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Hotels Are Trying To Find A Way To Survive. Short-Term Rentals Are Having Less Trouble

Hospitality company Sonder spent the last year preparing its first foray into the resort market. The 143-room property opened Oct. 1, outfitted with all the hallmarks of Sonder’s brand: digital check-in, an app-based mobile concierge and keyless entry. 

It is a formula that Sonder has been employing at its units in hotels and apartment buildings around the country and worldwide since the company launched. Having so many of these now highly desirable features baked into its business model has been a lucky boon to the company. 

One of the pools at Sonder Palm Springs

“It’s put us in a really good position,” said Ben Justus, general manager of Sonder Palm Springs, Phoenix and San Diego

It’s not a sentiment shared by many in the hotel industry, which has been hit especially hard by the coronavirus pandemic and is trying to figure out a way through the turmoil. There are signs that consumers might be slowly regaining confidence in returning to hotels, but those that are being designed now or under construction are making adjustments to their designs that reflect the concerns of present consumers.

In August, vacation rental researcher AirDNA and hospitality analytics company STR looked at the impact the pandemic has had on hotels and vacation rentals in a study that covered 27 markets around the globe, 18 of which were in the U.S. 

The study found that overall, short-term rentals were faring better than hotels: They had higher occupancy rates, and drops in average daily rates were less significant. As of June 21, RevPAR, or revenue per available room, of the hotels surveyed was still 64.8% lower than the previous year; the RevPAR for short-term rentals was down just 4.5%, the study found.

“The [AirDNA] results are indeed consistent with what we have observed over the last couple of months,” said Makarand Mody, an assistant professor at Boston University’s School of Hospitality Administration. 

Mody said some of the research he has been engaged in that compares short-term rentals and hotels shows that when choosing an accommodation, hygiene and safety concerns became the top priority for leisure travelers, who are the majority of travelers now. The privacy of short-term rentals was perceived by travelers as increased safety, making them more attractive, Mody said. That research also offers some hope for hotels, though. 

“As hotels have gotten safety and hygiene protocols in place, and are marketing these protocols more aggressively across different segments, consumer confidence in staying at a hotel ... has also increased,” Mody said.

AirDNA and STR’s findings included similar indications.

“While the hotel sector endured the hardest hit to performance, it has experienced noticeable week-over-week growth since its low point,” their report stated.

Architects working in hospitality said their clients have requested a number of changes to elements of their hotels, some as a response to traveler concerns about hygiene and to project cleanliness in rooms. That includes hard flooring surfaces in rooms where carpet would have gone or glass doors for showers instead of a curtain. 

But in the longer term, the big question for hotels remains how to adapt to the trends that were on the rise prior to the pandemic.

“Part of what’s been happening [pre-COVID] is that hotels are successful if they bring people together, especially through food and beverage. Not just guests, but also the general public,” Nadel Architects President Patrick Winters said. 

“The challenge is, how do we bring that back? Because that’s what was creating successful hotels for a certain demographic,” said Ancelmo Perez, Nadel Architects’ studio director of hospitality and multifamily.