Hospitality development services firms have shifted from developing and redeveloping properties to closing them. In the situation our industry is finding itself in, asset-preservation efforts to curb potential major setbacks, thoughtful property management and future reopenings are the keys to navigating the crisis in the best way we can at this time.
Hotel owners, developers, and brands are currently in a few different positions. One camp is not deterred at all and is aggressively trying to accelerate projects while business is down to have less revenue interruption and possibly lower costs down the road. Another group is closing and stopping everything, while a third is somewhere in the middle: they haven’t reached the construction part yet and are still working on the design process. Therefore, they haven’t had to face that difficult decision yet.
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The last thing you ever want to do is completely close a property. When you close a hotel, you may lose its certificate of occupancy and it can be subject to a number of code upgrades when reopening, to say nothing of the business you will lose from customers going to your competitors in the meantime. This factor may not be a reality right now but could change if another nearby hotel opens sooner.
Asset Preservation and Property Maintenance
To best stay afloat, maintaining a hotel’s legal standing with its local authorities and keeping its mechanical systems functioning at a low level is key—for example, running the air conditioning at a balanced pressure and temperature, particularly in southern climates. A long list of things needs to be done to gradually “close” a hotel to maintain it at a low-cost level until it reopens smoothly when the time is right. Managing this temporary shut-down is paramount. If you maintain a very low range of occupancy, you can designate the hotel as technically open. As a result, you might see part of a property reopen, but the restaurant, for example, will remain temporarily closed.
Reopenings and Brand Rebuilding
Owners will need to work closely with their franchise during this time, which could prove challenging. Recovery for hotels will work in tiers: low, middle and high. Low-tier hotels will recover first, depending on level of risk. Well-known hotels will eventually welcome new guests but have yet to see returns on rebuilding because they've cut their own staff by high percentages. Furthermore, brands may likely pivot to become more health-conscious; rooms will turn over with new industrial hygienic cleaning technologies and bacteria-proof textiles may replace current interiors. It will be very interesting to see how alternative lodging platforms like Airbnb will follow and how comfortable guests will be to book individual homes.
Of course, the main question is when hotels can fully reopen. Different dates and time periods in different parts of the country will dictate openings—it won’t happen collectively at once as an overnight phenomenon. The gradual process will in part involve restaffing. Leisure markets—and travel by car—may typically come back first as people grow tired of being shut in, and they'll travel to less affected areas. The key is not to get ahead of the customer base because this may cause companies to lose more money in the long run.
The more knowledge and expertise we share about our experiences will help all of us involved make better informed decisions for our businesses. We're all in this together.
John Hardy is founder, president and CEO of The Hardy Group.