How will the hotel industry recover from COVID-19?

Hotels were hit fast and hard when the pandemic began to spread. What’s next for the sector?

July 30, 2020

If Hollywood writers had written the script for how fast and hard the hotels industry was hit by COVID-19, most producers would have laughed them out of their office. Nearly overnight, many hotels went from “no vacancy” to “high vacancy.”

But even before that, disruption had upended the sector. From Airbnb to VRBO and others like them, many outside forces were pushing dramatic change on the industry. Guests wanted an experience, not just a room.

As Gilda Perez-Alvarado, CEO of JLL’s Hotels & Hospitality Americas, tells James Cook, now they’re wanting even more, including the security of knowing that where they rest their head at night will be clean and safe. 

James Cook: [00:00:00] If you're taking a vacation this summer, chances are it's a staycation. And that means you're not going to be staying at a hotel with nearly all business and leisure travel on hold right now, due to COVID-19 the hotel and travel industry. It's just on pause, but that's today, what happens tomorrow? What is the future of the hospitality industry?

[00:00:24] Let's find out. This is building places where we look at the world of commercial real estate through the eyes of the experts that study it every day. My name is James Cook. I research real estate for JLL today. I'm catching up with hotel and hospitality expert, Hilda Perez Alvarado.

[00:00:43] Gilda Perez-Alvarado: [00:00:43] My name is  and I am the chief executive officer of JLL, hotels and hospitality Americas.

[00:00:49] James Cook: [00:00:49] Well, what was the hospitality world like before the COVID crisis hit

[00:00:56] Gilda Perez-Alvarado: [00:00:56] before Kobe? Listen, we were already getting, or seeing a lot of disruption coming into our sector, the biggest being Airbnb and all the derivatives of home sharing. That was a disruptor that no one ever imagined. Hotels. We're trying to figure out how to differentiate themselves and make sure that they could target that millennial generation who was looking more for an experience, making sure that the offering of a hotel was unique instead of just a cookie cutter.

[00:01:26] Place where you go, you rent a room, you have a nice night sleep and,

[00:01:32] James Cook: [00:01:32] and then we've had this whole new world of COVID hit us. What does that meant for the hospitality industry?

[00:01:38] Gilda Perez-Alvarado: [00:01:38] It's really the most abrupt shock any of us could have imagined. I didn't even think a Hollywood movie could have thought about this really.

[00:01:46] It feels like the earth just is standing still. And we're waiting. If you look at hotels and the entire value chain, we rely on travel, whether it's corporate leisure group and no one is flying, you know, the CDs are in locked down. I think a lot of us were spending time, you know, reckoning as to what is happening and.

[00:02:06] And making sure that when the economy starts to reopen and people start traveling in earnest, you know, you offer an experience where the consumer's going to feel confident they're going to feel safe to stay at your hotel. So a lot of the companies are thinking about how do I certify that a room and my facilities are clean.

[00:02:27] The other area, James dent, you know, a lot of investors are talking about is what happens to corporate travel. You know, we've been functioning just fine with technology. I used to often a plane all the time. I've go around the world, literally once a quarter. Well, we're in the process in the midst of doing a virtual global roadshow right now, I've never felt closer to my colleagues and my peers on my clients, because now this is getting personal.

[00:02:55] It's not just a phone call. I can actually see you. So what does that mean for the group business? What does that mean for the large hotel that hosts conventions into thousands?

[00:03:06] James Cook: [00:03:06] I was at a conference that was supposed to start, and then we got the call. Hey, this conference has canceled. Everybody go home.

[00:03:13] And I think that was the last time I traveled for business. And do you think there is a up demand that when we do come out of this conferences, business travel. Will that come back.

[00:03:26] Gilda Perez-Alvarado: [00:03:26] That's a great question. And I think it's a million dollar question. Leisure travel is going to come back first. I am the first one that when things get better, I'm going to hop in a plane and I will travel.

[00:03:37] I'm a travel junkie. I love going to new places. And really getting immersed in the culture, not just for work, you know, but you do kind of that bless her, you know, business and leisure type trip. And once we saw some of it, James, not too long ago, when a lot of the States started to reopen and consumers wanting to, to get away from home, they were feeling pooped up.

[00:04:00] They were going into those drive to destinations. Unfortunately, the virus has come back and that is forcing a lot of these hotels to shut down and for demand too attract, we believe leisure travel comes first. Corporate travel comes second, but modified for the reasons that we discussed in terms of how technology has really minimized the impact of physical distance.

[00:04:25] And lastly, very large group for a lot of these tech companies that we're hearing, whether it's a Facebook or a Google, where they've said, listen, and employee, you can work from anywhere for the, you know, for the foreseeable future. Maybe what we do going forward is you work from home or you work from a destination and you know, it doesn't matter.

[00:04:47] You're still very well connected and plugged in through tech. But you do get together once in a while. And when you get together, you rent hotel space, right? So the hotel space is not going anywhere. You still want to be in physical contact with your peers and your colleagues so that you can brainstorm.

