Industry Update
Opinion Article11 August 2021

What Has Changed In The Hospitality Industry

How the Pandemic Changed Leisure and Business Travel

By Bob Rauch, President of RAR Hospitality

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We are 100% open at all our hotels and while there are still some closed hotels, they are now the exception, not the rule.

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We follow CDC guidelines regarding mask regulations as well as brand guidelines that were put in place back in March of 2020, and guests seem to have adapted nicely. Masks have been optional for those fully vaccinated since June 15, 2021, in California and many other destinations. Most of our staff continue to wear masks if guest-facing. We have not reopened our buffet breakfast service and continue to sanitize operations per our sanitization protocols put in place in March 2020. Those protocols protect guests and team members alike and we are getting no pushback on these protocols.

Now that we are close to normal operations at most hotels, what are the key takeaways that have truly changed the landscape?

“Workcations” is one. People who want to get away still have time before having to return to a normal Monday through Friday work week in an office with their peers. Many people are back in the office Tuesdays and Thursdays and hence, they take off Thursday afternoon to work remotely from their vacation destination and then end up staying through Monday where they work remotely. It means that they take no paid time off and still get away!

Now that live events like concerts, sports events, night clubs and more are reopened, room night demand is very strong. Most of the business is still leisure but weekends are full and interestingly, average rates have returned to 2019 levels already. Will this last? Only time will tell but it seems like the economy is back and lots of cash is burning a hole in those traveler pockets! Our weekend business is now beyond 2019 levels!

Group business and corporate business will likely return at a level that is off 20% from 2019 but international is the only market segment that is destined to be a bust in 2021’s second half. It is easy to see the combination of a return to the office and a return of corporate business. Rush hour traffic is back, check-ins at our hotels now include some corporate travelers and spending at the hotels is improving. Leisure travelers do not spend like corporate travelers — no expense accounts!

While business is outstanding after 15 consecutive months of significant operating losses, now we don't even have enough team members to serve our guests at full capacity yet. Managers and employees are working six long days per week and we are hiring contract labor to fill in for cleaning our parking lot and public areas.

Occupancy levels are returning to 2019 levels this year, too. Leisure travel is at or above 2019 and corporate travel began showing a return this month. We expect leisure travel to finish the second half of 2021 right at 2019 levels with international travel down sharply but domestic travel up to make up for it. Corporate travel will be down 40% from 2019 but it was down 96% in the first half of 2021. Group travel remains virtually nonexistent but will return in late third quarter and fourth quarter, albeit in a very muted way until 2022.

Business travel is still down and weekdays are still not quite as busy as they used to be. But we have plans to regain some of that business back. We feel that by September, the corporate business will return, though it may not be robust. We will likely stage some events in the fall to stimulate that sector, tying in our restaurant, deli, bar and hotel. We closed all but our deli during the pandemic and have reopened everything now to get back to pre-pandemic numbers.

The hospitality industry will be very close to fully opened by 2022, and is expected to be back in full strength by 2023. The "big boxes" in downtown markets will be the last to come back at 100% but the rest of the industry will be back to normal through most of 2022, barring an unforeseen wave of variant COVID-19. To a great finish to 2021!

Bob Rauch

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