Hotels ponder a puzzling future

New York

AS travel picks up amid signs the pandemic is waning, the hotel industry hopes its fortunes will rise, too. But so far, it's not clear when that moment will arrive - or whether some of the changes they have had to make will become permanent.

Hotels have struggled with labour shortages, for example, that have forced some to close completely and others to scale back services - like daily cleaning of guest rooms and restaurant hours.

Given the uncertainty about whether those workers will ever return, one industry expert predicts robots will take over some of the tasks once done by workers who have found better paying jobs elsewhere.

Hotels are also experimenting with ways to boost revenue - for instance, charging extra for some services, scaling back reward programmes and adding amenities to attract longer-term guests free to "work from anywhere".

The effect of the pandemic on the industry has been uneven at best, with US cities like New York among the hardest hit. One glimmer of hope: the Biden administration announced it will open US borders in November to vaccinated travellers from certain countries, including Canada and Mexico.

In China, travel has been greatly affected by Covid-related lockdowns, and Africa's low vaccination rates have depressed international travel there, said Jan Freitag, national director for hospitality market analytics at CoStar Group.

Michael Bellisario, lodging analyst for Robert W Baird & Co, said in the week ended Oct 2, 20 per cent of hotel rooms in the New York metropolitan statistical area - which includes New York City and surrounding communities - remained closed, though there are some signs of improvement.

The Grand Hyatt New York in Manhattan, which closed in spring 2020, is scheduled to reopen under the new name Hyatt Grand Central New York on Nov 1, while the New York Hilton Midtown, closed since March 2020, reopened on Oct 4; both are convention favourites. The Four Seasons Hotel New York, on East 57th Street, has been closed since summer 2020 and is not expected to reopen before next spring.

One obvious change likely to persist, particularly at three- and four-star hotels, is a decline in customer services. When called back to work, employees - housekeepers, doormen, porters, as well as workers in kitchens, restaurants, parking garages, health clubs and spas - often opted not to return to jobs that frequently paid a minimum wage.

Many have found jobs with better pay, hours and benefits at companies like Amazon, Walmart and Home Depot. Also exacerbating the labour shortage at US resorts, Freitag said, has been the inability to hire seasonal workers from outside the US, a group they heavily depend on in normal times. Similarly, the hotel labour pool in the UK has been affected by Brexit-imposed restrictions on immigrant workers, Freitag said.

This shortage of labour has had an effect on the guest experience, from longer check-in lines to reductions in daily guest room housekeeping.

Hilton, for example, announced in a press release in July that complimentary housekeeping would be available only by request at its three- and four-star properties, though housekeeping at its luxury brands - Waldorf Astoria, Conrad and LXR - and its Asia-Pacific properties would not be affected.

It is unclear whether changes in housekeeping frequency will last. Regardless, Henry Harteveldt, president of Atmosphere Research Group, a travel marketing research firm, expects hotels will become increasingly reliant on robots, which can disinfect guest rooms or prepare coffee or salads in kitchens, helping hotels make up for lost human labour and reducing costs.

One way hotels can improve their labour shortage is to offer prospective workers higher wages. However, Patrick Scholes, lodging analyst for Truist Securities, said that would require raising wages of existing employees in comparable positions, as well. To do both and maintain profit margins, hotel owners would have to raise room rates - a move that would cut into demand, particularly at urban hotels, in the current climate.

Raising rates would likely further suppress demand among travellers alienated by declining services - what Bellisario called a "Catch 22" problem for which there is "no answer". Another grim front: business travel. With so much business now conducted through video calls, such travel is dramatically down, especially at urban hotels. Bill Gates predicted last year that half of all business travel will not return. Freitag said executives will likely "take a hard look" at travel expenses and cut where possible.

To return to profitability, hotel owners are expected to cut other costs besides labour.

Harteveldt said one way they can do this is to tweak participation in their brands' loyalty programmes. Owners of branded hotels pay their brands - such as Marriott, Hilton, Hyatt and IHG - every time a loyalty programme member stays at their hotel and earns points.

Harteveldt said he expects owners will try to make it harder for loyalty programme members to redeem points for free reward stays by limiting the number of rooms available for these stays, and by requesting that brands elevate their properties into higher reward tiers, which require more points for free stays.

Limiting rooms for free stays will mean hotels will have more inventory available for revenue-producing paid stays. He further predicted hotel brands will permit such changes because they do not want to lose owners to competing brands. NYT