Industry Update
Opinion Article 4 May 2021

In a world of mobile lifestyles and remote working, what role will hotels play?

By Kimberly Yoong, Analyst, Capital Markets at Cushman & Wakefield Hospitality - Central & Eastern, South-Eastern Europe and Borivoj Vokrinek, Partner – Strategic Advisory & Head of Hospitality Research EMEA at Cushman & Wakefield

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Kimberly  YoongKimberly Yoong
Borivoj   VokrinekBorivoj Vokrinek

At a time when many of the world's events continue to be plagued by COVID-19, making plans even a week in advance may seem difficult, much less 10 years into the future. Nearly overnight, the dialogue shifted from "where to for lunch?" to "can you hear me?". And as hotels emptied out and travel restrictions drag on, many may wonder, where lies the future of hotels?

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To answer this question, it is first important to recognize that the hotel sector does not exist as an individual silo, but one which forms part of a much wider network: the ecosystem of how we live and work. The cities in which we live today are a reflection of how humans have shaped our environments to fit our social and economic needs. For generations, urban agglomeration had been the standard of cities, and central business districts (CBDs) thrived as we commuted between living in one area and working in another. Accordingly, hotels have typically focused on serving transient international or regional visitors, primarily playing one of two roles: a place to sleep and meet during our business travels, or a place of respite for our leisure getaways.

Today, rising interest in (semi-) permanent remote working and a greater desire to live outside of high-density urban areas may signal yet another impending change in the way we live and work. Could deurbanization or decentralization continue on this trajectory – and what would that mean for hotels? In a Cushman & Wakefield webinar, Richard Pickering, Chief Strategy Officer, EMEA and Borivoj Vokrinek, Strategic Advisory and Head of Hospitality Research EMEA from Cushman & Wakefield, traced the paths of how our societies and hotels have evolved, from their very beginnings to where they could be in the future.

Blast from the past: The evolution of travel, from immobile to transient lifestyles

Since the early days of civilization, the structure of our society has dictated where we lay our heads every night. When humans lived in self-sufficient tribes and settlements, there was no need to travel or sleep anywhere other than in our own beds; while as society progressed, business travel dominated as merchants travelled for trade. And then, with higher disposable incomes, more free time, rising globalization and the internationalisation of trade, there came the birth of mass leisure and business travel. Clearly, humans have become increasingly mobile – and the advancement of technology will only continue to push us towards this trend.

Similarly, the role of accommodation providers has also evolved immensely with our changing social and technological landscape. From being a place for shelter and food to becoming a place to meet and then emerging as a provider of experiences, hotels have always evolved alongside our society and the cities in which we live. In today's context, our 'social awakening' has brought rising calls for better work-life balance and a heightened desire to travel and 'unwind'. To perpetuate this image, hotels have taken on an additional role: a promoter of one's social status, driven by the growing prevalence of social media. Yet, this evolution will not end there – with our growing mobility, the role of hotels will only continue to expand to meet our transient needs. "There's no virtual pivot for hotels," Pickering emphasized. As our society and cities continue to evolve, so will hotels.

'The variable impact (of COVID-19) on different sectors' – C&W Webinar Part 1 of 2: Evolution of our cities and what it means for real estate, presented by Richard Pickering. Note: The relative positionings are for illustration purposes only.

Swimming against the current – the rise of remote working

Our cities of today, however, have been far from perfect, in fact, some may even argue that urbanisation in the developed world has become a myth. "In city centres, centralized demand, when combined with scarce supplies, pushes up rents for businesses as well as housing costs. [Meanwhile,] increasing city sizes means increasing commute times, which reduces free time and worsens pollution – all while our creaking infrastructure amplifies the penalties of distance," Pickering suggested.

It is unsurprising, therefore, to see an increasing number of digital nomads who choose to forego homeownership entirely to traverse the world in search of the much-revered triple-threat 'office spaces': stable Wi-Fi, multiple charging points and good coffee. In fact, as Global Workplace Analytics estimates that 25-30% of the workforce will telecommute multiple days a week by the end of 2021, some argue that 'working from home' may eventually become 'work from anywhere'. And with a number of hotels already offering 'work from hotel' packages or even subscription services, it is evident that hotels are well-placed to capitalize on this trend.

