With the coronavirus pandemic freezing international, business and convention travel, many hotels are turning to a group of consumers they’ve never before relied upon for revenue: local residents.
That has led many hotels to come up with new ways to appeal to consumers who live nearby, from marketing wellness staycation packages and hosting online seminars to establishing coworking operations for freelancers and small businesses.
The motive for such moves is clear: Hoteliers are looking to create alternative revenue streams to survive long enough for convention and business travel to return to pre-pandemic levels.
“We know that corporate travel is way down or pretty much nonexistent,” Dream Hotel Group Chief Development Officer David Kuperberg said. “So at the end of the day, we’re going to need the leisure travel, the people stuck in their house.”
The hospitality industry is in a fight for survival. Hotels are still less than 50% occupied across the country on average, and 31.5% below 2019 levels at 48.7%, according to STR data for the last week of September. Only in Norfolk, Virginia, San Diego, Los Angeles and Detroit did average hotel occupancy exceed 50% last week.
Average daily rates were down 29.6%, and revenues per available room, the industry’s chief performance metric, has fallen 51.7% year-over-year, according to STR. Travel spending has fallen apace: Consumers spent $12.1B on U.S. travel the week of Sept. 19, a $10B drop from the same period in 2019, according to the U.S. Travel Association.
“A lot of the sales and marketing teams are just looking forward to 2021,” said Erin MacNeil, a spa and wellness center consultant for the hotel industry. MacNeil, the founder of The Spa Business Coach in Toronto, said many hotels have focused their efforts early on in the pandemic attempting to rebook events postponed or canceled by COVID-19. But a 2021 recovery is likely an optimistic prediction. With revenues falling by 60% this year, McKinsey & Co. recently concluded that the hospitality industry could face “a sustained, systemic shock,” with a return to 2019 operating levels not coming until 2023 or beyond.
American Hotel and Lodging Association President and CEO Chip Rogers told an industry group in July that as many as 8,000 hotels could shutter by the fall. Confidence for people to travel is going to take more than a turn of the calendar to 2021, Kuperberg said.
“I think it’s going to take people wanting to jump on planes, and I don’t think we’re there yet,” he said.
McKinsey predicts local and regional hotel consumers will lead the recovery for the hospitality sector, especially given the uncertainty about when companies will begin allowing longer-distance travel or when consumers will have confidence with the security of their jobs and income for more elaborate trips.