Michael G. Medzigian, Chairman and CEO of Watermark Lodging Trust Inc., remembers the absolute devastation wreaked on the hotel business in 2020. His April occupancy rate plunged from 76% to 4%. His company furloughed 10,000 people and lost around $50 million in cash in the first month. 
It “took unimaginable effort to get to where we are now,” he said in The View for 2022: Insights and Expectations for the U.S. Hotel Industry, a recent webinar hosted by the Cornell Nolan School of Hotel Administration. And the journey’s not over: While Medzigian is generally optimistic, he sees more challenges piling on now than he’s ever seen before.
We distill four of the key insights he and other hospitality professionals shared in the webinar, to guide hotels through an encouraging but tumultuous year.
Hotel segments are recovering at different rates.
It’s a “tale of two cities,” said Jan D. Freitag, National Director of Hospitality Market Analytics for CoStar Group. “If you are in a resort destination, if you are very high-end, you are just rocking and rolling.” Resort occupancy in 2021 was around 60%, he said, with room rates up 12% over 2019. Luxury occupancy was 52%, and room rates were up 13%.
This may be attributed to the “revenge travel” trend, meaning that people are desperate to spend the money and vacation days that they’ve saved. “The American leisure traveler doesn’t care what the [COVID-19] case count is, and they’re just going,” Freitag said.
Urban hotels are having a harder time. While occupancy was similar in 2021, around 51%, rates were down 18% from 2019. Hotels that depend on large-group travel are still “in a world of pain,” he said.
Plan for reinvestment in hotel FF&E.
If 2022 is the year when we’re bringing service back, “then there’s the year you’ve got to bring capital investment back,” Medzigian said in the webinar.
When times were tough, he said, many hotels raided their FF&E reserves to pay their debt service. Now, the hospitality industry overall is under-renovated: “We’ve got a lot of repair to do.”
Here’s our take: If you don’t have the budget for big capital expenditures on renovations, consider upgrading amenities instead. Nicer linens. Better in-room coffeemakers. Clock radios with USB charging ports. These are inexpensive investments that can increase guest satisfaction.
Hotel guests are waiting for services to return.
Guest have been tolerant of limited service offerings, but their patience is waning, said Michelle Russo, Founder and CEO of Hotel Asset Value Enhancement. “When is this coming back? When are you going to do this?” customers ask hotel staff.
One big need is breakfast. "It is clear that guests expect breakfast service to resume, especially in limited-service hotels that usually provide complimentary hot breakfast," J.D. Power hospitality practice lead Andrea Stokes said in 2021.
Expectations of better service are pronounced in high-end leisure hospitality, which has seen higher prices. “They expect the services back, if they’re going to keep paying those rates on an ongoing basis,” Russo said.
And hotels shouldn’t be surprised if it’s hard to hire the people they need to deliver these services. “Our industry broke its promise,” Medzigian said. You can’t furlough people and then expect them to come running back. “We’ve got to change, to make this a more attractive industry,” he said.
Hotels must innovate, especially in food and beverage.
Meeting guests’ expectations — for hotel F&B especially — is easier said than done, Russo acknowledged. Food inflation is “massive.” Hiring is a challenge. Wages are rising, meaning revenue growth may be consumed by the additional staffing needed to meet service expectations.
One answer can be innovation in F&B. For instance, Russo said, many hotels are adopting menu QR codes to let guests order and pay their bill. Not only does that free up some server time, but it eliminates the “huge dissatisfier” of waiting for the check.
Open the hotel bar, Russo advised, because you can make money there. Consider partnering with other companies on F&B offerings. For example, Resorts World Las Vegas now allows guests to order from the resort’s 40 food and beverage concepts through Grubhub, which arranges pickup or delivery to guest rooms or to lockers at the pool complex.
“The consumer today wants what they want when they want it. … So why not give it to them?” Russo asked.
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