example, research shows that in the first three months of a CEO transition, internal emails and meetings drop by about 20 percent, leading to organizational confusion and communication slowdown.26 Such communication typically rebounds around the six-month mark, but you can avoid this pitfall altogether by thoughtfully balancing internal and external stakeholders with proactive planning and sustained connection points with you and your top team.
Invest in crisis readiness and response
Crisis readiness is inextricably linked with credible stakeholder engagement. During crises, leaders need to speak with clarity and conviction. Use time early in your tenure to rewrite your organization’s crisis response playbook in partnership with your board,27 top team, communications team, and HR team, among others. Incorporate tabletop exercises into your leadership team’s agenda to ensure that when disruption strikes, you’re prepared to mobilize and act with speed. The reality is that not all crises are created equal. Discern which issues are truly important to act on, and stay focused on the issues that are embedded in the organization’s DNA. Let your performance do the talking as you stay focused on playing “big ball” (spending your time on the large issues that require your attention) with a dedicated team on the ground to manage issues smoothly and efficiently.28 Taken together, these approaches will ensure that today’s small hiccup doesn’t turn into tomorrow’s front-page headline.
Think and perform like an elite athlete in your stakeholder engagements, maintaining a laser focus on how you manage your time and energy.
Exhibit 4.
Constantly ask yourself, ‘Is this something I should lead myself, or would it be better to lead this through others?’ In other words, are you better off as the protagonist or the architect of a particular engagement? This will help you delegate more effectively and triage incoming requests, while also sending the signal that you’re actively engaged.
Embed stakeholder engagement into your daily operating model
On average, CEOs spend 30 percent of their time with external stakeholders,29 but every leader is different. For example, Gail Kelly of Australian bank Westpac was “rigorous and relentless” about fitting as many stakeholders as possible into her quarterly visits to different regions.30 By contrast, Richard Davis of American financial-services firm US Bancorp waited until he had the “right team in place” to increase the time spent with external stakeholders.31
Any stakeholder rhythm you establish at the beginning of your tenure can evolve to best meet the changing landscape. If you can deliver on your promises early, you’ll also be able to build trust and optimize your time as your tenure progresses. As former CEO of Best Buy Hubert Joly explains, “If you do what you say you’ll do, [stakeholders will] want to see less of you. They’ll want you to spend time working on the business and delivering on your commitments.”32
The best CEOs keep a “tight but loose” schedule, leaving room for flexibility. Marillyn Hewson of Lockheed Martin told us, “Every September we look a year ahead and lay out what we’ll do and when: investor calls, customer visits, air shows, conferences. If something new arises, I either can’t do it, or something else has to come off my plate. It’s not so strict that things can’t be adjusted, but you know where your priorities are for the year.”33 Flexibility—or, as one leader put it, “structured serendipity”—is critical to provide you with the space to spotlight and celebrate the good news happening across the organization and amplify those messages.
Stakeholder engagement goes beyond day-to-day interactions—it’s about cultivating trust-based, intentional relationships and leading yourself and through others.
As CEO, you are the organization’s ultimate integrator, uniquely positioned to step onto the balcony, see the full landscape, and unite disparate—and often competing—perspectives. Taking a systematic approach now can help you galvanize stakeholders around a common vision to accelerate the company’s trajectory.
We’re excited as you embark on this next chapter of leadership.
Best,
Your friends at McKinsey
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