Big-box group hotels — those properties with at least 50,000 square feet of meeting space — face an uncertain road ahead, but if the overall hotel industry has any hopes of a full recovery, this type of property will need to quickly regain its mojo once the global pandemic subsides, according to industry observers.
“For the industry to come near a full recovery, these hotels are going to have to be up and running at levels similar to what they were before the virus,” said Mark Lomanno, partner and senior advisor for Kalibri Labs, whose data indicates that more than half of the guestrooms in such properties are closed. “Unless there’s a pretty significant recovery for the big boxes, the rest of the lodging world is going to be challenged. They’re really important.”
Big-box hotels are critical to the hotel industry, according to Jan Freitag, SVP of lodging insights for STR.
“This bellwether idea of the big box in important,” he said. “We have large groups coming together. To say we have a big group in-house is critical to the messaging for the industry. Those are the ones that create compression, and there’s spillover that lift all boats (in the market).”
The recovery period for large group-oriented hotels will vary depending on their location and the mix and type of their group business, said Bob Gilbert, president and CEO for Hospitality Sales & Marketing Association International.
“There will be commercial sectors (such as pharma and governmental emergency services) that will have a higher sense of urgency to reactivate their meetings and training calendar than, for example, a non-essential social organization,” he said. “Certainly, there is pent-up demand from many sectors, but how quickly their attendees are willing to travel — fly versus drive markets may also impact recovery time — will play a role.”
Loren Edelstein, VP and content director for Northstar Meetings Group, said the meeting industry greatly values the big-box hotel concept — and the sector will need to take a leadership position in the recovery to return to its previous levels of success.
“We’re going to learn as we go and find new ways of doing things,” she said. “It’s a challenging time, but we’re going to have to be inventive and smart as we go forward.”
The start of the recovery may very well begin this year, but it’s not going to be a complete turnaround from the current landscape any time soon, sources said.
Freitag said STR is expecting three distinct segments of demand to define the industry’s recovery:
- Leisure travel to drive-to markets. “We saw that post-9/11, and we expect that this time around, partly because people just need to get away. There will be demand in drive-to markets, high-end resorts.”
- Corporate transient. “This will happen when the CEO, who is now the chief risk officer, is comfortable with traveling.”
- Groups and meetings demand. “It will come back in a different way. If we’re living in a 6-foot world (because of social distancing guidelines), what does that mean for attendance in a ballroom?”
Freitag said that while technology has allowed meetings to become efficient, the social aspect of them is what a lot of people will crave — especially after missing out on it for an extended period during lockdowns.
“For sure this is temporary,” Freitag said. “We know this because we know the China data. Chinese occupancies—after being single digits at the end of February — are now back up to 30% or so. We know this is a severe, severe disruption, but it is temporary.”
Edelstein said meeting planners will tend to avoid places that were super hard hit and heavily populous cities.
“Second- and third-tier locations will benefit from this,” Edelstein said. “Drive markets will be big.
There will be smaller, more regional and local meetings rather than national and international meetings.”
Big-box hotels typically depend on a large number of people in their facilities to support all their food and beverage outlets and other revenue centers, according to Gilbert.
“This population base will directly impact their staffing levels and operational profit from various revenue centers,” he said. “If this sector of the industry did not exist, more events would get displaced to convention and municipal centers with hotel demand absorbed by multiple hotels in a market.”
The Numbers Back It Up
Survey results and data crunches illustrate the difficult situation for the conference-hotel segment.
Northstar Meetings Group’s Pulse Survey — a biweekly polling of meetings and events professionals — indicates in its May 6 report that there is uncertainty about the number of large conferences and meetings in the foreseeable future, Edelstein said.
Thirty percent of the approximately 800 respondents indicated they expect to plan fewer meetings in the future, while 30% said it is too soon to know whether they’d be planning fewer events. Thirty-four percent said they expect to plan the same number, while 6% said they expect to plan more.
“The expectation is the smaller, suburban properties, resorts and boutique hotels will be in more use. They’ll have less of a decline (in the number of meetings scheduled),” Edelstein said.
Meanwhile, Kalibri Labs’ data points to slow group nightly pickup through the rest of the year, according to Lomanno.
“Most things through July are being cancelled,” he said. “After that, the cancellations slow down a lot. Hoteliers are hopeful that what they have on the books stays there.
“Beginning in August the negative between the cancellations and the pickup is as small as it has been (since the virus arrived),” Lomanno said. “There are expectations by some people that things will turn around by the end of the year.”
The best news? “There haven’t been hardly any cancellations for 2021,” Lomanno said.
That would be a big leap from the current environment. STR data for the 306 U.S. hotels (279,281 guestrooms) that possess at least 50,000 square feet of meeting space, paints a stark picture:
|Occupancy||Average Daily Rate||Revenue Per Available Room|
|March YTD 2020||54.8%||$190.96||$104.63|
|March YTD 2019||72%||$189.05||$136.05|
“For the big-box hotel, of course group is critical because that allows them to yield up for the business transient demand,” Freitag said. “Unless you count medical workers and first responders, who are self-isolating, there is no organized group or convention demand.”
Operations Will Need An Overhaul
Finding alternative options in operations will be essential for a big-box hotel recovery, sources said. Mass temperature checks, many more hand-washing and hand-sanitizer stations, buffets that are no longer self-serve for guests, the reduction of room keycards, and completely different conference seating and guest-queuing techniques are just some of the changes big-box hotels will have to implement.
One needs to look no further than the 24-page “Wynn Las Vegas Health & Disinfection Program” (downloadable PDF) unveiled by Wynn Resorts to see the depth of the issue. Hotel companies and industry associations have introduced cleaning and disinfection programs as well.
Providing a safe environment for a large event to happen is the obvious concern, and there could be a silver lining, Edelstein said.
“The good thing for the big hotels with lots of meeting space—if you consider that a meeting room might only be able to be filled at 25% capacity (because of social distancing measures)—is that meeting planners will want the big hotels because they’re going to need more room to space (delegates) out,” she said. “If you have a meeting that you normally need space for 100 people, you might want to go to a hotel that houses 400 people.”
Some hotels will take every other room out of service at regular intervals for deep cleaning and sanitization purposes, which could help an overall market, Freitag said.
“Maybe you lower the room count and create compression that way,” Freitag said.
The biggest obstacles for big-box hotels’ road to recovery will range from compliance with safety and cleanliness standards as well as capacity chart revisions related to social distancing, according to Gilbert.
“These may vary by company or by municipality, by state or by country, and compliance varies by the type of group,” Gilbert said. “Many group customer segments may also have very different expectations of attrition and cancellation clauses. Many conference organizers will likely struggle with accurately forecasting attendance numbers, so they will want more flexibility than hotels have recently been accustomed to.”
Beyond the short-term crisis needs, safety and sanitization practices will clearly dominate every hotel operation short-term, and this will only make the industry better, Gilbert said.
“The guest of the future will come to expect this no different than their expectation of free Wi-Fi,” Gilbert said.