4 Ways Hospitality Real Estate Is Adapting

Along with most commercial real estate asset types, hospitality got rocked over the past 18 months. Travel — and thus hotel check-ins — halted literally overnight when the pandemic struck, and the industry is only just now recovering in fits and spurts to hit and exceed benchmarks set prior to March 2020. But recovering it certainly is, and quite impressively so, based on the reporting and analysis conducted by Hotel News Now (HNN), LoopNet’s affiliate outlet under publisher CoStar Group.

Hoteliers such as Hilton are seeing recovery happening “more quickly” than expected as of the headline-generating second-quarter earnings season, with key players like Pebblebrook Hotel Trust even expecting it to be “swift” at this point. Wyndham, for instance, says its hotel portfolio growth is back on track; while Marriot is “encouraged” by the resilience of travel demand; and Choice Hotels plans to “drive performance to new levels.”

And it’s not just traditional hotels experiencing recovery — Airbnb said in its most recent report that it’s preparing for a rebound in travel unlike any other in history. And this optimism is evident not just in performance upticks and revenue per available room (RevPAR) metrics; some investment vehicles like the Host Hotels & Resorts trust are even going on an acquisitions spree.

“We are ready for the rebound,” said Accor’s CEO, despite the firm experiencing reduced demand and rates. That outlook seems to be indicative of a trend echoing throughout the U.S. hospitality market. Sailing on the headwinds of summer travel, which is further encouraged by the lifting of restrictions and the sweeping vaccine rollout, the boon might be obvious. But it also might be short-lived, considering the Delta variant is changing travel ebbs and flows by the day and business travel has yet to fully rebound.

But what HNN has uncovered is that the industry has collectively used this ongoing period of economic and societal disruption to accelerate the industry’s own disruptors, in the form of technology, labor revolutions, guest enhancements, branding modifications and other purposeful changes. These are four of the ways hospitality real estate is adapting to recover from the ongoing pandemic in 2021 and beyond.

Ten years’ worth of hotel industry job growth has evaporated amid the ongoing pandemic, the American Hotel & Lodging Association reported. By year-end, the association said, the industry could still be looking to fill half a million jobs.

Hospitality companies furloughed and laid off their workforces in droves last year to survive, HNN reported, and departing employees took their highly transferable skills where they were needed most, such as in the delivery and other gig service industries.

Now that travel is accelerating and rooms are filling up again, the industry is having difficulty luring staff back. “Who would want to work for an industry that has laid off that many people during a downturn?” President and CEO of BWH Hotel Group David Kong asked attendees of the 2021 Americas Lodging Investment Summit in Los Angeles in late July.

Elements of gig work such as flexible scheduling, benefits for part-time and non-eligible employees and paying out employees following each shift might help attract talent back, Aimbridge Hospitality President and CEO Mike Deitemeyer posited at the Summit. Hourly rates need to climb, he continued, and until that’s possible following a sustained period of recovery, it may just be the industry’s biggest setback.

Hotel workers "are thrilled to be back," said Rob Palleschi, CEO of G6 Hospitality, according to HNN. “They're just worried their hours are going to be cut again and that they can't depend on us." To counteract that concern, he said, it's important that hoteliers "speak as one voice as an industry" to sell the idea of working in hotels.

In some regions, labor just isn’t there. Omni Hotels & Resorts President Peter Strebel said that for the first time in his career, he can’t fill jobs fast enough to accommodate the demand for rooms.

At the same time, some companies are pointing out a silver lining to the current labor shortages. Labor is one of the industry’s biggest costs, and by streamlining 1,200 full-time positions, or 8% of its staff, Park Hotels, for instance, saved around $85 million.

One of the only ways to bridge the labor shortage in the meantime, though, is through technology. Text-based communications is one of the simplest such features that several industry stalwarts have endorsed recently. Kong said at the Summit that texting between guests and hotel staff is essential given new guest expectations, which are informed by the practices of other service providers during the pandemic, such as apps for restaurant takeout and delivery. With front desks short-staffed, texting is a simple implementation of existing technology that keeps guests serviced and brings in additional opportunities for revenue.

Provenance Hotels said its business is even stronger after shrinking staff during the pandemic, thanks in part to incorporating a “virtual concierge system” that allows guests to interact with the hotel entirely via text for most needs, if that’s their preference.

Startups in the space are taking that concept one step further and asking why it’s necessary to have a front desk at all. Airports, for instance, did away with mandatory in-person check-in processes 15 years ago, Mint House CEO and founder Will Lucas said at the same event. Moreover, lodging industry disruptors such as Airbnb operate almost entirely through digital means.

Interactions with staff are still supremely important, though, according to the J.D. Power 2021 North America Hotel Guest Satisfaction Index Study. And though smart TVs and mobile apps for communicating with staff and conducting check-ins scored huge in the survey, luxury brands might differentiate themselves even further with a more attuned human-centric approach, according to Strebel.

Guests’ demands for cleanliness over the course of the pandemic have run the gamut from wanting hyper-intensive disinfection to preferring zero-contact and zero-room-entry during their stay.

For the latter, reduction in daily housekeeping aligns nicely with reduced labor and cost-saving efforts, Kong said. For much of the last year, travelers were not comfortable with staff coming in their room during their stay, Kong added, which is fine considering the current staffing shortages. And though that may change in time, for the moment, it hasn’t had a negative impact on hotel performance. According to the J.D. Power study, guest satisfaction actually stayed steady throughout the pandemic thus far.

For many guests who responded to the survey, however, “cleanliness was top-of-mind,” indicating that increased housekeeping efforts led to higher satisfaction.

To align elements of the labor shortage, technology enhancements and ever-changing guest preferences, Hilton recently launched an opt-in model for daily housekeeping at its non-luxury U.S. properties. They expect many other hotels that haven’t already adopted similar approaches will soon follow suit.

Daily housekeeping is an even bigger touchpoint when average stays are longer, which they most definitely are at the moment. Increasing from three to four nights prior to March 2020, the average length of stay in Mint House’s experience “exploded” during the pandemic to as high as 21 days, Lucas said.

HNN reported that extended-stay hotels scored the highest occupancies over the course of 2020, as they became key for specialized workers, displaced populations and essential travelers and outperformed other segments of the industry during the pandemic.

Red Roof, for one, is leaning into the trend, with a new extended stay concept called HomeTowne Studios by Red Roof that also aims to streamline technology and efficiency to staff as few as six employees at each location.

Leisure-oriented, ”experiential” resorts also shined bright during the doldrums of the pandemic, according to luxury brands such as DiamondRock Hospitality Co., a Bethesda, Maryland-based real estate investment trust that acquired two hotels for $108.6 million this year: the 220-room, lifestyle boutique Bourbon Orleans Hotel in New Orleans' French Quarter, and the 37-room Henderson Park Inn, a beachfront property located in Destin, Florida.

“We think that travel trends that are going to outperform are going to tend to be more experiential whether that's urban or pure resorts,” DiamondRock President and CEO Mark Brugger said, according to HNN.