Although Covid-19 seems to be here for a while, the pandemic is nearing its end. Businesses that were shut down and running at 50% capacity are expected to revive back in this year. This includes the hospitality real estate industry too. The hotel industry is ready for a comeback with new hotel trends with the recovery of business and international travel.
In 2020 lockdown restrictions and travel bans resulted in the whole world coming to a standstill. However, the impact on the travel industry was severe. Hotels were restricted to operating as take-outs only. Eight out of ten hotel rooms went vacant during the pandemic. Vacancy rates were at an all-time high. Travel intent saw a steep decline soon after. As a result, hotels had to let go of almost 70 percent of their employees. Hotels almost became a non-performing asset and investors started to pull away from investing in hotel real estate.
Fast forward to 2022, and though the pandemic is still not over, the situation seems almost normal. Businesses are returning to a normal level of operation after a long time. The hospitality industry is too set to recover this year. But, the pandemic has changed our day-to-day lifestyles drastically, along with the way we conduct business. The hotel industry needs to come up with new strategies and adapt to certain trends to survive the aftermath of Covid.
Lilypads has done the hard work and dug up some of these hospitality trends for you which are as follows.
Hotel trends that will revive the industry in 2022
Here are 9 trends in the hospitality industry that hotels need to adapt to make a comeback.
1. Digital Experience
From mobile check-ins to smart rooms, from booking a hotel room to transactions everything is going digital. Thereby, creating a more contactless environment. Real estate investors can also take advantage of these technologies during transactions and dealings.
2. Personal Well-Being and Health
The present scenario demands hotel rooms, lounge areas, dining, hotel gyms, spas, and elevators are needed to be properly cleaned regularly. In addition to spas, guests also want health diagnostic technology, stress management, and healing sessions conducted by experts.
3. Virtual Reality and Augmented Reality
VR(Virtual Reality) technology allows guests to take virtual tours through the hotels and see the environment from every angle. On the other side, augmented reality enhances the surroundings by making the surroundings more interactive. As a result, this improves guests’ local experiences as well as hotel management services.
4. Bleisure Travelers and Hotel Workspaces
Another hotel trend that has gained quite a popularity in the travel industry is combining business with leisure travel. The unused hotel spaces are being turned into flexible workspaces. Hotels in 2022 have a great chance to benefit from leisure travelers.
5. Economical Travel Preference
Pocket-friendly stays like Airbnb, homestays, and vacation rentals have introduced a cheaper and minimalistic solution in the hotel market. Travelers are now preferring less expensive rooms and instead spend on leisure activities like tours, fine dining, etc.
6. Solo Traveling
Individuals are in desperate search of freedom from staying cooped up in their homes. As a result, 2022 will see a boost in solo travel. To attract more solo travelers, the hospitality industry is undergoing modifications. Such as changes in interior designs and lowering barriers between solo travelers and hotel staff.
The hotel industry is trying to engage its target audience through personalized email greetings. Technologies like CRM and CEM software help to interact better with the guests. In addition, chatbots also enhance the guest experience by attending to their needs at any time.
8. Asset Management
Asset management in the hotel industry is not new. There is a trend in the hotel industry to separate real estate asset management from operations management. Doing so relieves the hotels from property management and allows them to give their full attention to operation management. Thus increasing productivity and business growth.
People, mostly millennials, are more conscious of the environment. These people are shaping the hospitality industry with eco-friendly trends. Such as adding vegan options to their restaurant menu, ensuring a plastic-free zone, and others.
Hotel trends 2022: Things Investors Need to keep in mind
Hotels operate differently from other commercial real estate properties. Their operation and business management are different from other categories. But the pandemic had its impact on all regardless of the sector. Therefore to survive and make a comeback, hotel owners and revenue managers need to rethink their old ways of conducting business. Here are some
1. Increase in stays
A hotel’s main source of income is its occupancy rate. Study shows that in the last year vaccination drives and loosening travel restrictions has led to an increase in hotel bookings.
According to STR, the hotel industry has seen an increase in RevPAR by 83% since the pandemic. Although the numbers are not greater than in 2019. But it indicates that the market has picked up the pace and is expected to revive in 2022. Night rates had a drastic improvement and experts believe ADR will recover fully by 2022. This promising economic outlook of the hotel industry makes it an investment opportunity for real estate investors.
2. Demand for leisure travel
Hotels located in scenic beauty environments such as beaches, springs, and others recorded higher foot traffic. Withdrawal of travel restrictions led to an increase in leisure travelers opting for hotels in popular vacation destinations. 2022 will see a huge rise in leisure travel. As a result, demand for hotels might be more widely spread since the economic environment will be more open.
3. Budget hotels on the rise
Besides leisure travelers, most travelers are conscious about how much they are going to spend on accommodations. According to GlobalData, price is an important factor when selecting hotel rooms. Travelers are preferring budget-friendly stays to fulfill their desire for traveling in this economy. As a result, budget-friendly hotels and chains are expected to soar in 2022.
4. Local attractions
Although travel restrictions have been lifted, many people are still not comfortable with traveling far. 2021 saw an increase in sales of recreational vehicles (RV) and boats. Indicating that people are preferring to travel locally for now. Therefore, the construction of hotels located near local attraction sites like lakes, parks, and mountains looks promising.
5. High returns
In comparison to other kinds of commercial real estate, hotels provide high returns with the right management. A good investment manager can help minimize the risk and assist both hotel and real estate operations. Moreover, the cap rates of hotel real estate are higher in general making it a perfect choice for investors.
6. Tax benefits
The deferral of capital gains taxes on real estate investments is one of the biggest reasons for investors to stick around. Just like any other real estate property, hotels are subjected to depreciation as well. The depreciation expense helps in offsetting taxable income. Moreover, hotels are the only real estate assets that provide bonus depreciation policies.
Another tax benefit that investors enjoy is cash-out refinance. The funds withdrawn as cash equity are not taxed at the federal level.
Granted, a hotel’s main source of income comes from travelers. But in light of recent events, this may not work as usual. One of the biggest features of hotels is they are flexible and can adapt to the latest trends.
These new hotel trends require them to adapt to all kinds of situations. From changing the interior design according to travelers’ preferences to utilizing vacant spaces for office workspace. Thereby ensuring a steady cash flow for investors.
In urban areas, multi-family investors are looking for hotels that include kitchen space to convert them into apartment studios.
8. Business travel will take time to return
The majority of the employees are still preferring work from home. And since the pandemic is not completely over, employers do not feel safe sending their employees on business travel. Business travel is often accompanied by leisure travel, which is expensive. Another reason for employers to cut down on business travel. As a result, business travel may not see much growth in 2022. And being one of the biggest income sources for hotels this might be something investors must look into.
The Lilypads Bottomline
As we have already seen in 2021, the hotel industry gradually started to pick up its pace. And these new hotel trends will further help revive the industry investors might want to reconsider joining the industry again. Lifting travel restrictions and successful vaccination drives open a good opportunity for real estate investors. Thus 2022 is expected to be a good year for hotel investment.
However in some cases, for the past couple of months, hotels have suffered a historic low in their revenue generation. Hotel owners are forced to sell their properties below market value because of this, making hotels an easy grab for investors.
As the industry is recovering slowly, this might be a good time for investors to dive into hotel real estate. But, make sure you choose the right hotel in the right location as all hotels may not perform the same.