By Nicholas Leider
SAFE TRAVELS
Rick Garlick
Trust isn ’ t easily defined , but you know when it ’ s not there . Such a deficiency is inherent to the monumental challenges faced by the hospitality and travel real estate sector . Hotels , airlines , rental car firms — these businesses watched customer bases evaporate in days when the COVID-19 pandemic spread across the world earlier this year .
“ If people don ’ t trust you , they aren ’ t going to engage with you ,” says Rick Garlick , PhD , vice president at Magid , a market research firm specializing in leisure and travel . “ If you tell your guests they are safe , but they don ’ t believe you , the revenue losses will continue . The rub for the travel companies is that they ’ ve not sat still during the pandemic relative to improving health and safety standards . In many cases , they ’ ve pursued some aggressive action , but so far , the enhancements have not gained traction with customers .”
These businesses are combatting the challenges presented by the pandemic , but consumers are skeptical that any efforts can ensure public safety . Magid research shows trust is lacking in airports ( 32 percent ), hotels ( 41 percent ), and rental cars ( 34 percent ), making life difficult for firms when two-thirds of potential customers are wary .
But successful businesses are built on adversity . The market may contract and doors will shutter , but opportunities are available to those willing to adapt .
“ Those who survive and thrive make the challenging calls , pivot successfully , and reinvent themselves ,” Garlick says . “ If you just try to shut your eyes and hope for the best , it ’ s going to be hard to hold on long term . Trying to simply adapt what you were doing before to this new world won ’ t get you much .”
For those looking for an angle on commercial real estate , consumers will have new priorities when traveling .
If you just try to shut your eyes and hope for the best , it ’ s going to be hard to hold on long term . Trying to simply adapt what you were doing before to this new world won ’ t get you much .
“ The reason private rentals do better is that it ’ s easier to socially distance yourself from strangers ,” Garlick says . “ There are fewer shared amenities , public spaces , etc . where people can catch COVID . If it ’ s just you and your family , it ’ s a lot easier to trust and feel assured you aren ’ t going to catch someone else ’ s disease .
“ The implication is that private spaces may take on greater value for guests . For example , offering guests private dining experiences is something for which some people would be willing to pay a premium in hotel restaurants .”
Outside of shifting strategies inside a hotel , different markets could experience growth thanks to geographic and demographic shifts in response to the coronavirus . If social distancing is here to stay — which appears to be a safe bet for the next 12 or 24 months — activities like camping might see an uptick . Smaller , remote destinations may also rebound more quickly than Manhattan or Miami Beach .
“ Consider investing in areas where tourism is nascent ,” he says . “ That is , more remote areas that are not overcrowded and truly represent places off the beaten path . Right now , people are seeking destinations that are not overcrowded . Even after COVID , you can expect to maintain interest as people are looking for more authentic experiences .”
The truth stands , though , that many hotels and vacation properties will not survive , with an overall 13 percent decrease in traffic , according to Magid . In those cases , adaptive reuse could be an invaluable way to revitalize shuttered businesses .
“ This is an idea that is being particularly promoted in New York , a city that is somewhat landlocked on housing and where hotel rooms are abundant ,” Garlick says . “ It ’ s not what hoteliers envisioned , but it ’ s a way to at least repurpose the space hoteliers have already purchased to get something in partnership with the city . Hotels were arguably overbuilt before the pandemic .”
Change can be scary — and it will undoubtedly be for many who will not stay afloat in the coming year or two . But opportunity will present itself amid such tectonic shifts in the hospitality sector , though the new normal has yet to be clearly defined .
Nicholas Leider
Senior content editor of Commercial Investment Real Estate Contact him at nleider @ ccim . com .
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COMMERCIAL INVESTMENT REAL ESTATE MAGAZINE FALL 2020