[00:05:04] James Cook: [00:05:04] What I miss most right now of all of the different types of meetings and travel that I used to do for work was the sort of small to medium size group offsite meeting at a hotel somewhere where everybody was out of town. So you kind of felt like the small group on an Island and you'd get work done.

[00:05:22] You do a lot of creative stuff, and then you'd go out and have dinner and have drinks together. I love that's my favorite kind of work. What did you call it? Blah. What's the combination. Pleasure. I love it.

[00:05:33] Gilda Perez-Alvarado: [00:05:33] The other point, I'm going to make James, you know, prior to the crisis, a lot of these. Major global destinations, whether it's, you know, New York, Paris, London, Tokyo, they were getting a ton of tourism to the point that it was unsustainable.

[00:05:48] I mean, you saw pictures of Venice or scenes in the loop where you couldn't even get close to a painting to take a picture. Cause it was just a swarm of people. Going in. And that, you know, from a sustainability perspective, it really killed the experience. It's bad for the environment. I think now that we've gone through this and people are seeing how beautiful a lot of these days destinations have become, because they've finally gotten a little bit of a break from all this tourists.

[00:06:17] A lot of people are going to think about, you know, what? We don't need a lot of mass tourism. Let's go for the niche specialty, low impact type tourism. You know, we can still make a profit. We can charge accordingly. But we're going to take care of our destination in the longer term I am from Costa Rica.

[00:06:35] You know, we're all about eco-friendly low impact tourism, respect of the environment and your surroundings. And I think a lot of other destinations are taking notice.

[00:06:45] James Cook: [00:06:45] I think that message of sustainability really resonates with a lot of travelers and it goes hand in hand with this idea of safety and healthy environments.

[00:06:56] When we get to this reopening stage. People start to travel. They want to feel safe in the hotels they stay at. Are there new things that hotels are doing to kind of signal that?

[00:07:07] Gilda Perez-Alvarado: [00:07:07] Yeah, absolutely. So listen, first and foremost, huge investment in technology. So that as a consumer, you can have the choice of little to no, to a lot of interaction with the hotel staff.

[00:07:20] So if I don't want to interact with anybody. I can do everything from my cell phone, but it will be the key to my room. I can order anything I need. I have a concierge texting me. Hey, do you need, tell us for that pool? Is your stay fine? Do you need a reservation? So everything can be done digitally.

[00:07:38] However, if I want an interaction, I can, I can go to the front desk. I can interact with the front desk attendant with a concierge, with whoever a lot of hoteliers is as well are spending time rethinking the room. Prior to COVID. We were thinking more about the public areas and the fact that just having a small space to sleep and a tiny desk was fine because people want it to be in the lobby or the other public areas.

[00:08:03] And just be there with a bunch of people where you could order a drink or a meal, well, and be at a long communal table and do your work. I think people now want to. Rethink the room experience and maybe add a little bit more square footage, make sure that the technology in that room is amazing so that you can continue to stream all the shows that you watch or have that video call with your colleagues while you're in your guestroom.

[00:08:25] The other bit is obviously cleanliness to make sure that they can get a certification that the room has been sanitized. And then anything and everything around wellness, the hotel may facilitate something as simple as a yoga mat or have a really nice spa or have some theories where you can go in there and just meditate.

[00:08:46] It can be really cheesy if not done well, it can be gimmicky. Or it can be done. Stellarly

[00:08:52] James Cook: [00:08:52] Oh, I do have one more question for you. So where is the place you're going to travel to and the hotel that you want to stay at whenever you can, where are you going?

[00:09:02] Gilda Perez-Alvarado: [00:09:02] Oh my goodness. Uh, James, I don't know, like I said, I'm a travel junkie and normally what I do in this summer, My husband and I pick a destination that we haven't been to before and just do a really deep dive.

[00:09:16] And so this year he wanted to go to Vietnam. So maybe it's that. I just became a new mom. So I'm really eager to start to take the baby around the world. And I think the first place I would love to take her, I guess, is Europe to meet her grandparents. She's already met my parents, but needs to meet my husband, parents.

[00:09:36] And then I want to go to the middle East. So I gave you a bunch of places. I'm going to have to figure out where to go, but the world is really beautiful and I miss seeing it.

[00:09:45] James Cook: [00:09:45] Oh my gosh. I agree so much. I we're going to have you back when this is all over and you can, you can reveal to our listeners where you've actually visited.

[00:09:55] Where was your next place? Well, thank you so much for joining me today. I learned a lot about a topic that I really didn't know that much about.

[00:10:03] Gilda Perez-Alvarado: [00:10:03] Thank you for having me. It's been a pleasure and anytime you want to talk leisure travel hospitality. I am here. Do

[00:10:11] James Cook: [00:10:11] you have a comment on today's episode or a question or topic you'd like for us to tackle in a future episode, we should just tell us about it.

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