The coronavirus pandemic hammered hotels in a colossal way, resulting in 2020 being the industry's worst year on record, with astoundingly low occupancy rates and devastating revenue losses. But so far, things are looking better in 2021. Since coronavirus vaccines are now widely available in the U.S., domestic hotels are in a great spot to recover some of their 2020 losses.
Unfortunately, hotels that cater to business travelers may not fare as well. In fact, it could be quite some time before business travel resumes at full speed -- if it ever recovers.
Airbnb CEO sounds a warning
Clearly, leisure hotels can look forward to a travel boom as Americans attempt to make up for the isolation they experienced over the past year by packing their bags and getting out of town. The fact that coronavirus vaccines were recently expanded to older kids could also help spur more leisure travel, especially going into the summer, when school's out for a couple of months.
And it's not just hotels that stand to benefit from that boom. Vacation property owners could also see an uptick in demand as people seek out more space in the course of their travels.
In fact, Airbnb (NASDAQ: ABNB) has already seen travel activity return to 2019 levels, and that's without cross-border travel reopening in full. Yet Airbnb CEO Brian Chesky is a lot less optimistic about travel-related bookings, to the point where he doesn't expect business travel to ever return to the way it was before the pandemic started.
When we think about what the workforce looks like right now, that makes sense. Many companies are making plans to keep their staff working remotely on a long-term basis, partly due to the cost savings involved, but also because that setup just plain works.
Tools and technology make it easy for teams to collaborate from afar, and remote work removes certain barriers that companies once faced in hiring talent, such as the need for employees to live within commuting distance of a company's headquarters.
If companies continue to let staff work remotely, it stands to reason that many business trips could be replaced with videoconferencing and other communication and collaboration methods. That could, in turn, hurt hotels that house large meeting rooms and mostly cater to business clients rather than everyday travelers.
Hotels adjacent to convention centers that see a lot of business from conference attendees could also struggle for many years. Many of these hotels don't have a large array of amenities to draw in guests -- their primary perk is proximity to a convention hall. But if business conventions don't happen, those hotels won't see their occupancy rates rise.
It could be a rocky ride for some hotels
Last year, hotel REIT (real estate investment trust) investors were shaking in their boots as the pandemic upended travel as a whole. Right now, there's a reason for those same investors to be more optimistic -- at least about leisure hotels. But hotels catering to the business segment may still have a long road ahead of them, and it wouldn't be shocking if some of those spaces eventually get repurposed in light of low ongoing demand.