Excerpt from CoStar
While some changes the hotel industry shouldered as a result of the COVID-19 pandemic were temporary, more long-term shifts in guest behavior are influencing how hoteliers build, buy and operate hotels.
On this day two years ago when the first massive wave of COVID-19-related shutdowns hit the United States, many hoteliers thought the impacts would be temporary. Now, many of the challenges facing the industry pertain to shifting business models and expectations that are expected to be permanent.
“We’ve been living with this for two years. It’s more than just an event that we had to deal with,” said Hostmark Hospitality Group President and CEO Jerry Cataldo during a recent Hotel News Now roundtable discussion. “It’s been a change of life. People have changed how they think about life and how they want to live their lives.”
Hotel News Now, in partnership with Pinkowski & Company, convened a group of U.S. hotel industry executives to talk about the state of the industry two years into COVID-19 and the opportunities and lingering challenges wrought by such widespread disruption.
“There is permanent change,” Cataldo said. “Some of it is good. Some of it is scary. And there’s a lot of the industry that just doesn’t know what’s going to happen for them — what business travel is going to look like, what their employees will want. It’s going to evolve and we don’t see all the answers clearly.”
Hostmark is a third-party hotel management company based in Chicago.
Roundtable participants, who ranged from hotel investors and owners to third-party managers, designers and architects, agreed that the changes happening across all levels and segments of the industry are a mixed bag of positives and negatives, depending on the asset, the location and any given stakeholder’s goals.
Top of the positives list continues to be leisure travel, whether it’s pure leisure or the increasingly popular bleisure mix.
Hoteliers with properties in leisure markets have had success driving average daily rate over the past two years, and keeping those rates high is definitely a priority, said Larry Wright Jr., president and CEO at hotel investor Wright Investments, based in Memphis.
“We have huge discussions about how much we can depend on these leisure, transient travelers,” he said. “I don’t think any of us are going to give up rate going forward because insurance and labor costs are higher, so we’re going to be fighting to the death for these ADR changes. We want to make these permanent.”
Roger Hill, chairman and CEO of Chicago-based architecture and design firm The Gettys Group, said demand for leisure and bleisure travel will continue to be high, and that’s influencing everything from building trends to underwriting.
“It already existed before, but it’s even more perfect now because it fills a nice void in the landscape and gives you revenue-management opportunities, particularly if you design some rooms the way we do it in the timeshare industry with lock-offs, where rooms can be sold as a multi-bedroom unit and also sold separately,” he said. “It’s also positive from an underwriting perspective, because we saw the extended-stay segment handle this crisis in a good position. Lenders may look at properties and see advantages if a certain percentage of room inventory can flex in a different way.”
Ron Lustig, principal at Nashville-based ESA, an architecture and design firm, agreed that leisure travel trends are influencing new hotel construction and conversions.
He said his company sees the trend manifesting clearly in its headquarters city of Nashville, Tennessee, where bachelorette parties dominate leisure business.
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