When the Hotel Asset Managers Association last met in the spring, the COVID-19 pandemic had just passed the one-year mark in the U.S., and members were generally optimistic. At the time, the nationwide vaccine rollout was in full swing and vaccination rates were going up while COVID-19 cases were decreasing.
That optimism has largely sustained through the competing forces of a full summer season of leisure demand, the spread of the delta variant and lower business travel demand in the autumn.
In a survey of members, HAMA found roughly 50% said they expect overall U.S. revenue per available room will return to 2019 levels in 2023, which is consistent with spring survey results. More than 40% expect that recovery in 2024, down a bit from the spring.
Forty-five percent of members indicated they expect RevPAR in the top 25 U.S. markets to recover to 2019 levels by 2024; 35% said that would occur in 2023.
The results are reversed for markets outside of the top 25, with 45% of members indicating RevPAR recovery by 2023. That number is down from the spring survey, when nearly 60% of members had faith the recovery would happen by 2023.
The expectations for top 25 markets remained consistent from last spring, said Larry Trabulsi, executive vice president at CHMWarnick and current HAMA president. Expectations for markets outside of the top 25 also recognize that certain types of hotels in certain markets will recover faster than others.
“They see that the top 25 markets are not performing as well as the industry overall, which says that there's maybe a little bit more of a recovery outside of the top 25 markets and in suburban areas as well,” he said.
Food and Beverage Offerings
At the start of the pandemic, many of CHMWarnick’s hotels cut out all food and beverage offerings, Trabulsi said. Hotels gradually added back options, such as grab-and-go breakfasts, using a lower-cost staffing model.
“We were joking that a couple of our hotels, if there’s 500 people in the hotel on a Saturday night, we should be able to make a buck or two selling $8 beers and $15 pizzas,” he said.
Hotels have expanded offerings from grab-and-go seven days a week to breakfast and drink services on weekends, he said, noting this is possible due to a better understanding of the break-even point and yield management as demand grows.
“None of our pre-discussions for 2022 budgets have gone to the wholesale three-meals-a-day, restaurant open 18 hours a day, come hell or high water, except in a resort destination,” he said. “For the most part, it’s been very surgical and very strategic.”
Sarah Gulla, senior vice president of asset management at Pebblebrook Hotel Trust, agreed that resorts and lifestyle hotels are probably the exception to the rule.
“There’s been a fair amount of feedback from guests to the effect that they’re still paying a premium at resort hotels or lifestyle hotels,” she said.
One of the ongoing challenges in restoring food and beverage services is how “extraordinarily difficult” it has been from a labor standpoint, Gulla said. Staff members have been leveraged in both front and back of house.
“In some cases, that has been a limiting factor even when we felt there was demand,” she said. “Some hotels you can’t bring it back because you don’t have anyone to serve it.”
Trabulsi said one hotel finished building out a restaurant just before the pandemic started.
“We never opened it,” he said. “Now we’re looking at planning our store opening for beverage service for weekends only. We haven’t been able to open because they don’t have the culinary staff. I can’t find anyone to come in and do that, so that’s tying up our reopening plan for that space.”
Keeping Brands, Operators
HAMA members indicated they are more likely now to stay with their current brand partners and operators. Fall survey results show nearly 80% plan no changes in branding or management, up from the nearly 70% with the same answer in the spring. Roughly 5% said in the fall survey they were planning on changing both, down from more than 15% in the spring.
The percentage in favor of changing brands or operators stayed relatively the same from the spring survey at or below 10%, but there was a slight increase of those looking to change brands.
That fewer HAMA members were considering a brand or management change is an acknowledgment of where the market is now and deciding to wait for the recovery, Trabulsi said. However, 15% equates to nearly one in six respondents.
Based on her conversations with other hoteliers, Gulla said those interested in making changes were making opportunistic decisions.