Industry Voices Hospitality

Safe Travels

Rick Garlick
Rick Garlick

Trust isn't easily defined, but you know when it's not there. Such a deficiency is inherent to the monumental challenges faced by the hospitality and travel real estate sector. Hotels, airlines, rental car firms - these businesses watched customer bases evaporate in days when the COVID-19 pandemic spread across the world earlier this year. 

“If people don't trust you, they aren't going to engage with you,” says Rick Garlick, PhD, vice president at Magid, a market research firm specializing in leisure and travel. “If you tell your guests they are safe, but they don't believe you, the revenue losses will continue. The rub for the travel companies is that they've not sat still during the pandemic relative to improving health and safety standards. In many cases, they've pursued some aggressive action, but so far, the enhancements have not gained traction with customers.”

These businesses are combatting the challenges presented by the pandemic, but consumers are skeptical that any efforts can ensure public safety. Magid research shows trust is lacking in airports (32 percent), hotels (41 percent), and rental cars (34 percent), making life difficult for firms when two-thirds of potential customers are wary. 
But successful businesses are built on adversity. The market may contract and doors will shutter, but opportunities are available to those willing to adapt.

Listen to the full podcast episode, Hospitality Looks to Build Trust to Overcome COVID-19 with Strategy Consultant Rick Garlick, PhD.

“Those who survive and thrive make the challenging calls, pivot successfully, and reinvent themselves,” Garlick says. “If you just try to shut your eyes and hope for the best, it's going to be hard to hold on long term. Trying to simply adapt what you were doing before to this new world won't get you much.”

For those looking for an angle on commercial real estate, consumers will have new priorities when traveling.
“The reason private rentals do better is that it's easier to socially distance yourself from strangers,” Garlick says. “There are fewer shared amenities, public spaces, etc. where people can catch COVID. If it's just you and your family, it's a lot easier to trust and feel assured you aren't going to catch someone 
else's disease.

The implication is that private spaces may take on greater value for guests. For example, offering guests private dining experiences is something for which some people would be willing to pay a premium in hotel restaurants.”

If you just try to shut your eyes and hope for the best, it's going to be hard to hold on long term. Trying to simply adapt what you were doing before to this new world won't get you much.

Outside of shifting strategies inside a hotel, different markets could experience growth thanks to geographic and demographic shifts in response to the coronavirus. If social distancing is here to stay - which appears to be a safe bet for the next 12 or 24 months - activities like camping might see an uptick. Smaller, remote destinations may also rebound more quickly than Manhattan or Miami Beach.

Consider investing in areas where tourism is nascent,” he says. “That is, more remote areas that are not overcrowded and truly represent places off the beaten path. Right now, people are seeking destinations that are not overcrowded. Even after COVID, you can expect to maintain interest as people are looking for more authentic experiences.”

The truth stands, though, that many hotels and vacation properties will not survive, with an overall 13 percent decrease in traffic, according to Magid.

In those cases, adaptive reuse could be an invaluable way to revitalize shuttered businesses.
“This is an idea that is being particularly promoted in New York, a city that is somewhat landlocked on housing and where hotel rooms are abundant,” Garlick says. “It's not what hoteliers envisioned, but it's a way to at least repurpose the space hoteliers have already purchased to get something in partnership with the city. Hotels were arguably overbuilt before the pandemic.”

Change can be scary - and it will undoubtedly be for many who will not stay afloat in the coming year or two. But opportunity will present itself amid such tectonic shifts in the hospitality sector, though the new normal has yet to be clearly defined.  

Nicholas Leider

Nicholas Leider is senior content editor for Commercial Investment Real Estate. Contact him at nleider@ccim.com.

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