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Long-Range Perspective

By Dennis Nessler | August 18, 2020

Both the short-term and longer-term impact of the coronavirus on the hospitality industry were a major focus among research executives who also discussed a recent jobs report, current booking trends and some traction in select markets.

The executives weighed in on the aforementioned topics during an AAHOACON20 educational session last week entitled “What The Data Says: Before, During and After The Pandemic.”

In acknowledging the drop in demand since April, the panelists view the upcoming months as being critical.

Amanda Hite, president, STR, commented. “I think the real question mark for the industry is after Labor Day because the demand is the leisure driven demand in those destinations spots. So after Labor Day when everyone goes back to school what happens to demand, because there’s not a lot of corporate demand,” she said.

Jamie Lane, senior research director, CBRE, noted his company is taking a longer-term approach and looking at a number of factors. “How is demand going to recover once the pandemic isn’t the issue? Obviously there are major shifts happening out there. There’s not much debate out there there’s going to be less people overall going into the office. Some surveys are showing up to one-fifth of workers are working from home permanently. What does that mean long-term for lodging demand? It could mean a major shift down, or a major shift up…Right now I’m leaning more towards the latter, that it’s going to induce more demand, but that’s a big point of uncertainty right now,” he said.

Lane also dissected the recent most jobs report, which he noted contained both “good news and bad news.”

He commented, “The good news to start is the biggest gains were again in the leisure and hospitality industry, which is now down just 25 percent compared to the levels we were at in February. That compares to 50 percent in April so there were considerable gains there even while we saw increases in COVID cases.”

Lane added, “the bad news is that the pace of growth has slowed. While it’s great that the jobs are returning to our industry we haven’t yet seen a strong rebound in the core office using jobs, which are the businesses of many of the customers that we serve.”

Meanwhile, Cindy Estis Green, CEO/co-founder, Kalibri Labs, addressed the issue of the OTAs and how customers have been booking their rooms.

“The biggest question everybody has is are the OTAs going to become this dominant force like they had been? I have to say that with the introduction of these loyalty programs three-and-a-half years ago nobody knew how much traction it would get or how sustainable it would be. But an interesting point that I have observed is that the loyalty programs are not just point driven and they have benefits like mobile apps or mobile check in. When travelers want to use those contactless apps in order to improve their experience and feel safer they’re more likely to book direct so it’s going to impose some strain on what the OTAs had in past recoveries as a dominant position,” she said, adding the channel where they’ve observed the most growth of late is property direct.

Despite some of the negative trends and overall concerns about the industry, all the panelists were able to point to some positive developments as well, including some traction on rates in select markets.

“There are some hotels in some markets that are doing better right now than they were doing last year. So there are positive stories out there. We see some hotels in the luxury segment that are running a much higher ADR today than last year, because they have a different mix of business than they did last year. Yes, occupancies are down but their ADR is up and significantly up from last year,” said Hite.

She further added, “we anticipate that demand is going to recover faster than ADR. By 2023 we’ll be back to our 2019 levels of demand, but it may take us a little longer on the rate side.”

Estis-Green further touted the financial impact of loyalty member rate programs on owners’ bottom lines. “Those rates if you net them out with booking costs, there’s a 15 to 20 percent premium on that direct basis. That is awesome and wonderful because that is flow-through cash; that goes straight to the bottom line. So if the business that’s coming in in this interim period is coming in at higher rate and is a more profitable kind of business, that’s really terrific,” she said.

Lane also talked about how the relationship with owners and brands has evolved. “The brands have been working with them being lenient in terms of services and amenity requirements and we’ve learned that fixed costs aren’t really all that fixed. It does provide some green chutes going forward that the industry is going to get through this. Demand will come back and we’ll return to profitability,” he concluded.

 

Credit
Dennis Nessler
Editor-in-Chief

Dennis Nessler is Editor-in-Chief of Hotel Interactive, parent company of Hotel Community Forum. Nessler brings more than 28 years of editorial experience to his position, including some 17 years in the hospitality industry. As part of his duties, Nessler not only covers the industry editorially but moderates various high-level panel sessions at hospitality events and frequently conducts one-on-one interviews with C-level executives.


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