Hotels Prep for Changes in Post-Pandemic Recovery

The COVID-19 pandemic should provide some future expansion opportunities in the hotel and resorts space, but investors will need to see a vaccine or strong therapeutics in place before they regain confidence, a key hotel executive recently said.

James Risoleo, chief executive officer and director of Host Hotels & Resorts, said on CBRE’s The Weekly Take podcast that he expects to see “meaningfully more” opportunities than those that emerged after the Great Recession “just because of the severity of the decline and the timeframe of the decline. I don’t think a lot of people are going to be able to survive.”

Bob Webster, president of CBRE Hotels’ Institutional Group, said average values on hotel properties have dropped somewhere between 25% and 35% from 2019 levels due to slumping demand linked to stay-at-home orders. CBRE Hotels Research predicts that pre-pandemic demand levels won’t return until 2023.

“That’s across the entire industry,” Webster said. “And there’s going to be markets that recover quicker and there’s going to be markets that take a little bit longer based on how the hotel accommodates its demand throughout a given year.”

The executives touched on issues related to guest safety, changing services, Airbnb impacts and future hotel inventory in the wide-ranging podcast conversation.

Hotel guests, when they do return, can expect to see more visible signs of sanitization and perhaps fewer amenities, they said. Fitness centers may be closed due to local health regulations. Most breakfast buffets will be gone and other buffet-style offerings will be limited.

Marriott hotels, Risoleo said, will soon begin electrostatic spraying in common areas. “Collateral” properties have been removed from guest rooms so there are fewer items to touch. Seals are placed on the doors alerting guests that no one has been inside since rooms were cleaned.

Even with more intensive cleaning, the less-contact approach to combating the virus may lower hotel costs, the executives said, especially if front desk staff is reduced in favor of cell phone check-in procedures.

“I think coming out of this–call it 2023, theoretically–if we get back to 2000, 2019 levels of [revenue per available room] and we make these changes, theoretically, hotels should be more profitable than they were in 2019,” Webster said.

As for Airbnb, Webster said that bookings appear to be up for drive-to destination properties but “I’ve also been hearing that inner city urban Airbnb is not doing well.”

“Some of the other home sharing platforms that came online like Sonder and Lyric,  I don’t think that they’re going to make it for the same reasons,” Webster continued. “You know, they’ve gone long on leases and unless the landlords are truly willing to forbear and forgive. I think it’s going to be challenging for them to stay in business.”

Webster and Risoleo both predicted that New York City will lose upwards of 20,000 hotel rooms post-pandemic. Risoleo blamed “way too much supply” for the “very high cost operating environment.”