The reopening of the economy may mean it’s a good time to be a big hotel brand, but it’s still not a great time to be a big hotel. With full group business recovery projected to take from two to five years, a lot of prime interior hotel real estate will be looking pretty vacant.
Sloan Dean, CEO and president of Remington Hotels, sees a number of short-term hurdles.
“Some [smaller] conferences were pushed back to Q4 2020, but there’s already a chance 10% won’t occur even if they have dates,” he said. “As for big events with thousands of people — conventions, sporting events, concerts, entertainment — they could struggle for 12 months or longer. Even if there’s a vaccine by the end of the year, will people be comfortable in a room with 3,000 other people or at an event with tens of thousands of fans?”
Contributed by Mary Scoviak
Chad Crandell, CEO and managing director of CHMWarnick, is even more cautious. “Larger group hotels will likely lag in profit recovery given the size and scale of these assets, as well as the wide draw and dependency on convention centers and citywide business,” he said.
In his view, the stall in group bookings today will impact business three to five years down the line given the long lead time necessary for groups. When meeting planners do pick up the phone, they will be expecting more flexible contract terms and some price breaks.
“In all cases, rate will play a key role in profit growth once business resumes, so it is imperative that operators be held accountable for strategic re-entry from day one, which requires developing a plan well before reopening,” Crandell added.
More space = more distance
At least near term, big-box hotels could market their size as an advantage. The sheer square footage of their function spaces is a plus in terms of complying with social-distancing regulations and offering flexible layout planners want — such as suggestions from Professional Convention Management Association members for keeping tables 6 feet apart and allowing for 12-foot aisles, or blowing out theater seating by creating columns of seating with added space between seats and wider aisles. More space is also crucial to addressing guidelines such as Harvard University’s, which call for staggering food and drink stations so that attendees can be socially distanced with picking up boxed meals and packaged drinks.
Additional space could also be a major selling point given new health protocols. Expect more planners to request dedicated areas for temperature checks (keeping in mind attendees will need to be 6 feet apart as they wait) and the setup of medical rooms where anyone who becomes ill or is confirmed as having coronavirus can be quarantined. Although brands have rolled out their own hygiene standards, some PCMA members are developing their own requirements. That could impact everything from supplies to surfacing choices.
Large hotels may be better positioned to tailor their offers to COVID-19-era demand. Marketing outdoor spaces for weddings and other functions is a no-brainer. However, presidential or other large suites could have appeal for one- or two-person meetings, interviews or presenters hosting a videoconference. Higher tech capabilities play to current trends — whether the best connectivity for sophisticated virtual events or state-of-the art audiovisual.
Digital awareness is now essential to marketing, too. A survey by Northstar Meetings Group reported, “For the future, the greatest needs, cited by 84%, are for virtual event platforms. Another 77% will depend on virtual site visits, and 66% cited a need for virtual hosted-buyer events and fams as they make their destination and venue decisions.”
Some of these measures are clearly “just for now.” However, the first hotels to act on them could get a near-term payoff. Jan Freitag, STR’s senior vice president, lodging insights, pointed out in his recent report that “one positive scenario might be that meetings in Q4 take place as planned. Postponed meetings from Q2 are pushed into Q4. This could lead to compression nights, as a city has now many more attendees than before, which in turn could lead to higher rates for the corporate transient traveler. This is a best-case scenario, I would not bet on it, but it could happen in certain nights in certain markets, providing some demand and average daily rate upside.”
Others reflect more fundamental shifts in convention business. Dean joins a number of industry voices who point to a smaller-is-better paradigm on the horizon. “For the most part, mega-conferences with thousands of people won’t be coming back in big numbers in the near future,” he said.
The return of live events
How committed industries, associations and companies will be to shoulder the costs of in-person events longer term is still a question, and there may be different answers for different sectors. An Association Laboratory survey termed virtual events “a major strategy going forward.” But whether that’s a stand-alone direction, a hybrid or “subject to change” is still open to debate.
A study by independent global public affairs and strategic communications consultancy APCO Worldwide revealed 83% said they miss attending in-person business meetings and conventions, and 78% say they plan to attend as many, or more, “when the threat of COVID-19 passes and it is safe.”
A large-scale study released May 6 by Enigma Research and supported by the Northstar Meetings Group and its SportsTravel concluded that 94% of the 2,000 respondents “very much” or “somewhat” miss attending live events. Ninety percent said they’re likely to return to large trade shows and conferences when they resume. Of that total, 36% will do so immediately and another 23% will wait one to four weeks. Just 18% would hold out for a vaccine before attending a large event.