Changes in guest demands and favored trends do not stop, so neither can investment in new hotels, services, design and interaction, said a panel of operators.
GLOBAL REPORT—Operators and consultants know that while the COVID-19 pain is shared, it falls hardest on the shoulders of owners, according to sources.
Speaking at the 13 August online Designscape conference at a panel titled “Hospitality investment: Unexpected opportunities,” Hugh Taylor, CEO, Michels & Taylor, which has an advisory division and a 23-asset management firm, said that “owners do very well when things go well, but in a downturn it is the opposite, and they feel it very hard.”
Taylor said this is the fourth recession he has seen in his career (the United Kingdom officially entered a recession on 12 August).
“It is by far the worst, and I cannot see what is going to happen next week,” Taylor said. “We look at reinvestment, at costs, to formulate a three- to five-year plan, but here I cannot do that. (Owners) do not know where the business is going to come from, and what they will be able to offer.
“We lost 90% of our income overnight, and we are a small company compared with the big boys. What will happen in (the third and fourth quarters, 2020), and into next year? How sustainable is it all?”
Those who have less exposure to the profit-and-loss accounts said everyone has to “embrace the unknown, to get to the next chapter and hold on for the ride,” in the words of Kfir Levy, co-founder, Habitas, which started by opening pop-up hotels in Mexico to cater to events but has now decided to leave one of those standing.
Habitas also has a hotel in Namibia, and a pipeline of three hotels—two more in Mexico and one in Bhutan—all of which it designs, manufactures, owns and operates.
Sydell Group owns, develops and operates hotels across the U.S. and The Ned in London. Matthew Livian, Sydell Group’s managing partner and chief investment officer, said the one big change in this recession is the certainty that recovery has to be collectively reached.
“At the end of the day, it is the owners bearing the brunt of the financial pain, but this crisis has seen collaboration, where past recessions might not have,” he said.
Taylor said recovery is being helped by the “banks staying in line.”
“There is a great deal of support, without exception, throughout the lending community, and brands are doing their bit, too,” he said. “There is no brand police, and they are waiving fees where they can.”
Panelists said the COVID-19 crisis will accelerate industry trends that were already there, rather than it sparking a wholesale revolution.
Habitas’ Levy said he is excited by what he called the “purpose-driven travel experience.”
“There is a shift happening, and when we come out, it will be for the better,” Levy said. “Trends will be accelerated, and these are the things people will think about when they are ready to travel again.”
Michels and Taylor’s Taylor said the short term depends on how the virus is handled and whether a vaccine is ready early next year.
“If so, we will see a normalization over the short term, and then we can analyze (as we did) before,” Taylor said. “People are looking at the model, and advisory business is doing well. There maybe is more creativity now than at any time.”
Taylor said there isn’t much demand for new change, as guests already saw the changes made in the industry as “substantial and tangible.”
“The franchise model means more innovation is possible” he said. “It will be a continuation of the extension of where we were before, not a revolution.”
Livian said Sydell Group, whose portfolio contains brands The Line, The Ned, Park MGM, Saguaro and NoMad, is using the crisis to step back and think about what was and what was not working.
“We do not see it as a wholesale re-envisaging, but consumer behavior might change,” Livian said. “We are asking what are the things we were doing that now do not make sense, and this is forcing us to be nimble and adapt and see what customers are willing to pay for, or not. Of course, different markets will behave very differently.”
He added Sydell Group’s Saguaro Palm Springs hotel saw more revenue this July than it did in 2019.
Taylor said there remains pain, though, with his expectation being that the peaks of 2019 will not be seen again until 2023 or 2024.
“Profitability will take even longer, but where businesses were strong, they will remain so, as demand will return,” he added.
Panelists said investment would continue, both in pipeline hotels and in technology and other cost centers.
The crisis “is forcing us to rethink and redefine, prioritize the conversation we come away with, and this makes us think how we stage our hotels, to create the same impact with smaller groups and small gatherings outdoors,” Levy said. “It is an opportunity to rethink programming while keeping our DNA.”
Habitas is extending its capabilities in 3D technology, Levy added.
Taylor said brands have a role to play in moving the industry forward.
“Brands have made huge progress in technology, and ultimately it is distribution and yield management that they pay for,” Taylor said. “The entire industry needs the data that comes from hoteliers more than ever.”
Levy said independents and small groups have the advantage of being able to change even more flexibly and with urgency in this crisis than the big brands.
Sydell Group is getting ready to open its first NoMad outside of the U.S. in London, in the former Bow Street Magistrates’ Court and Police Station. It was due to open this summer, but now will open in December, Livian said.
“We’re incredibly blessed with a supportive partner, and we feel with 91 rooms and an intimate F&B experience, we should do well in the current environment,” he added.