Reopening is a tightrope walk for hoteliers
REPORT FROM THE U.S.—At this point in the coronavirus (COVID-19) pandemic in the U.S., many hoteliers are assessing what reopening may look like, whether that’s soon or further down the road.
Speakers on a panel at the recent New England Lodging Conference, produced by Pinnacle Advisory Group and Boston University’s School of Hotel Administration, weighed in on how they’re financing operations, how they’re managing individual state guidelines and what operations may look like—and cost—in the future.
Accessing money to finance any level of operations has been a tricky scenario in some cases, panelists said.
Matt Arrants, EVP at Pinnacle Advisory Group, said the first wave was going through the process of furloughing employees and suspending operations at hotels where staying open didn’t make financial sense, but now the industry is moving into the next stages.
“The second wave was (PPP), figuring that out, applying for it and staying on top of all the changes,” he said.
Chad Crandell, managing director and CEO of CHMWarnick, said “the practicality of using (PPP) money has been a real challenge.”
“In some cases we’ve gotten it and before we did anything with it, we sent it back,” he said. “While it’s certainly a program with great intentions, it has largely missed the mark. In many jurisdictions, we can’t really open hotels, so PPP money at this stage of the recovery is too premature.”
It’s still a good option in some cases though, Crandell added.
“In some properties where we remained open, it has provided a source of funds,” he said. “Cash is critical right now, and even cash that may not be forgiven, at an interest rate of 1%, there’s a compelling proposition if you did not have liquidity.”
Furniture, fixtures and equipment reserves have in many cases been a more accessible reserve to tap, speakers said.
Crandell called it “probably the savior of liquidity for the majority of hotel owners” in this case. Once owners worked through sign-off from brands and lenders to access reserves, those reserves “have given us the liquidity that we need to pay the ongoing operating expenses.”
Dealing with restrictions
Navigating different state guidelines is another layer of complication as hotel owners weigh reopening, speakers said.
Jon Crellin is managing director of the Boston Park Plaza and VP of operations at Highgate. About 40 of the company’s 105 hotels are open, including the Boston Park Plaza. He said the company is “planning for the future for everything from valet parking to laundry service to safety issues,” despite variations that likely will shake out from state to state.
“I’m in a group with other VPs of operations within Highgate and we’re going through all our SOPs across all our locations that will all be localized and made appropriate for the different operations we have,” he said.
He said his company is looking at regulations released for the states they operate in, as well as keeping on top of other state regulations and guidelines from national associations.
Guidelines around additional quarantine measures will have an impact on hotel operations from state to state, Arrants said. He cited a conversation he had about a property the company asset-manages in Rhode Island, where guidelines haven’t yet been issued on valet parking. If the hotel can’t use valet parking, an alternative may be having guests park further away and take a trolley, but as Arrants said, “who pays for the trolley?”
In Maine, he added, state government officials want a 14-day quarantine for people coming from out of state, which he said “could pretty much wipe out” what is a seasonally dependent summer tourism season.
Figuring out timing
Most early forecasts in the U.S. call for leisure drive-to business to return first to hotels. Panelists agreed but added that reopening is heavily dependent on demand and business volume.
“Although we all closed around the same time, I do not expect we’re all going to reopen at the same time, even if regulations and governors are allowing us,” Crandell said.
Arrants agreed, reminding conference attendees to be careful about reopening because “it isn’t just a matter of the immediate demand, it’s also a question of how long that demand is going to last.”
To better forecast how leisure transient demand will evolve, he said he closely follows the reopening plans for local travel drivers, like amusement parks, universities and even museums.
Jumping the gun on reopening can have a big impact on employees, Arrants said.
“If you rehire all your employees and the demand isn’t there, you may have to lay them off again,” he said.
Group business is the segment with the least visibility right now, speakers said.
Crellin said he is optimistic about group demand in 2021 right now based on his team’s efforts to move business ahead and because of pent-up demand from 2020, but he said definitely “the big question (from event organizers) is what we’re doing from a health and safety standpoint that we’ll be doing differently post-COVID-19.”
“This is important, and we’re all going to be doing the same things,” he said. “It will be a cost of doing business and a point of entry into all our business segments.”
On-site operations will change
Housekeeping and F&B are two examples of on-property operations that likely will change permanently because of the pandemic, speakers said, due to guest behaviors and associated costs.
“It’s likely going to be a situation where (hoteliers) aren’t providing daily housekeeping,” Crandell said, laying out some potential scenarios. “Upon arrival, your room will be cleaned and sanitized, then if you’re there for a two- or three-night stay, you won’t want anyone else in your room and we’ll respect that so your room may not get cleaned until your departure. And there could be some cost savings associated with that.”
F&B is another high-touch and often high-expense area that may change, speakers said.
Crandell predicted hotels will offer only limited F&B to start, with more focus on grab-and-go options that limit touchpoints.
As groups return in some capacity, he said banquet and catering revenue will begin to come back, but “buffets are gone.”
He said full-service restaurants “that (don’t) have a reputation with locals will be hard-pressed to open.”
Lasting positive change?
Speakers ended the session on a positive note, sharing examples of lasting positive change that may be a side effect of the pandemic.
“It’s going to allow us to refocus on the basics,” Crellin said. “We usually run 90% occupancy, we’re going 100 miles an hour. … But now we’re breaking things down to the basics. We’re going to take a new and re-energized look at our operation, how we’re set up, our customers, our segmentation, and do we know (our customers’) needs? We’re going to relearn a lot about our business.”
Arrants said this period will be beneficial for hotel owners to “really take a hard look at everything.”
Crandell said he’s looking forward to getting a rare second chance.
“We talk about ‘reopening’ a hotel and that says it all,” he said. “We rarely ever have a chance to do it a second time around. Let’s see if we can do it better than the first time. That’s the goal.”