Some of the performance has to do with these locations being within driving distance of a large population . We ’ ve seen strong demand for travel destinations that are easy drives for a lot of people . Meanwhile , hotels in major airport markets have struggled , especially those that cater to international travel , which has not yet returned . So , Savannah and Augusta are easy spots for millions of people in the Southeast and East Coast regions .
CIRE : IN LOOKING AT PRIMARY MARKETS LIKE ATLANTA , NEW YORK , AND SAN FRANCISCO , DO YOU SEE ANY LONG- TERM CONTRACTION OR EXPANSION IN OVERALL INVENTORY AS WE LOOK TO A POST-COVID-19 PERIOD ?
ZAVER : Looking at inventory , the construction costs have increased by 25 to 30 percent , so that has reduced the supply of new properties in many markets . You ’ ll find projects that were supposed to start but never did . Part of that is due to costs , and part of it has been a pullback on the availability of financing . As we see demand return , I think the hotels that are in those markets will see significant growth in the next two years .
Different cities are seeing different recoveries . Many of the primary markets , New York and San Francisco in particular , took a very large hit at the start of COVID-19 . Recovery to 2019 levels in those markets is not expected until 2026 or 2027 . It really depends on location . The Southeast has seen some migration in recent years , so recoveries in those locations have been helped .
In examining New York in particular , one of the biggest factors is what we touched on earlier — the lack of international tourists and business travelers . These are two significant sources of business for New York , and they remain relatively low , even into 2022 .
CIRE : IN LOOKING AT DIFFERENT HOTEL ASSET CLASSES , HAS ONE AREA PERFORMED BETTER THAN OTHERS ? CAN YOU COMPARE BUDGET LOCATIONS VERSUS HIGH-END PROPERTIES ?
ZAVER : It ’ s been amazing — budget hotels have recovered much faster than any other sector . They seem to be doing quite well . But with luxury locations , it goes back to the same discussion of leisure destinations and those in downtown locations , which will take a little longer . Again , it has to do with convention and international travel .
CIRE : CONSIDERING THE LONG-TERM IMPACT OF COVID-19 , WHAT HAVE YOU SEEN IN WHAT CONSUMERS WANT FROM HOSPITALITY PROPERTY OPERATORS ?
ZAVER : Considering the importance in public safety and sanitation , people often preferred locations that were within driving distance . They also looked to book with less advance notice . But one of the biggest changes that came with the pandemic was a willingness to embrace technology . Downloading an app to check in , using your phone as a room key , and ordering services through a hotel brand ’ s app — these are all ways to improve customer experience . Technology is at the forefront of the hotel industry ’ s ability to win more business and improve efficiency . In the wake of the pandemic , hotels have been quickly adopting technology that allowed them to operate during difficult times .
As for amenities and services , during the worst of COVID-19 , many weren ’ t available . Gyms were closed , restaurants were limited , and breakfast options were limited . These things are coming back in a big way , but all with a consideration for extreme cleanliness . Properties must be intentional in their processes . Additionally , many hotels are experiencing challenges related to labor shortages that are causing concern . The demand is expected to come
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back , but businesses may have difficulty finding the necessary workforce . Speaking with hotel owners and operators , I ’ ve heard they face continued difficulty in finding people to fully staff properties and take care of guests .
CIRE : DISRUPTION TO THE HOSPITALITY MARKET WON ’ T ALL BE TRANSITORY — THERE WILL BE PERMANENT EFFECTS FROM COVID-19 . CAN YOU PINPOINT A CHANGE OR TWO THAT MIGHT BE UNEX- PECTED TO CRE PROFESSIONALS ?
ZAVER : One of the changes I ’ ve noticed has been consumer travel patterns . Many people are taking shorter trips , booking in a shorter window , and combining work and leisure travel . Remote work , of course , is here to stay in a lot of different sectors , so that ’ s meant an adjustment to hotels to be able to have the right staff to take care of rooms and handle longer stays . People who may travel for work are asking , “ Why don ’ t I just stay here for the weekend ?” People used to travel Friday and Saturday , and then everyone left Sunday . Travelers are now more capable of checking in on a
Thursday and staying into the next week . These changes in patterns are something I see as a permanent impact .
I also see an increased emphasis on efficiency . Whether it ’ s in check-in procedures or available services , those technology-driven improvements are here to stay .
Also , in the use of community areas , guests are looking for more offerings . Many people are becoming more comfortable ordering in and having dinner somewhere on the property . Guests who are working
Helen Zaver
remotely will want public areas that are accommodating and spacious . These areas will need to be clean , comfortable , and inviting . An increased demand for these types of offerings and these spaces will be a continued trend in hospitality . These public areas are shared among guests , where they can have clean , cozy spaces where they feel comfortable getting together with friends or family . In addition to work areas in a property , these types of spaces will be in demand as people interact with hospitality assets in different ways due to COVID-19 . I think that ’ s something that has changed for the foreseeable future .
Nicholas Leider
Senior content editor of Commercial Investment Real Estate Contact him at nleider @ ccim . com .
Editor ’ s note : This article is an adapted excerpt from a fulllength Commercial Investment Real Estate podcast . To listen to the full episode , head to SoundCloud , iTunes , Spotify , or wherever you listen to your favorite podcasts . Don ’ t forget to subscribe , rate , and review .
CIREMAGAZINE . COM COMMERCIAL INVESTMENT REAL ESTATE MAGAZINE 7