Preview 2021: Hotels

After a tumultuous 2020, hotels are expected to remain challenged well into 2021, even with cost-saving Covid-era protocols like streamlined dining options and reduced housekeeping likely to extend into the coming year.

"When looking at the latest earnings calls, the capital expenditures for many of the major hotel brands were down 75%," said Robert Cole, Phocuswright's senior research analyst for lodging and leisure travel. "They're going to be trying to save money radically."

During a virtual panel at this year's NYU International Hospitality Industry Investment Conference in mid-November, Choice Hotels CEO Patrick Pacious told attendees that as the pandemic hits its one-year milestone, temporary Covid-related service changes are increasingly likely to become "more permanent" in 2021.

"The good news is a lot of these changes are really going to hit at some of the core problems that we've had as an industry, which are rising costs," said Pacious.

Pacious cited expenses tied to labor and food and beverage as particularly prohibitive, with pandemic-related practices like daily housekeeping on request and more limited breakfast options helping to ease some of those financial pressures.

Likewise, Cole said he knows of at least one major hotel real estate investment trust considering turning housekeeping during a guest's stay into an add-on upcharge, though he expects such a policy could negatively impact guest satisfaction.

Bjorn Hanson generally agrees. The hospitality consultant and adjunct professor at New York University's Tisch Center for Hospitality, Tourism and Sports Management predicted that an extension of on-demand housekeeping could prove controversial.

"People have understood the rationale behind on-demand housekeeping," Hanson said. "But as we come out of the pandemic, I think many of those reductions may not be acceptable to travelers, though there will be some that are."

Instead, Hanson said he expects amenities like 24-hour room service to be among the first to face a more widespread phaseout in 2021, due to the fact "less than 2% of room service revenue comes between midnight and 5 a.m."

In fact, some hotels have already abandoned room service completely, opting to outsource the amenity to third-party operators like New York-based hotel room service provider Butler Hospitality. Butler Hospitality's model hinges largely on economies of scale, with the company using centralized "ghost kitchens" to serve numerous properties within a densely populated area.

"There are huge opportunities for ghost kitchens within the hospitality space, especially with so many large banquet facilities essentially going unused," said Phocuswright's Cole.

The Hyatt Regency Atlanta has provided free kitchen space to a local business through the Hyatt Loves Local initiative.
The Hyatt Regency Atlanta has provided free kitchen space to a local business through the Hyatt Loves Local initiative.

Also likely to have staying power into 2021 is the growing trend toward digital check-in and checkout. Digital check-in/out adoption existed prepandemic but has soared amid the crisis as guests look to minimize in-person interactions. Cole said he believes many consumers may prefer a more seamless, digitally driven hotel experience, while for hotel brands and companies, that preference could drive hotel brand app downloads and, consequently, customer engagement and loyalty.

Lastly, Hanson predicted that even as the threat of Covid-19 is mitigated in the coming year, hotels will continue to lure travelers by promising flexibility on the booking front.

"I'm certain we'll see them ease cancellation penalties," Hanson said. "We'll see more general flexibility and complimentary upgrades, since those enhancements don't come at a cost when occupancy is lower."

For the hotels, however, a longer-term extension in booking flexibility wouldn't entirely be without repercussions.

"The industry fought hard to get guests to accept [cancellation penalties]," added Hanson. "And the fear is that in giving it up, it's going to be hard to win that back again."

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