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Accelerating vaccine efforts this year helped the travel sector turn a corner in major markets like the U.S., leading hotel companies to focus both on recovery and growth opportunities.

Hotel industry leaders at this week’s Skift Hospitality & Leisure Summit were largely bullish on an accelerating recovery momentum in the months and years ahead. Progress isn’t without its problems and growing pains, however.

The pandemic was a catastrophe for the global hospitality industry and remains so in many parts of the world. Labor shortages threaten how fast hotels can get back to normal. Extraordinary investor competition inflates hotel property values, and hotel owners and developers have to quickly adapt to changing customer tastes to capitalize on whatever revenue is out there during an uncertain recovery.

A Languishing Labor Pool

U.S. hotel owners have many reasons to rejoice heading into the summer. Major hotel companies like Hilton expect this to be the busiest summer travel season on record, and U.S. occupancy rates have outperformed China the last two weeks.

China has typically led the world in hotel occupancy recovery during the pandemic, but the country faced a setback in recent weeks in light of a spike in new cases around the city of Guangzhou.

The U.S. shouldn’t get too cocky. The labor shortage crisis was a talking point among most panelists at the hospitality summit, and it is a problem that puts a ceiling on how well the industry can recover.

Hotel owners aren’t able to call back furloughed workers fast enough to meet returning travel demand. MCR, the hotel owner and operator behind properties like the TWA Hotel in New York City, has between 600 and 700 open positions company leaders are grappling to fill for a variety of reasons.

“We are having a devil of a time [filling those positions],” said MCR Hotels CEO Tyler Morse. “A big reason why is unemployment [insurance].”

Many industry experts point to a combination of extra federal unemployment benefits running through September, lack of childcare during the pandemic, and health concerns as to what’s driving the labor shortage. Others see the hotel industry’s furloughed worker migration into other industries like retail during the pandemic as a move difficult to reverse due to higher wages.

The labor shortage is expected to strain workloads this summer. Some hotels, like Heckfield Place in the UK, have at times limited guest capacity in order to maintain typical levels of service for guests.

Solving the crisis won’t be easy, and guests should expect to immediately notice some of the ways hotel operators are maneuvering through the crisis. Daily housekeeping services during a hotel stay are likely gone for good across many parts of the industry. Technology advancements are unlikely to offset the lack of workers, either.

“Technology does not know how to dust, and technology can’t use a mop,” Morse said. “Everyone thinks technology is magic, but technology is not going to solve any of these problems.

Despite the near-term concern, Morse is optimistic the problem will get solved within two years through a combination of reopened borders that bring in more labor as well as higher wages in certain U.S. markets.

“Two years from now it will not be an issue, but, depending on what market you’re in, there will have to be some systemic changes, and we’re all just going to have to plow through and wait it out,” Morse said.

Money, Money, Money

A downturn is a terrible thing to waste, investors like to say. But the coronavirus pandemic — the worst downturn in history for the hotel industry — hasn’t necessarily spurred the kind of spending and hotel transactions experts would have expected a year ago.

Occasional deals happen: Blackstone and Starwood Capital closed on their roughly $6 billion Extended Stay America acquisition this week, and several timeshare companies have traded hands. Investors want more.

A lot of capital is waiting in the wings to deploy on hotel assets, and several investments funds formed during the pandemic hoping to capitalize on expected bargain prices. Rock-bottom pricing hasn’t materialized due to various rounds of federal economic relief as well as lender flexibility.

Despite travel restrictions, foreign buyers are also vying for deals in major U.S. markets with typically higher barriers to entry. But border restrictions during the pandemic limit how much these potential buyers can actually scope out.

“The appetite for foreigners to invest in the United States is at the highest it has ever been,” JLL Hotels CEO Gilda Perez-Alvarado said. “The biggest handicap is we can’t get these investors to come to the U.S. It’s very difficult for them to buy property without seeing it.”

While these buyers typically want to be in major cities like New York City or San Francisco, some have even turned to exploding medium-sized markets like Nashville. European and Middle Eastern buyers are the most active international buyers in the U.S., Perez-Alvarado said.

There has been less direct interest from Asia as a result of border restrictions, but some of that capital does still indirectly find its way into U.S. hotel ownership by investing into various hospitality investment funds.

“The hotel industry provides a really good growth and recovery story, so we should be doing absolutely fine there,” Perez-Alvarado said.

Thoughtful Experiences Reign Supreme

A vast majority of the hotel industry’s growth over the last few decades has been around the idea guests like the continuity of a brand. A Marriott hotel room in Shanghai would be the same as a Marriott hotel room in Sarasota, the thinking went.

But travelers these days want more, especially after so many have spent a year or more at home.

The so-called lifestyle hotel sector has been the most visible evidence major hotel companies are taking the calls for experiences seriously. Accor plans to link up forces with Ennismore, owner of brands like Gleneagles and the Hoxton, on building up a lifestyle hotel conglomerate.

Accor leaders have described lifestyle hotels as those that make half their revenue from food and beverage outlets; though, some company leaders in interviews with Skift raise that figure to as high as 70 percent for all non-room uses when you consider other amenities like coworking or entertainment.

IHG Hotels & Resorts, which has about 450 of these properties and currently plans for roughly 200 more, has even noticed the experiential elements of lifestyle hotels seep into brands not typically within the sector like Even, the company’s brand focused on health and wellness.

“It’s not just about the gym and spa,” said Jane Mackie, a senior vice president at IHG. “It’s about movement, diet and exercise, and sleep. A lot of those lifestyle choices people make use that experience and our learnings from lifestyle brands to improve the overall experience.”

But no city depends on experiences for its recovery like Las Vegas, where sporting events and concert residencies are major draws for weekend crowds.

MGM Resorts CEO William Hornbuckle is particularly bullish on the return of Sin City, given how shows for stars like Dave Chapelle have sold out in a matter of hours.

“Fundamentally, nothing has changed. We’re selling out 80, 90 percent weekends, 70 or 80 percent mid-week and growing consistently,” Hornbuckle said. “The last 90 days have literally been on fire.”

Keep in mind: that’s all without the return of major events, which kick into high gear later this year.

All Eyes on September

Major acts returning to Las Vegas residencies later this year is a win for Sin City, but the greater hospitality industry still has a major test come September.

Leisure travel dominates the current hotel recovery pattern, but what happens when in-person school is back in session and more companies call back workers? While there has been a lot of speculation about the death of corporate travel following the virtual working world of the pandemic, the hotel industry has rallied around the idea of pent-up business and events travel demand.

Hornbuckle noted there are more room bookings for 2022 at MGM Resorts than there was in 2019.

Even more business transient demand is expected to kick into high gear this fall, despite predictions last year from the likes of Bill Gates saying as much as a half of corporate travel could permanently go away due to the cost-savings discovered while working on platforms like Zoom.

“Every corporation we’ve spoken to, they’re getting ready to send their sales teams out,” Perez-Alvarado said. “Everybody’s mind is on getting on planes, trains, and automobiles to go meet customers and other businesses.”

Photo Credit: Major hotel markets like Las Vegas are expected to roar back to life this year, but hotel owners have to accommodate changing traveler demands. EconomicOldenburger / Wikimedia