What happens when the hospitality sector reopens?
Wednesday, April 22, 2020
Just before the COVID-19 pandemic brought the industry nearly to a halt, U.S. hotel construction hit an all-time high in March. Other projects were queueing up in the pipeline.
Now, as with so many industries at present, the future of those projects as well as of hospitality in general remains in doubt. Once travel restrictions begin to loosen up, will guests come back, which ones, and how soon are questions both travel and hospitality analysts are trying to answer.
Projections for 2020 indicated slow growth in hospitality construction. The American Institute of Architects (AIA) Consensus Construction Forecast predicted a 0.5% annualized growth rate for the year. Dodge Data & Analytics foresaw a 6% decline in the dollar value of commercial projects year-over-year, with hotels facing one of the steepest declines in that sector.
In its economic outlook for hospitality, the American Society of Interior Designers’ (ASID) 2020 Outlook and State of the Interior Design report observed, “the need for large amounts of spending in the sector has abated,” and projected a 4% decline in spending from 2019, which was up 6%.
In the first quarter of the year, though, hotel construction activity continued to increase. According to industry analyst STR, the number of U.S. hotel rooms under construction rose 6.8% month-over-month in January, surpassed the industry’s previous peak (from 2007) in February, and reached the highest month-level total ever reported in March.
Then the pandemic slammed the brakes on construction, and the trend began to reverse. STR reported that in March nine projects from the final planning stage of the pipeline moved to deferred status, as did 21 projects from the planning phase. Additionally, one project in final planning and seven projects in planning were abandoned.
The expectation is that projects already in the ground will continue once restrictions are lifted, but that others may be reassessed depending on how well the industry weathers the post-pandemic recovery.
Various scenarios have been proposed for what that recovery may look like. For certain, the reopening of hotels and other hospitality venues will be gradual and phased in, depending on the local conditions.
Ensuring guest health and wellness will be the first priority of business, with properties focusing on increasing standards of cleanliness and hygiene. Until such time as a vaccine is widely available, social distancing will need to be maintained in lobbies, restaurants, bars, and fitness facilities. Properties may need to settle for reduced occupancies in order to manage levels of social interaction and deliver higher levels of individualized service.
With many countries already planning to extend travel restrictions to the fall or later, initially properties are likely to attract mainly local or domestic guests. Most of those are likely to be tourists instead of business travelers.
Large gatherings, such as conferences, expos, business meetings, and celebrations that larger properties depend on will not be possible for some time. Some industry experts foresee a pent-up demand for luxury travel, both domestically and internally, for those who have the means and want relief from weeks of staying in place. Affluent millennials without children are expected to be among the first to renew travel plans.
For the hospitality side of the interior design industry, the outlook is uncertain. Businesses have lost substantial amounts of money and will need time to recover financially. Many are likely to invest in technologies to reduce interpersonal transactions.
Some will want to undertake upgrades and renovations to make their properties more attractive and safer to leery travelers. New construction projects will be slow to come back and those already under construction will take longer to complete. Demand for services is likely to be mixed at best for some time but will gradually improve as travel picks up and more properties revive.
- Interior Design, Furnishings & Fixtures
- Construction & Building Materials
- Recreation & Leisure
- Travel, Hospitality & Event Management
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