Due to the COVID-19 spread, the hospitality industryin the US experienced many consequences. Social distancing, travel curbs, and cancellations caused a dramatic downturn in the number of travelers, bookings, and significant events, such as sports says Maxwell Drever. As a result, hotels and resorts had their occupancy rates dip to an average of 36.7% by December 2020 compared to 66.1% in 2019, causing hotel revenues to drop by 60% per available room. Additionally, the daily room occupancy rate fell by 28% in 2020.With the perpetually depressed state of the travel industry and with international tourist arrivals low compared to what they used to be before the pandemic, nearly114,102 hotel rooms closed across several brand categories in the US.
Over 20,000 hotel rooms opened during the same period across three categories,including upper midscale, midscale, and economy chains. Quite possibly, some of these rooms saw bookings from leisure travelers or professionals who sheltered in the extended-stay hotels as their workplaces. Interestingly, many permanent or temporary closures happened in independently run hotels.The small business survey informs that permanent closers were lower, possibly because of federal assistance. Independent operators were already in the troubled waters before the COVID-19 outbreak, though. Still, some reports suggest sales have been better than the damage caused by the Great Recession.
According to predictions, personal and business travels can revive faster, but the full impact may only be visible by 2024 when revenue per available room touches the pre-covid level. However, a lot depends on the industry’s recovery.
What do you need to know about repurposing hotels into workforce housing?
Maxwell Drever brings attention to the lodging industry with short-term rental players. Who can pose a grave challenge to struggling hotels and motels. Meanwhile, the shortage of affordable housing is a crisis. Hence, the idea of converting them into inhabitable units for the moderate to middle-income groups can tackle two concerns simultaneously. While closed hotels have an opportunity to revive their dead revenue. The cost-burdened families can end their daily survival fight by getting affordable inhabitable housing. Hotel to housing conversion is not a huge challenge, but it demands attention to detail.
Points to explore under the hotel to housing conversion projects
Maxwell Drever says that determining the hotel’s viability as affordable housing is crucial. For example, specific hotel types can be most suitable for this purpose. So knowing whether it is a limited, full service, or extended-stay hotel would be helpful. Hotels with kitchens can be a good bet as they can further reduce conversion costs. The main concern for many developers, hotel owners, and investors. With this, you also have to estimate if you can rent the units at below-market rates. Zoning rules, loan-to-cost metrics, and financing sources also come into play.
Since residential and hotel units share many similarities. It can be an excellent opportunity to scale up affordable housing development projects. And make a difference to society. Already many hotel owners are exploring this new real estate segment. As the workforce housing demand is high, it can be worth taking this route.