The pandemic dealt a massive blow to the hospitality industry in the US, affecting their cash flow and ability to pay debts and manage operational costs says Maxwell Drever. Due to this, many hotels decided to close down their business temporarily and start with low occupancy later. When restrictions eased out, plenty of hotels restarted to tap into the demand. However, reopening has been market-driven, with some places witnessing 70% hotel room availability and others just about 50%. The latter was the scenario in the leading markets. It compelled some hotel owners to look for alternative ways to revive their assets. With buyers and investors eager to lap up the opportunity, they only found merit in doing things differently to rebound.
Maxwell Drever informs that meanwhile, the middle-income population’s struggle to find affordable housing also intensified. Since their suffering has already been a concern, COVID-19 exposed the risks that the country and its communities could face without proper measures. Acquiring land and building new homes tend to be an extensive and prolonged process. However, reforming hotels into residential units can be much faster and more practical. Initially, hotel owners were hesitant, but they realized the potential of this segment. Plus, it is an opportunity for them to start their revenue flow.
Why are hotel owners interested in the adaptive reuse of their assets in affordable housing?
According to Maxwell Drever, hotel owners consider three main things before giving their approval for converting into other types of real estate. One of them is financial consideration. They assess the building and operational cost. Next, they need to determine whether it is legal to convert their hotel into an asset type of their choice. Knowing the structural advantage of their existing hotel for such purposes is also necessary. Because hotels and residential structures share many similarities, the headache of redevelopment remains low. At the same time, it allows them to launch their repurposed asset sooner in the market.
Although the revenue generation can be slow initially, they can trust their rental home business to provide income for an extended period. Plus, they can find investors and builders quickly because they also want projects that complete fast and offer returns.
How do middle-income people benefit from this scenario?
Most hotels enjoy the strategic location in the neighborhoods, close to healthcare clinics, transportation, shopping stores, and more. So living in these places near the job centers allows them to control their travel time and expenses. Since hotels make a good case for affordable multifamily homes due to reduced development costs and other factors, they can also expect savings on their accommodations.
Rundown and old hotels are only the burden in any city. Owners also don’t benefit when the business is not running. However, turning hotels into affordable housing helps them create a sustainable revenue stream that had remained inaccessible otherwise. Struggling income groups find affordable housing, and hotel owners start generating revenue after repurposing. Hence, it is a win-win situation for all the parties. It is also a good thing for the communities and the whole nation.