Since March, a lot of questions surrounding the hospitality market have started to arise. As the market serves two key clienteles, we’ll consider both sides of the business: the vacation & leisure segment, and the business travel segment. We’ll begin with the vacation and leisure side.
In spite of being one of the most enjoyable parts of the year, vacations have been put on hold or plans altered for almost everyone as a result of Covid-19. While this may be challenging for individuals, the hospitality market as a whole is facing incredible uncertainty regarding its return to “normal”. Given the cost structure of the market and the high number of travelers needed to make it worthwhile, the most recent report published by McKinsey & Company raises interesting points.
For instance, how much pain will the industry be able to withstand before turning the page? And of course, will the majority of participants be able to turn the page? Or will they be forced to cut their losses?
When evaluating the second segment of the market, their picture is not so pretty over the long term. Even after moving closer to the old “normal”, it still needs to be asked: will business travel return to the degree we knew it? Regardless of how many experts weigh-in, my gut tells me one thing: “I’ll believe it when I see it”. It’s not going to be an easy climb back up the hill.
How many employees will have the desire to go back to their old ways of booking travel (which can be an administrative nightmare), getting to the airport on time, waiting in line, getting on the plane (if there are no delays or cancellations), then there’s the lost luggage, the rental cars, the hotel check-ins. There’s a lot of waiting involved which is not a pastime enjoyed by many… and we have yet to discuss eating multiple meals in restaurants each day.
But what is very real is the amount of time and money saved by employees and employers alike. The new virtual formats in place will have a lasting impact on this segment, which will in turn impact the real estate market. There’s a clear shift afoot.
Gone are the days of running between multiple meetings in multiple cities. For years we’ve been connecting virtually, having digital conferences, and attending online webinars. We’ve proven to an even higher degree how these can save a lot of resources – all for the price of an internet connection. To boot, we can reach a wider audience by delivering online.
But then there’s the other side of the coin. What happens when business travelers mix their business trips with their personal time? It’s common to book time off following a business trip (while still on the trip). So why not? It’s highly affordable. As reported on National Geographic, “A 2016 survey by Expedia Group Media Solutions found that leisure travelers worldwide turned 43% of their business trips into vacations. That figure increased to 60% by 2018”. This poses an interesting question: if business travel declines, will personal travel increase to offset it? Or will the relationship be positively correlated?
How to Move Forward in the New World
When it comes to hotels, the one-size fits all approach may no longer be enough to stay afloat. Instead, innovative new uses for this space are currently being tested, and why not? There may be no better space to take time away from the new office – home. They’re even better than traditional offices. No annoying co-workers, no one to placate. Just check-in and work for the day. If you’re tired, then have a nap. Hungry? Room service is no more than a phone call away. People want more than a place to stay they want an experience and a feeling of community. In this vain “Instagrammable hospitality” is a concept spreading more rapidly as per this interesting article in Glion Magazine. One thing for sure is that the hospitality market needs to adapt out of the box thinking in line with lifestyle and technology shifts.
I want to hear what you have to say. Add your thoughts to the comments and let’s keep this conversation going.
– For Real Estate Trends, I’m Moses Gross.
