Hotels Brace For Remote Work's Impact
Office owners are far from the only ones wondering about the short- and long-term effects of remote work.
With millions of Americans still compelled to work outside their offices, the hospitality sector is adjusting its current offerings and anticipating longer stays from future business travelers.
Hotel properties are being decimated by the coronavirus pandemic, with hotel executives looking for ways to navigate through a multiyear recovery period and find success in a changed travel economy. In Q2, U.S. hotel occupancy fell to 28.3%, its lowest level since the Great Depression, according to CBRE. Experts expect a recovery to start this year but don’t see a full rebound happening until 2023.
“I do think there will be a return to some semblance of normal, but I do think there will be things that will change,” Choice Hotels Senior Vice President of Upscale Brands Janis Cannon said in a Bisnow webinar on the California hospitality industry Tuesday.
Cannon and others on the web event said that changes to the nature of business travel, which has been especially slowed by the pandemic, will require adjustments.
“As people are coming into corporate offices or coming in together, or coming in for monthly or quarterly check-ins with teams and that type of thing, it won’t necessarily be the one- or two-night stay,” Cannon said. “It’ll be more three- and four-night stays that people will be requiring from hotels.”
While Cannon said the effects of longer average stays on hotel demand is yet to be determined, citizenM hotels Managing Director Ernest Lee, who leads development and investments in North America for the European hotel company, said the company is shifting its entire strategy accordingly.
“The way that we are meeting this demand is, we’re shifting our entire commercial strategy from one that has been a historically daily and transactional business model to one that is more longer-term and subscription-based,” Lee said.
“We strongly believe that COVID has fast-tracked one particular theme that was pre-COVID, and that was the blending of asset classes,” he said. “And we think this has been fast-tracked largely because of the secular impact remote work will have on lifestyle, and consequently, real estate.”
Other large hospitality companies are pivoting as well.
On another panel, McKinsey & Co. partner Melissa Dalrymple mentioned hospitality giant Hyatt Hotels Corp.’s speedy adoption of a remote work package. “Work from Hyatt” gives hotel guests their own private workspace, daily food and beverage credits, and waived resort fees, among other offerings attempting to cater to the remote work experience.
Before the pandemic, extended-stay hotels were looked at as a source of potential growth for the hospitality sector. Last January, Choice Hotels launched another extended-stay brand, with CEO Patrick Pacious noting an undersupply in the niche.
Now, extended-stay may be heading to an even greater percentage of the hospitality sector.
“I think we are going to see longer length of stays in hotels,” Cannon said. “So as business travel returns, with what we’ve seen happen with work from home, that will be a format and a platform that will extend into the future.”