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How Hotels Plan for Recovery Beyond COVID-19

How Hotels Plan for Recovery Beyond COVID-19
Joe Cortez

It’s no secret that the travel industry is one of the deepest-hurt industries by the novel Coronavirus outbreak. The virus leading to the COVID-19 disease has killed thousands all around the world, creating an immeasurable human toll that we may never recover.

Seemingly overnight, airlines grounded planes due to regulations and lower demand. Likewise, hotels were forced to furlough or outright layoff thousands of employees due to a lack of guests.

As we look beyond this situation and towards the “new normal” post-Coronavirus, how will hotels survive? Will pricing trend lower to attract guests once more? And will hotels offer generous specials to reward loyal guests?

Like everything in the travel world: Your actual points value may vary now and well beyond the catastrophe that is and was COVID-19.

The state of the hotel industry today

COVID-19 has not been kind to the hospitality industry as a whole. But the numbers being reported are absolutely dismal for everyone to read.

According to hospitality consultants STR, occupancy rate among reporting hotels over the week of Apr. 25, 2020 compared to last year fluctuates from -62.2 percent, to a low 26 percent. The average daily rate for hotel rooms has dropped nearly 50 percent to $73.61. The amount of money hotels are making on rooms is even less: $19.13 in revenue per available room.

Both areas hit hardest by the Coronavirus and tourist destinations are the most affected by these numbers. On Oahu Island in Hawaii, occupancy compared to this time last year dropped by 87.5 percent. In the Miami/Hialeah, Florida market, average daily rates of rooms dropped to near all-time lows, of $85.94 per night. And in both New York and Seattle – two cities direly affected by the Coronavirus outbreak – hotel occupancy rate was down to 41 percent and 22 percent, respectively.

But the good news is that we could be reaching the bottom. Analysts suggest that because occupancy rates are slowly increasing once more and states are making a slow shift to re-open businesses, we could be on the road to recovery once more.

“Demand has grown slightly across the country during the last two weeks, which could provide some hope that the levels seen in early April were indeed the bottom,” says Jan Freitag, senior VP of lodging insights at STR. “The 1.4 million additional room nights sold the last two weeks only represent around 100,000 new rooms occupied per night, but gains even that small are certainly better than further declines.

Unfortunately, when those hotels actually re-open, some of the amenities that we take for granted could be coming to an end. A recent hotel webinar suggested the amenities that come with luxury hotels, including mini-bars, high-end restaurants, and turndown services, may be coming to an end.

How will hotel pricing recover?

Unfortunately, this isn’t necessarily good news for hotel guests looking to earn status in 2021 or beyond. A recent report by Skift about the state of hotel pricing suggests hotels need to keep their rates around their normal pricing levels unless they run the risk of losing revenue over time.

“One reason is that the pricing structure of many hotels is based on a ‘best available retail rate,’ meaning that all the other rates, such as for business, group, and so on, are tied to it,” Neville Isaac, chief customer officer of Beonprice told Skift. “When demand comes back, the more lucrative customers like business travelers and event or wedding planners will be reticent to accept price hikes.”

From a historical standpoint, hotel pricing trends vary between the lodging categories. In a recent study published by HVS, data from the 2008-2009 global recession whose hotel prices started curving downward in late 2007, before sharply declining in February 2009. The downward drop continued through the year, before starting to recover by the second quarter of 2010.

How quickly those hotels recovered were based on the services offered. Limited service lodging didn’t consistently improve to pre-recession rates until mid-year 2012, while traditional hotels consistently returned to business as usual by 2014. Luxury hotels were some of the quickest to recover, with pricing consistently rebounding by the second quarter of 2013.

If the past is any indicator of recovery – complicated by social distancing standards to prevent the spread of disease – pricing will continue to remain low for the immediate future, before recovering over the next two to four years.

Hotels quickly entice guests to return with promotions and future credits

Knowing that the rebound is coming, hotels are doing everything they can to ensure guests want to come back to their properties. Many hotels are touting new disinfecting policies while driving emphasis on technology to keep surfaces clean. For example: Business Traveller notes Hilton is rolling out their CleanStay program in partnership with the manufacturers of Lysol, which includes room seals to ensure the room has not been tampered with between cleanings and rolling out mobile phone keys to more properties.

Other hotels are offering “bonds,” offering guests a certain amount of credit if they pre-purchase a stay certificate today. According to USA Today, the deals change between hotels, but the current asking price is around $200 today for $300 in future stay credits. Meanwhile, Porter and Sail is launching Hotel Credits to entice guests to buy certificates towards future stays. Much like hotel startups before it, the site offers a selection of hotels where guests can purchase “credits” towards a future stay. Guests get more exposure to hotels, while the hotels get to keep most of the money purchased off each credit.

Hotel loyalty programs are also getting into the mix. Wyndham Rewards is now offering a 40 percent bonus on points purchases, up to 45,000 points maximum per guest (an increase of 35,000 from the previous maximum). Wyndham Rewards members can also earn points through ordering DoorDash delivery – but those orders must start from the Wyndham Rewards website.

Other hotel loyalty programs are ensuring that guests can use points once this is all over. Nearly every program has extended their loyalty benefits through 2021, with longer expiration dates on points.

When hotels come back online, they will be ready for guests. With a knowledge of what’s available, there are deals that help favorite destinations stay afloat, while offering value towards the day we can all travel once more.

View Comments (1)

1 Comment

  1. Danwriter

    May 5, 2020 at 7:29 am

    Don’t worry, they’ll make it up in resort and destination fees.

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