Room at the Inn: The post-COVID Era of Hospitality

With the dismal opening of Disney World amidst Florida’s spike in COVID-19 cases, the uncertain fate of the hospitality industry has reached new heights. Despite praise for its extensive precautions, low visitor numbers foster doubt about whether Disney can pull off magic and masks. Disney, like many other hospitality franchises, faces a bleak reality; COVID-19 has decimated international travel for the near future, as many countries maintain border closures and enforce strict quarantines. Some hotel chains stepped up in the early weeks of the pandemic and acted as makeshift hospitals, but empty rooms and unemployed workers are a grim reminder of their decreased utility in the absence of tourists and business travelers. Most outlets forecast recovery for the global hotel industry for about 2023 — but the uncertainty of COVID-19 hazes this prediction.

In the meantime, the pandemic has forced many hoteliers to intensify room cleaning, add contactless check-ins, and perform daily temperature tests for guests. While these short-term measures are important to ensure customers are comfortable, as COVID stretches into a months-long crisis with no foreseeable end, the return to hotels is contingent on how safe guests feel long-term. Loews, one of the largest hotel groups in the United States, has already taken this into consideration and begun a massive rebranding campaign. Its campaign, “Welcoming you like family”, attempts to “define Loews as more than simply a collection of hotels, but a brand deeply rooted in welcoming and caring for guests like family.” 

This campaign aims not just to gain trust from the newly cautious traveler; more relaxed domestic travel means hotels are seeing a new type of guest occupying their rooms - the domestic tourist. Prior to COVID-19, conference goers and corporate guests dominated the broader hotel market, accounting for the majority of occupancy and in most cases, significantly driving revenue. As business travel is forecasted to be the last type of travel to return, hoteliers have no choice but to accept that leisure travelers, in particular staycationers, will direct demand in the long-term. Coming from within a five-hundred-kilometer radius and staying anywhere from one night to one month, the domestic tourist requires amenities like kitchens, laundry facilities, and ample space to exercise or wind down. Although some suite style hotels may fit this criterion, many traditional hotels have to rethink their operations to adapt to these needs. Loews reacted to this change of clientele by offering incentives for families such as complementary cribs, allowing pets, and letting kids under eighteen stay free.

The home-away-from-home style of accommodations offered by Loews is nothing new; Airbnb has successfully delivered this experience since 2008. Initially, Airbnb’s future seemed uncertain given travel shutdowns, company-wide layoffs, and quarterly losses nearing $400 million. However, apartments and longer-term rentals, rather than hotel rooms, may be exactly what the COVID-era travelers need. For the first time since February, Airbnb has seen year-over-year growth in gross booking value; moreover, the company has booked more than one million nights worth of future stays at Airbnb listings in a single day, the first time this has happened since March 3rd.

Airbnb is betting big on domestic tourism as the company faces its long-awaited IPO. After filing confidentially for their IPO in August, Airbnb hopes that their surge in bookings will provide investors with a glimpse of how tourism will bounce back – less international travel to popular cities, and more local, long-term trips to lesser known destinations. Before the pandemic hit, the startup had planned to go public in early 2020 through a direct listing, since it didn’t need to raise any capital. However, after the pandemic brought travel plans to a sudden halt, the company delayed its IPO plans and raised $1 billion through a syndicated loan from private equity firms to weather the mounting cancellations and pent-up demand. 

Airbnb isn’t the only hospitality company that received a vote of confidence from consumers and investors; Sonder is another non-traditional hospitality firm fresh off a $225 million funding round in July, which valued the company at around $1 billion. Founded by a McGill freshman in 2012, Sonder manages and leases their own rentals as licensed hotels for anywhere from one night to two years. In doing this, Sonder offers the best of both worlds; fully furnished apartments with 24/7 concierge services. Like Airbnb, Sonder is suited for contemporary urban travelers, perhaps more so because they can assure standardized cleaning and safety measures as they manage their own properties. Their “private homes” offer exactly the familiar and comfortable atmosphere sought by long term guests, and investors have caught on. 

While companies like Airbnb and Sonder fit the current climate perfectly, the question still remains whether this type of accommodation will be the driving force behind the future of the hospitality industry. COVID-19 may be with us for longer than anticipated, resulting in traditional hotels taking a step back to focus less on their communal spaces and more on what each individual room can offer to their guests. Many hotel chains have already begun this transition by upgrading their units with kitchens and workout equipment, calling into question whether startups Airbnb and Sonder will be able to dominate traditional hotels in the long-term. After all, staying in a hotel versus a short-term rental is a dilemma that travelers have faced for years; at the end of the day, nothing beats coming back to a clean room, putting on a complimentary bathrobe, and ordering room service.