From Conventions to Reinvention: Five New Considerations for Generating Stable Hotel Revenue

By Kaitlyn Wallace

As COVID-19 has swept across the globe in recent months, many (if not all) industries have faced dramatic changes. Factors such as social distancing, sanitization, and self-isolation have shifted the way businesses operate across the U.S. and across the world. And nowhere is this truer than in the hotel and tourism industry.

With travel being actively discouraged for most of 2020, hotel reporting statistics such as occupancy, average daily rate (ADR) and revenue per available room (RevPAR), collected from Smith Travel Research (STR) have demonstrated all-time lows in hotel occupancy and revenue. With an absence of the usual variety of alternative revenue streams such as on-site events and conventions, hotels have been left with few options. In this time, permanent closings, lay-offs and furloughs, and onset of or increasing debt have devastated the industry, leading many to contemplate the feasibility of a future for the tourism and hotel industry at all.

Like all industries in the era of COVID-19, innovation and adaptation are key. With no clear revitalization of travel and tourism in the near future, hotels are looking to alternative business pursuits in order to generate steady revenue and employment, as well as diversify their business portfolios. Read on to learn about five alternative business pursuits that could help revitalize the hotel industry.

  1. Conversion to Rentals

One of the most promising alternative business pursuits during COVID-19 is the conversion of hotel space to residential apartment complexes (with leases available for one year or more) and/or short-term rentals (with leases available for one month or more). This model has existed with promising success pre-COVID-19, particularly for older hotels which have been entirely converted to luxury apartments. However, this model can be expanded to partial conversions (for example, converting 10-30% of hotel rooms to long-term rentals) or mixed conversions (which include a mix of day-to-day, monthly, and year-long rentals). Some advantages of this model include a more stable cash inflow, relatively little construction or conversion costs in comparison to establishing a new property, and a more diverse portfolio or revenue sources, all of which could be highly advantageous in the unstable economic climate that hotels cannot currently thrive within.

There are several considerations for hotel management to examine before committing to conversion. These include the macroeconomic environment of the surrounding area, including housing availability and cost, legal considerations such as changing insurance requirements, building codes and zoning, and space considerations, such as ease of conversion of floor plans and introduction of new amenities.

  1. Government Partnerships

Shorter-term option for hotels during COVID-19 could include governmental partnerships. The city of Chicago, for example, has partnered with hotels in order to provide private self-isolation for people who have been exposed to or experiencing mild symptoms of COVID-19. This partnership has several advantages. It allows cities to relieve some of the hospital burden of mild COVID-19 cases while working to slow the spread of the virus, and allows hotels to generate revenue and reintegrate hotel staff that have been laid off or furloughed. Like rental conversion, however, there are several considerations to be made before fully committing to usage of hotel space for isolation purposes, including an increased focus on sanitization and safety for staff. Regardless, for hotels that don’t want to make the full leap to room conversion, isolation housing and other temporary government partnerships have the potential to be a great alternative revenue option.

  1. University Partnerships

For a long-term temporary option (a year-long partnership, for example), hotels near universities or other educational settings have the option of housing and/or facility partnerships. This option has a history of success in both pre- and post-COVID-19 eras. For example, institutions such as the University of South Florida-Saint Petersburg (USFSP), Virginia Tech, New York University, and University of Southern California, among others, have partnered with hotels to house college students when their dorms have reached capacity in the past. During the post-COVID-19 era, the need for increased college housing has greatly increased. To say that close-quarter living, in which students share rooms, bathrooms, and communal spaces (coming into close contact frequently), is unadvisable is an understatement; to this end, universities have been looking to disperse college housing in new and innovative ways. Universities such as Northwestern University and University of Colorado Boulder have already made plans to disperse their students across dorms and hotels for the coming year and semester. University partnerships could be an excellent option for hotels that don’t want to commit to a full restructuring plan but want a more stable source of revenue than isolation housing, which can ebb and flow much more than a structured year- or semester-long plan with a university.

  1. Marketing and Amenities

Another option that doesn’t require complete restructuring is targeting marketing efforts towards COVID-19-conscious options and amenities that hotels can uniquely provide. For example, hotels have seen an unprecedented use of hotel rooms as temporary individual office space as many office-based employees struggle with work-life balance and separation. Capitalizing on work-life separation marketing could see a moderate increase in hotel room utilization for individuals desperate to be able to “leave their work at work.” Similarly, apps such as Daycation have begun to capitalize on hotel amenities without requiring an overnight stay. Taking advantage of other amenities, such as restaurants with outdoor seating, pool or fitness center access, or access to a business center, can help hotels maximize non-occupancy revenue without major restructuring.

  1. Facility Rentals

Finally, it is always possible for hotels to utilize space and amenities previously available for conventions or events for alternative purposes. For example, event spaces could be used as year-long rentals for mini studios, wellness clinics, or socially-distanced office space. Hotels could also partner with any institution or business with a need for increasing physical space in order to accommodate socially-distanced activities for large groups of people. Reaching out to local businesses or schools has the potential to generate short- or long-term leases, diversifying your revenue stream without needing to commit to major conversions.

Like every industry, hotels are facing unprecedented challenges which many will not survive. The hotel space is changing rapidly, and the future of the industry is uncertain. In order to survive, and even thrive, hotels will need to innovate and adapt at an accelerated pace. The examples outlined in this article are just a few good options for generating stable revenue and employment. Pursuing any of these options, as well as coming up with unique solutions that work with your property and business plan, will greatly increase a hotel’s prospects of surviving the COVID-19 pandemic and the economic challenges that have come with it.

MM&E

Kaitlyn Wallace is a contributing writer/editor from St. Louis.

 

About the author

Joe Clote

Joseph W. Clote is owner of Publishing Concepts, LLC a communications and marketing firm based in Saint Louis, Missouri. Mr. Clote is Group Publisher of MeetMed™ and Missouri Meetings & Events™ (MM&E) magazine, a quarterly publication read by thousands of meeting and event professionals, and producer of the St. Louis and Kansas City trade shows under the MM&E name. Mr. Clote has extensive sales and marketing expertise in the travel, tourism, fine art, insurance, and software development industries.