The holiday season is upon us, typically when restaurants and hotels get to enjoy an uptick in revenue as companies book parties and events for the masses. But this year, those parties are pretty much canceled due to safety concerns. After all, if the coronavirus outbreak is so bad that employees need to continue working remotely, it's hardly a wise idea to gather workers in a dining establishment or hotel where they're apt to be stuck maskless in close quarters for an extended period of time.
In fact, an estimated 55% of companies say they're calling off their holiday celebrations this year, according to Challenger, Gray & Christmas, which surveys companies annually about their plans. Interestingly, those cancellations aren't all rooted in an effort to keep people safe. For 5.3% of companies, they stem from a desire to cut costs. But for the most part, health concerns are causing the change of plans.
Either way, the absence of holiday parties -- or Zoom (NASDAQ: ZM) parties in place of live ones -- is apt to hurt the hospitality industry at a time when it just can't afford another blow. And that could, in turn, leave real estate investors with even more worries on their hands as we creep toward the end of 2020.
The opposite of festive
It's not just corporate parties restaurants and hotels rely on in December. There's also holiday travel that typically serves as a big source of revenue. But this year, much of that late-in-the-year activity is off the table due to the pandemic, which means restaurants and hotels on the brink of closing their doors may just be pushed over the edge.
As of late November, hotel occupancy was at its lowest level since May, reports STR. Meanwhile, as of September, a good 100,000 restaurants had closed either on a permanent or long-term basis since the start of the pandemic.
These hits aren't just bad for the restaurant and hotel owners; they're also bad news for commercial landlords and hotel REIT, or real estate investment trust, investors. If restaurants experience an extreme decrease in seasonal revenue due to big parties being canceled, they're even more likely to fall behind on rent or close their doors, leaving landlords with vacancies to grapple with. And if hotels continue to struggle, hotel REIT values will sink.
Some restaurants may be able to pivot their holiday offerings and capitalize on the need for catering in the coming weeks. That could, to some degree, help compensate for lost revenue in the absence of on-site parties and gatherings. But hotels may not have a comparable plan to fall back on. After all, you can bring a platter of food to a CEO's home, but you can't bring him or her a hotel room.
The Millionacres bottom line
Thankfully, coronavirus vaccines are in the pipeline with the potential to put an end to the pandemic, or at least help the current crisis improve. But while the 2021 holiday season may end up looking very different for restaurants and hotels, they'll have to survive the next number of months to make it to that point.