Reprinted from Hotel News Now
The lack of corporate and business transient demand this fall has prompted hoteliers to stretch the summer leisure season out a few more months by offering creative promotions and packages as well as building relationships between universities and health care providers.
REPORT FROM THE U.S.—Hoteliers in the U.S. would typically see business travel pick up in the fall, but now they are left strategizing ways to stretch the summer leisure season to offset the loss of corporate demand because of the COVID-19 pandemic.
Michael Bellisario, senior hotel research analyst and director at Baird, said from September on, the industry would expect conferences and other business-related travel to resume. Because that’s still questionable, demand will come from travelers who have maximum flexibility to work from anywhere.
“So many more companies have made the commitment, especially some big companies, to say, ‘You can work from anywhere for the rest of the year or through next summer,’” he said. “I think you’ll see the lines blurred between weekend/weekday… there’s no precedence, that’s the toughest part. We can’t look back at history and say, ‘This is what happened last time.’”
“I think at the end of the day, it doesn’t matter how strong the leisure traveler is … the bread and butter of the hotel industry, and especially for the hotel (real estate investment trusts), (is) business transient and it’s group and convention business.”
Bellisario said the leisure traveler alone cannot get the industry back to breakeven or even profitability for some companies, but noted it is great that the “pie is a little bit more toward leisure today in terms of the component, but it’s not enough.”
However, any bit of creativity helps, such as hotels promoting packages to working professionals or teachers, he said. The way hotel operators are thinking right now, especially in markets that don’t see a lot of drive-to leisure, is anyway they can fill the rooms to make the losses less or at least try to break even.
Hotels in Boston, for example, are signing contracts with universities because of social-distancing requirements in dorms.
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“Any way you can bring in dollars on the top line is a win in this environment,” he added.
Bellisario noted when comparing year-over-year data to sequential, the sequential data ignores seasonality.
“Everything that I see on TV, the TSA check-ins, the open-table restaurant reservations, everything is pegged to January and people are looking at sequential improvement. You’ve got to remember hotels …
are probably the most seasonal of anything, and the sequential data might look worse but the year-over-year data … might not be as bad as some people fear,” he said.
Hoteliers should focus more on the year-over-year change and less on the sequential change, because July and August are the highest demand months of the year and there should be a natural step down in a normal period anyways, he said.
“We know who’s traveling, can we start to push some rate … Do we start to see some rate integrity and if not, that’s a cause for some concern, but focus on the year-over-year change a little bit more… Things should start to taper off into the end of the year like it always does,” he added.
Hoteliers’ strategies
Omari Head, senior associate at Paramount Lodging Advisors, said hoteliers are in survival mode, hoping to carry leisure travel through the fall, but the challenge is finding where it will come from. The biggest asset for any property class right now is its outdoor spaces, even the parking lot at suburban properties.
He’s seen many properties try to do the outdoor drive-in movie theater, and he’s seen some be successful with creating smaller outdoor concerts and food truck festivals, which may mean partnering with a third party, a mutually beneficial arrangement for the hotel and festival vendors.
It will be crucial to partner with event curators and the local community, because they know how to get creative.
“Emphasize that you are there to be of service, you’re welcoming guests and (doing so in) the safest fashion possible” he said. “Right now, community relations cannot be skipped, and the people who have had to break relationships, they’re reaping it now.”
Head has also seen instances where some hotels are offering to be a virtual classroom, especially for college students forced to leave dorms but cannot go home. Hotels should also prepare for a possible upswing in cases during the winter, he said. By the fourth quarter, he anticipates hotels will be housing more virus patients.
“I think hotels have the opportunity right now to build those relationships with health care providers and their local municipalities and say we’re available,” he said.
And some large hotels left with vacant meeting spaces, since most conferences are now virtual, still have some opportunity to be creative.
“With virtual conferences … there is still a desire to have stuff done, not necessarily in person, but maybe in a different format. I think there’s an opportunity to potentially beef up your internet … if they have all the speakers local, where you can still do a socially-distant panel and still have it broadcasted,” he said.
Emily Wilson, VP of asset management at CHMWarnick, said it’s no secret that drive-to leisure demand has helped keep hotels afloat right now, and hotels need to continue focusing on that this fall.
“It’s worked well in the summer, anything they can do to extend that beyond Labor Day will be beneficial,” she said.
In general, folks who are working from home have some more flexibility to do their daily routines from any location. Those travelers will be traveling for leisure reasons but doing other activities such as schoolwork or business while at the hotel, she said.
Wilson said asset managers are in unique position as they work across multiple brands and get to see all types of creative approaches, then test them until they find what works best.
Some of these approaches include hotels turning a vacant guestroom or boardroom into a video conferencing studio with a green screen and good lighting where people can rent it by the hour or day. Something like that is an inexpensive, one-time cost, she said.
In warmer markets, The Shores Resort & Spa in Daytona Beach, Florida, launched a Teach by the Beach promotion, targeting both teachers who can work remotely and families that are attending those virtual lessons.
“They can do their school online in the morning in the room and then (do) educational activities in the destinations surrounding the resort,” she said.
Grassroots marketing will also be key. Wilson has seen a few hotels have success with marketing to groups of moms by offering special promotions to them, resulting in short-term bookings. She said the booking window is typically zero to three days out, as people are hesitant to make long-term plans.
Some are still willing to book small events like micro-weddings and baby showers, she added.
