This article is part of our special report on Business Transformation, which looks at how the pandemic has changed the world’s business.
As travel increases amid signs of the pandemic easing, the hotel industry is hoping their fortunes will grow too. But, as of now, it’s not clear when that moment will come – or if some of the changes they had to make will become permanent.
Hotels, for example, have faced labor shortages, forcing some to close completely and others to reduce services such as daily cleaning of guest rooms and restaurant hours.
With uncertainty as to whether these workers will ever return, one industry expert predicts that robots will take over some of the tasks that were once done by workers who have found better-paying jobs elsewhere.
Hotels are also experimenting with ways to increase revenue – for example, by charging additional fees for some services, scaling back reward programs, and adding amenities to attract longer-term guests who can “work from anywhere.”
The impact of the pandemic on the industry has been uneven at best, including U.S. cities like New York most affected. A glimmer of hope: The Biden administration announced that it would open US borders to vaccinated travelers from certain countries, including Canada and Mexico, in November.
In China, travel has been severely impacted by Covid-related lockdowns, and Africa’s low vaccination rates have put pressure on international travel there, said Jan Freitag, national director for hospitality market analytics at CoStar Group.
Michael Bellisario, lodging analyst at Robert W. Baird & Co., said the week ending October 2 that 20 percent of hotel rooms in the statistical New York metropolitan area – which includes New York City and the surrounding communities – will remain closed, though there are some signs of improvement.
The Grand Hyatt New York in Manhattan, which was closed in spring 2020, is due to reopen on November 1 under the new name Hyatt Grand Central New York, while the New York Hilton Midtown, which has been closed since March 2020, is to reopen on October 4; both are convention favorites. The Four Seasons Hotel New York on East 57th Street has been closed since summer 2020 and is not expected to reopen until next spring.
One obvious change that is likely to continue, especially in three- and four-star hotels, is the decline in customer service.
When you call back to work, employee – Housekeepers, bouncers, porters and workers in kitchens, restaurants, parking garages, gyms and spas – often chose not to return to jobs that often paid a minimum wage.
Many have found jobs with better pay, better hours, and benefits at companies like Amazon, Walmart, and Home Depot. The labor shortage at U.S. resorts also exacerbated the inability to hire seasonal workers from outside the United States, a group they are heavily dependent on during normal times, said Friday. Similarly, the UK hotel labor pool is being affected by Brexit restrictions on migrant workers, Friday said.
Updated
Oct. 18, 2021, 3:56 p.m. ET
This labor shortage has had an impact on the guest experience, from longer check-in lines to reductions in daily housekeeping.
Hilton, for example, announced in a press release in July that free housekeeping would only be available on request at its three- and four-star hotels, although housekeeping at its luxury brands – Waldorf Astoria, Conrad, and LXR – and its Asian- Pacific homes would not be affected.
It is unclear whether the changes in cleaning frequency are permanent. Separately, Henry Harteveldt, president of Atmosphere Research Group, a travel marketing research firm, expects hotels to increasingly rely on robots to disinfect guest rooms or prepare coffee or salads in kitchens to help hotels make up for lost manpower and costs to lower .
One way hotels can address their labor shortages is to offer potential workers higher wages. However, Patrick Scholes, housing analyst at Truist Securities, said it would also require an increase in the wages of existing employees in comparable positions. To do both and maintain profit margins, hotel owners would have to raise room rates – a move that would reduce demand, especially for urban hotels, in the current climate.
Raising prices would likely further stifle demand among travelers alienated by declining services – what Mr Bellisario called a “catch 22” problem to which there is “no answer”.
Another dire front: business travel. With so much business now conducted over video calling, such travel has decreased dramatically, especially in urban hotels. Bill Gates predicted last year that half of all business trips will not return. Mr Freitag said executives are likely to “test” travel expenses and cut them if possible.
One segment of the hospitality industry that has generally flourished during the pandemic is resorts. Mr Freitag said an example of the segment’s health was the record-breaking April sale of the Ventana Big Sur Resort in California for $ 148 million – $ 2.5 million per key or guest room – by Geolo Capital, a privately owned Equity firm, in a subsidiary of Hyatt Hotels. And Mr. Gates acquired a controlling stake in Four Seasons Hotels and Resorts from Prince Alwaleed bin Talal of Saudi Arabia in September. The price: $ 2.21 billion.
Many resorts offer “work from anywhere” packages to well-heeled travelers in particular. These can offer a better rate for longer stays, as well as amenities like a ring light and microphone in guest rooms to enhance video calling. The Mandarin Oriental, Washington DC’s “MOBase” membership program offers guest rooms that are converted into private residential offices.
In order to return to profitability, hotel owners are expected to cut costs other than labor.
Mr Harteveldt said they can do this by optimizing their brands’ loyalty programs participation. Branded hotel owners pay their brands – such as Marriott, Hilton, Hyatt, and IHG – every time a loyalty program member stays at their hotel and earns points.
Mr Harteveldt said he expected the owners to try to make it more difficult for members of the loyalty program to redeem program points for free award stays by limiting the number of rooms available for those stays and by asking brands to upgrade their properties to higher award tiers need more points for free stays. Limiting rooms for free stays means hotels have more inventory available for revenue-generating paid stays. He further predicted that hotel brands will allow such changes because they don’t want to lose their owners to competing brands.
Tyler Morse, chairman and chief executive of MCR, the fourth largest hotel owner and operator in the United States, said another way to increase profitability is to bill guests for services like pool use, early check-in and late check-out. Similar to how airlines charge passengers when buying cheap fares to check in their baggage or to book a specific seat on their flight. (Some hotels, both branded and independent, have been charging early check-in and late check-out fees for years.)
Several years ago, Mr. Morse began collecting early check-in and late check-out fees at the TWA Hotel at John F. Kennedy International Airport and the High Line Hotel, both in New York, as well as pool use fees the TWA hotel.
However, Mr Harteveldt said such charges are a “prime example of how a hotel can kill any degree of guest preference”. Since travelers have far more choices in hotels than they do in airlines, they have far less loyalty. You could pay extra fees, he said, but “don’t come back”.
