A cleaner in the lobby of MGM National Harbor Resort & Casino in Oxon Hill, Maryland. Several MGM Resort hotels now offer “office-ready” rooms. After work, people can have fun at the casino.
Financial adviser Ana Raviña used to travel overseas almost every week of the year, hopping from one hotel to the next. As part of her job in international development, she regularly flew to Latin America and Africa. She also traveled widely around Europe to meet with donors, investors and clients.
For many traveling professionals like her, hotels were until recently a second home: More than just a place to sleep, they served as offices, meeting rooms, gyms, a place to have a drink at the end of the day. Then, the coronavirus broke out, and the hotel industry lost a sizable chunk of its clientele almost overnight.
Today, eight months on, companies are extending their restrictions on corporate travel, and the hotel industry is suffering badly.
Revenue per available room—a key industry metric—in the U.S. is expected to drop by more than 52% this year, and won’t recover to pre-pandemic levels until 2024, according to the forecasts of hospitality research group STR.
European hotels face an equally dire outlook. Despite the easing of containment measures across the region this summer, revenue per available room in July was still down 73% on the year, according to STR data. By 2024, only 72% of European cities will have recovered to their pre-pandemic levels of international visitors, according to forecasting firm Tourism Economics.
Ms. Raviña, who lives in Santiago de Compostela, Spain, remembers one week in January when she was in seven different cities: Santiago, Rome, Zurich, Amsterdam, Madrid and Nairobi, with a layover in Doha.
She hasn’t traveled for work since February, and says the coronavirus has made businesses realize that most of the meetings they had held in person can now be switched to virtual ones. “If it wasn’t for the pandemic, we wouldn’t have had such a rapid transformation,” she said.
Analysts say the pandemic will likely make businesses reconsider travel more generally, with long-term consequences for the hospitality sector, which relies greatly on business travelers: In the U.S., direct spending on business travel totaled $334.2 billion last year, or roughly 30% of all spending on travel, according to the U.S. Travel Association. In Europe that share is 22%, according to the World Travel and Tourism Council.
The hospitality industry is going through enormous disruption, said Neil Shearing, group chief economist at Capital Economics. “Business hotels will struggle in a post-Covid world,” he adds. He sees these hotels switching their focus to leisure travel as the share of business travel shrinks.
Other hotels have seen a business opportunity in the rise of remote work and are pivoting their business toward this growing segment.
German hotel chain Achat, for example, is inviting its customers to swap their home office for its “HotelOffice.” The firm has 4,000 hotel rooms in 33 different cities across Germany that can be turned into office space for those who can’t focus at home. The package includes a room with a big desk, fast Wi-Fi, and a laser printer for 39 euros a day, equivalent to about $46, or 175 euros a week.
“Our HotelOffice gives our customers the needed separation between work and private life, which is really important for our mental health,” said Achat CEO Philipp Freiherr von Bodman.
In Las Vegas, several hotels have also started offering “work from home” packages that allow people to combine work and travel, said Leith Martin, director of the Troesh Center for Entrepreneurship and Innovation at the University of Nevada, Las Vegas. Although it is best known as a leisure-oriented destination, the city is an important location for business meetings and events too, and ranks as one of the top convention cities in the U.S. Hotels there are looking for ways to compensate for the collapse in demand from business travelers.
“Viva Las Vegas” has changed to “Viva Las Office.” MGM Resort hotels such as the Bellagio and ARIA now offer “office-ready” rooms complete with secure Wi-Fi and plenty of Zoom-worthy backdrops. After work, people can have fun at the casino.
Shocks like the pandemic don’t create changes out of the blue, but they do accelerate ones that were already under way. One of these transformations is the use of automation in hospitality, Mr. Martin said.
“Many of the resorts in Las Vegas have started installing technology during the pandemic that will over the long-term more than likely reduce the total head count necessary to operate the properties,” Mr. Martin said. Something as simple as being able to check into your hotel room with your phone as opposed to going to a front desk might have an impact on the number of people hired, helping hotels keep their costs down while they weather what looks set to be a protracted downturn.
Southwest Airlines Chief Executive Gary Kelly predicted that it would be a decade before business travel returned to 2019 levels, Mr. Martin pointed out. “Let’s say he is only half right, that’s still five years! That would mean a major shift in the way we have historically done business in the U.S.,” he said.
“Leisure and private travel will recover as soon as it’s safe because traveling is in people’s DNA,” Deutsche Bank analyst Eric Heymann said. He is more skeptical when it comes to the business segment.
There is a huge cost argument against business travel, he said. Although conferences and trade fairs probably won’t disappear, Mr. Heymann thinks the popularity of these events, their duration and the number of attendees could decrease in the future.
“It will take a long time until the business travel sector recovers from the pandemic crisis, and it’s unclear if it will ever reach pre-pandemic levels, at least in industrialized countries,” Mr. Heymann said.
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