Hotel News: Timing of comeback an ‘enigma’ to industry leaders

REPORT FROM THE U.S.—As the industry starts to reopen hotels around the globe, it’s important for hoteliers and their teams to do everything they can to make guests feel safe so they will travel again, sources said.

On the “ALIS 6×8: Recovery top of mind episode 2” webinar, hosted by The BHN Group, panelists said drive-to leisure business will lead the recovery, but a full recovery will be in place once people are booking more flights and international travel returns.

Keith Barr, CEO of InterContinental Hotels Group, said the signal that the full recovery has started will be when there are no longer restrictions on getting on a plane and traveling from state to state and country to country. Group business also needs to come back for the recovery to start, but when that will happen is unclear.

“It’s an enigma to me,” he said. “We look at what’s on the books as an industry and I hear there’s a bunch of things on the books, and then I am trying to figure out, well how do you do that in a socially distanced way?”

IHG properties have changed seating capacity down to one third, so small meetings likely will come back faster than big conferences due to new restrictions, he said.

Greg Friedman, managing principal and CEO of Peachtree Hotel Group, said he’s optimistic about the long-term recovery of the industry, but there are challenges in the short term.

“The biggest challenge we face just looking across our industry from a standpoint of the investment side or the ownership side of the business is really the solvency of most groups coming out of this kind of event, because it’s been so deep and so quick,” he said.

As the federal Paycheck Protection Program and debt deferments owners have received burn off over the next couple of months, the industry is going to see more issues in that the industry is recovering to some degree, but the recovery isn’t moving quickly enough and it will be in an economic recession, he said.

Industry data
From a data perspective, STR is looking for “any green shoots that could point to signs of recovery for this industry,” STR President Amanda Hite said. STR is HNN’s parent company.

The data company is also looking into the different analyses it can do to help its hotel partners “reopen and re-establish their businesses,” she said.

When asked what the biggest surprise seen in the data during the pandemic has been, Hite said there have been several.

“Just how bad it got so quickly, the worst ever in a matter of a month that (performance) dropped, and I think just because we’ve never experienced that much of a drop before,” she said. “What’s interesting is this is the worst we’ve ever been, the worst we’ve ever experienced, and in the U.S., we’re still selling a million roomnights a day at our absolute worst. That’s the bottom floor for us as an industry in the U.S.”

Recovery in China could also mean recovery in the U.S. is getting closer.

Tier-one cities started to come back mid-May in China, Hite said. There’s some business travel going on there, and while that’s what U.S hotels need, the industry hasn’t seen it yet, she said. The signs in China are encouraging, though, she said.

“Hopefully we’re able to model that in the U.S.,” she said.

Hite added that the U.S. has been running six weeks behind China in terms of recovery and performance metrics. Weekday occupancy from corporate travelers will hopefully be the next step in the U.S., she said.

Ashford and PPP program
The industry is in a crisis and needs help to get through it, said Monty Bennett, chairman and CEO of Ashford.

Bennett’s company received funding through the Paycheck Protection Program and later returned those funds over political, public and media backlash, moderator Jeff Higley said. When asked what he’s learned from that experience, Bennett said, “It’s a shame.”

“The PPP program was designed to help those small businesses and larger businesses within NAICS code 72, and those are hotels and restaurants … but when the media reported, they said the PPP program is just for small businesses and wouldn’t bother mentioning the other part, and so a lot of people out there in the country would listen to that and not realize there’s more to the story and get very upset…” he said. “With the few people I did communicate with, we got a lot of inbound hate mail. I would explain it to them, and they were perfectly fine and they understood that 75% of the money was going to the employees anyway, and that this was for them. It hardly helped us, it helped us somewhat, which we appreciated, but it was able to get people back to work.”

He said Ashford gave the money back because the government changed the rules under pressure and said the company would need to certify there was no other way for them to raise money. The process became politicized and would have made the company a target, he said.

Consolidation, transactions
When asked about consolidation in the real estate investment trust and management spaces, Bennett said he doesn’t think “anyone wants to take advantage of the situation in this environment with the attitude we’re all working together, but at the same time, some people need capital infusions in order to survive and that may involve some type of a merger or consolidation.”

He added that consolidation might happen once people have more visibility into what might happen.

In the current environment, buyers don’t want to deal and sellers don’t want to give a deal.

Gilda Perez-Alvarado, CEO of the Americas at JLL, said people are trying to determine if the cash burn happening now and summer pent-up demand is a false positive.

“The reality is that market participants right now do not seem unanimous in underwriting,” she said. “There’s a very big bid-ask spread. At the end of the day, my philosophy is you always revert back to basics. We’re looking at price per keys, we’re looking at price per square foot as well. We’re seeing a tremendous amount of new entrants, these are alternative users.”

JLL is currently seeing that the highest bidder for hotels is someone who is going to turn it into alternative use, she said.

Industry events
Throughout the crisis, AAHOA has been helping its members and educating government officials on the hotel industry, said President and CEO Cecil Staton.

The company pushed back its annual convention from April to early August, and Staton said the organization still plans to have the event in Orlando in August.

“Obviously this has been very fluid; it’s changing on a daily basis, but we’ve been working very closely with Orlando health, with the convention center, with our hotel partners to make sure we can have an event like AAHOACON and do it in a very safe and productive manner,” he said.