Industry Update
External Article19 August 2020

COVID-19 Hasn’t Stopped Nearly 1,000 New Hotels From Opening

Though occupancy is down, insiders say it’s more costly for new hospitality projects to stay closed

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architecturaldigest.com

Between border closures, conference cancellations, and widespread apprehension about getting on a plane, 2020 has been an incredibly down year for business or pleasure travel. Subsequently, conventional wisdom would suggest that it's pretty much the worst possible time for a new hotel to open its doors.

And yet, nearly 1,000 new hotels from Hilton, Marriott, and a host of high-end and boutique hoteliers will have opened their doors during the COVID-19 pandemic. According to a new article in Bloomberg, those in the business suggest that opening now is better than not opening at all—and might even help new hotels get their kinks sorted out before tourism comes back in earnest.

A major factor driving these hotel openings is the idea of sunk costs. By the time a hotel is on the verge of opening, millions of dollars can't be recovered and multiple years of planning and construction can't be undone. Between taxes, insurance, certain high-level salaries, and basic energy costs, the idea of letting a finished or nearly finished hotel sit empty also incurs its own set of costs with no chance for the hotel to generate revenue.

"A typical hotel project might take anywhere from two to five years to develop and open," Sean Hennessey, a professor at NYU's Jonathan M. Tisch Center of Hospitality, told Bloomberg. "Even if it's unsuccessful at launch, a completed project is a heck of a lot more valuable than an 80% completed one."

Read the full article at architecturaldigest.com

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