Forward to the future: Super-commuters in a decentralized world. As the idea of remote working with occasional commutes to the workplace gains wider acceptance from both employers and employees, it seems that we are at the tipping point of a new emerging trend: super-commuting. Super-commuters live in one city or country while their office is in another, commuting between the two from time to time – and this will have implications for hotels. "In the future, if more of the workforce is living in remote areas, it is actually likely that they will use hotel accommodation more frequently [for the days that they do travel to the office]," Vokrinek explained.

Importantly, increased remote working does not mean a lesser need for meetings and social interactions – rather, the contrary is most likely true. "Not only will employees be living further away and have fewer interactions amongst each other, but clients will also be living outside of cities. So, there would be a need for more structured [and deliberate] meetings, not only on an international scale, but locally and regionally as well – and that will drive demand for meeting facilities in hotels," Vokrinek suggested.

In fact, not only will the role of hotels evolve, but there will likely be a greater need for hotels in the smaller communities that will form in these areas where such super-commuters will typically work from. "Historically, those towns and places were probably mostly residential, with limited [interest from investors] and limited amenities. However, if people will be living in those local hubs on a regular basis and commute less to the central core office, there will be a need for amenities in those local hubs and this will include hotels. Of course, the demand will be softer, so the hotels will probably be smaller. They will need to be more flexible; most likely a hybrid concept within mixed-use developments, [but there will be a need for them"] explained Vokrinek.

'Hotels within a new eco-system of workspaces' – C&W Webinar Part 2 of 2: The role of hotels as cities evolve, presented by Borivoj Vokrinek.

The who and the why? Towards a new kind of work-life balance

Although the notion of such super-commuters forming a considerable proportion of our workforce seems to lie somewhere in the distant future, with the prevalence of low-cost airlines and the advancements of technology, experts speculated, as early as 2014, that there could already be hundreds of thousands of super-commuters worldwide.

This decentralization of the workplace is likely to pick up not only because of our increased mobility and higher level of comfort with remote working, but also due to the attractive benefits it may bring to both employees and employers. As Pickering explained, "In a digitally enabled world where distance no longer matters, […] I see a real opportunity for employees to derive labour arbitrage and live a better life" – even taking a small pay cut from a London salary to work from the Greek island of Kefalonia could be well worth the trade-off".

On the flip side, employers may also realize that sourcing the best (and/or cheaper) talent will no longer be bound by geographical borders. And with higher pressure on costs, especially in the short-term, employers too may find themselves increasingly attracted to the lure of allowing super-commuting.

The shift, not death of business travel

Many soothsayers have begun lamenting the death of business travel, citing the rise of video conferencing and growing realization that not all meetings call for an 8-hour flight and 2-hour layover. However, while the increased usage of video conferencing will undeniably replace some business travel, especially in the short-term, it would be hasty to presume that this would necessarily lead to a significant decline in business travel in the long-term.

Rather, as we become increasingly accustomed to living a mobile lifestyle and working remotely, this emerging form of business travel will likely broaden the opportunities for hotels, through catering to the needs of a more decentralized workforce and their clientele. As Vokrinek further suggested, "Some part of the demand will become more regular and predictable, and this will open opportunities for more membership or subscription concepts and increase the importance of loyalty programmes."

Despite the short-term challenges faced by the hotel industry, it is evident that the role of hotels has constantly expanded to meet the new needs of the times – and there is no reason to assume that this time will be any different. Our society is undoubtedly becoming ever more transient, spending more time outside of our homes. But even then, we will still need places to eat, sleep, work and relax. With the rise of remote working, we will likely crave physical interactions and seek places to meet with others more than ever before.

Therefore, while the current pandemic has had an indescribable impact on the hotel sector, its long-term implication is that it has catalysed the evolution of how and where we live and work, with hotels destined to play a much bigger role in our increasingly mobile lifestyles and new work ecosystems.

Tune in to the recordings of this Cushman & Wakefield webinar:

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