Asset managers said the COVID-19 crisis has pushed hoteliers to get creative with how they bring in business and the types of business they seek out.
REPORT FROM THE U.S.—The COVID-19 pandemic has forced hotel owners and operators to get creative with how they run their hotels, and repositioning strategies have been considered in some cases, sources said.
David Israel, SVP at HotelAVE, said some resort properties that his company manages have morphed operations toward a cruise-ship-type model, meaning all meals and activities are scheduled and all-inclusive pricing has become a trend.
Hotels have also shifted to a variety of alternative uses to stay afloat during the pandemic, he said.
HotelAVE has hotels in New York, Boston and Nashville that have converted rooms to university housing to accommodate distancing at some schools that have dorms with double occupancy, Israel said.
During “the heat of COVID-19,” Israel said his company had a hotel that was turned into a command center for the National Guard.
He added some hotels in the industry have entered three- to six-month contracts to temporarily house the homeless. He said this is a unique situation because those hotels will likely have to consider renovating or converting because the “wear and tear will be significant.”
Creativity has been especially important for hoteliers with properties in markets driven by corporate travel, Israel said.
Corporate travel is gone and isn’t coming back any time soon, so these hotels have to consider adding refrigerators and microwaves to rooms to appeal to the extended-stay traveler, or cross-selling suites and connected rooms to people who want to stay in a hotel but want a separate room to work in.
Hotel owners could also completely reevaluate properties and convert to senior living facilities or another real estate use as a result of the pandemic, Israel said. For those who want to keep their hotels as hotels, now is a good time to be more aggressive on large-scale renovations, he said.
Changes in operations
CHMWarnick doesn’t have any hotels that have been repositioned in the traditional sense, but Derek Olsen, EVP at the firm, said “rates have come down across all sectors,” so full-service luxury hotels are operating like select-service properties right now.
“The only F&B that’s been brought back at a lot of them is grab-and-go at this point,” he said. “They have kind of repositioned as bare-bones, select-service operations with grab-and-go at a much lower rate because the rates have dropped.”
Once the market improves, the goal is for these hotels to go back to full-service operations, Olsen said.
The brands are allowing hotels to operate in a limited-service capacity, which they would not have done in the past, he added.
“But once the market and revenues improve, we’re going to be gradually ramping back up the F&B operations of the hotel and other services like spa and so forth,” he said.
The brands have waived brand standards significantly in the short term, which has affected how often asset managers have had to communicate with the brands, he said.
“They are not requiring the type of communication they did in the past,” he said. “Sometimes when you try to reach out and communicate, it’s been hard to get someone on the phone because (the brands) have let go of so much of their corporate staff. Most of the communications have come out through the owner, like emails to the owner, email distribution to the brands, so we’ve been getting most of our communications through email and through the hotel owner portals.”
In terms of pricing changes, Olsen said CHMWarnick has been trying to stay away from the online travel agencies because of the commissions.
“Right now, leisure demand is coming from the drive-to markets,” he said. “What we’ve been trying to do is work with the property teams to develop promotions targeting that regional drive-to business and promote through (brand websites) because brand.com has a much lower commission.”
It’s not all bad for luxury hotels
Many luxury properties have taken a demand hit due to the pandemic.
Matt Arrants, EVP at Pinnacle Advisory Group, said Pinnacle asset manages an ultra-luxury property that’s benefited from micro weddings and is expected to have a record season this year.
“The performance has really been amazing and that’s because it’s in a (drive-to) destination; it’s in Rhode Island,” he said. “All of the big weddings have canceled, the 150-to-300-person weddings have all canceled for the year, and they’ve been doing micro weddings.”
People who had planned for a 300-person wedding have now moved to a 20-person ultra-luxury wedding at the property, he said.
Arrants said micro weddings have even led to an increase in pricing at the hotel.
“The demand is so strong that we’re able to increase rates and people will pay for it,” he said. “As part of the luxury experience … safety is critical at the property, and as a result, people are willing to pay for it.”
Strong demand for micro weddings has led more last-minute wedding reservations, he said.
“That’s the case with these micro weddings,” he said. “They’re kind of last-minute, pop-up (bookings) where people are realizing they don’t want to wait.”
He said these bookings have also helped make up for losses in F&B revenue.
The industry is still in the early stages of getting through the pandemic, Arrants said, so everyone is trying to figure out what they are going to do “since group and corporate are dead for now.”
“The strength of extended-stay has caught a lot of attention,” he said.
“People are certainly looking at (extended-stay) as an option,” he said. “The problem is just the physical issue. They are going after that business to the best that they can, but the extended-stay traveler wants more in terms of a kitchenette and that sort of thing.”