We all know that 2020 was a brutal year for hotels -- the worst on record, in fact. And while hotels did enjoy an uptick in revenue earlier this summer, the ongoing delta variant surge continues to threaten travel, leaving hotels in a tricky spot as the holiday season approaches.
Compounding the issue is the fact that business travel has not come close to returning to pre-pandemic levels, and may not, in fact, get there for years. At this point, many companies have yet to even bring workers back to the office due to delta-related concerns. And so putting employees on a plane makes little sense, especially in the age of Zoom.
But still, there's reason for real estate investors in hotels or hospitality REITs (real estate investment trusts) to be hopeful. Last month, the U.S. announced that come November, international tourists who provide proof of a COVID-19 vaccine can once again enter the country. And this week, the U.S. announced that it also plans to reopen its land borders with Canada and Mexico next month, ending a 19-month ban on nonessential travel from those countries.
A boon to hotels
Beginning in early November, fully vaccinated foreign nationals will be allowed to visit the U.S. by land. Those entering by vehicle, rail, and ferry will be required to provide proof of vaccination. However, unlike air travelers, they won't be required to provide proof of a negative COVID-19 test.
Furthermore, the CDC has confirmed that the U.S. will accept travelers who are fully vaccinated with any formula approved for emergency use by the World Health Organization. For example, the AstraZeneca vaccine, which has been widely deployed in Canada, will be accepted.
Once those U.S. borders open up again to land travel, traffic could pick up in a very big way. And that's apt to benefit hotels all over the country.
But some hotels might enjoy a greater surge in revenue than others -- namely, those located in border towns and popular tourist areas. Take Niagara Falls, New York, the busiest land crossing on the Canadian border. In 2020, the number of vehicle passengers entering the U.S. via that crossing dropped 83%, and it's remained low throughout 2021. Once that border opens back up, traffic could surge, and hotels in that area and beyond could see their occupancy rates start to rise.
Not only is the opening of land borders positive news for hotels in general, it's especially positive given the upcoming holidays. Now, more visitors might enter the U.S. in an effort to see family. And those requiring lodging will no doubt turn to hotels to fill that need.
Local businesses could benefit, too
It's not just hotels that have been hurt by the closing of U.S. borders. Border towns that rely heavily on foreign visitors have also been hurt by a lack of traffic. In Nogales, Arizona, near the Mexican border, travel restrictions forced about 40 retail businesses to close on the main strip in the city of 20,000 people. And that's just one example.
Opening up borders could therefore prevent countless smaller businesses from shuttering. And after a year of record store closures, that's good news for real estate investors as well.