Cornell Hospitality Outlook 2021: Experts See Light at the End of the Tunnel
Hotel business will continue to improve as we head into summer and emerging consumer trends bode well for a quicker rebound to profitability, according to the virtual panel “Hospitality Outlook 2021: Hotel Performance, Capital Markets, and Consumer Behavior,” held yesterday by the Cornell University School of Hotel Administration and featured distinguished industry thought leaders: Cindy Estis Green, CEO and Co-Founder, Kalibri Labs; Rachael Rothman, Head of Hotels Research and Data Analytics, CBRE Hotels; and Jess Petitt, Vice President of Analytics, Hilton Hotels. The event was moderated by Dave Roberts, Lecturer, at the Cornell University School of Hotel Administration.
Short take: Based on the latest hotel, capital markets data, and consumer behavior patterns, the recovery has already started in the US and will pick up steam by the end of the year and continue--barring another outbreak--to 2024, which is when the panel predicts overall RevPAR recovery, though it will vary by market.
Hard numbers: GDP in Q4 2020 was in line with Q1 2019, but RevPAR dollars were significantly less. GDP is poised to surpass pre-recession levels this quarter, with experts forecast for GDP growth going from 5.2 % (January 2021) to 6.6% (March 2021), the correlation between the health of the economy and RevPAR growth is a key indicator, so this is very encouraging news. In addition, CBRE historical data shows hotel operators have become more efficient with each cycle, losing less money on the downside and becoming more profitable, quickly on the upside. Hotels have improved on loan repayments since the beginning of the pandemic and now there are many banks willing to lend on hotel projects and new money looking to invest in the sector, another positive sign.
Business and consumer trends: The hardest thing to predict is when business travel demand will return and as this makes up about 50% of the US market overall, very important. The return of business travel is highly dependent on the vaccine rollout and when herd immunity is achieved, so while this is going well in the US and some select countries, it remains a TBD globally. Leisure has made up some of the shortfalls, but it can’t make up all of the business travel particularly in the bigger cities that rely on meetings, conventions, and international travelers. In terms of consumer trends, the most interesting has been the growth of long weekends due to people working from home and having the flexibility to take short breaks.
What else you need to know:
No need for cautious optimism. The hotel and economic data and indicators are all positive, Rachael from CBRE says there’s no need for “cautious optimism” anymore, we are definitely in a recovery that should continue (barring any unforeseen disruption.)
The Leisure Travel market has been the first to pick up, this has started regionally and will expand as people feel more comfortable going further afield and flights resume. Mostly value-oriented bookings on OTAs and direct, and the booking cycle has shortened. Kalibri Labs and Hilton have seen and tracked the customer movements which reflects this.
New patterns in travel are the silver lining, says Cindy of Kalibri Labs, with the best thing to come out of the working from home trend is the extended long weekend. In addition to Saturday and Sunday, Thursday and Sunday are now popular. Beach properties, resorts, and national parks have been popular, they forecast big city leisure trips to start coming back in late summer.
People have saved money. With people unable to travel over the last year, there has been a great deal of savings amassed, so there is money waiting on the sidelines which they predict will come back fast in the form of “revenge travel” for bigger more splashy trips. They are also seeing bookings for social coming back, things like weddings and parties that have been pushed and pushed.
Still hard to say when the Business Travel and Meetings sectors will resume. First, people need to get back to work in their offices. Panelists predict government first, then sales and client-facing people, then small corporate groups, and finally meetings and conventions. Overall the panel felt there is pent-up demand for business travel, and as the economy improves companies will have the budget and desire to have people travel and meet face-to-face. They predict business people may do fewer trips but stay longer, which would be great for hotels but not for airlines.
Technology will be incorporated into meetings but not replace them, though there will be an impact. The general sentiment is people are tired of feeling stuck at home, and a more hybrid model will emerge for meetings and conventions, especially the educational components. Jess from Hilton predicts online meetings will take 5-10% of business across groups and individual work travel, and that needs to be addressed through tech solutions in hotels.
Technology will continue to be woven throughout hotel operations. Already we are seeing operators incorporate more technology into both back-of-house, i.e. cleaning rooms, especially as it is hard to find staff, and front-of-house, i.e. automated check-in or the ability to order food from your phone while sitting by the pool to drive upsell, but it will be important to keep the feeling of genuine hospitality.
To watch the full panel click here; it was organized by the School of Hotel Administration at Cornell University.