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Recovery of the Luxury Hotel Market

By Deborah Friedland, Managing Director for EisnerAmper
26 June 2020
4 min read
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What is your vision for the recovery of the luxury hotel market going forward?
Recent trends indicate that location is a key driver in a consumer’s decision to travel. Luxury hotels that are located within driving distance of urban areas hit hard by the pandemic should benefit from pent-up demand from city dwellers in search of privacy, cleanliness, and as an escape from the confined spaces of large cities. Those properties located in crowded destinations will lag hotels located in rural settings. Further, hotels dependent on international travelers will be slow to recover as many countries are enforcing strict travel requirements, mandatory quarantines, and additional documentation.

On the positive side, the luxury hotel segment is geared toward providing privacy and seclusion for its guests during normal times. Those hotels that can offer guests large private villas or bungalows offering the guest the convenience of driving directly to the entrance or offering private elevators, essentially limiting contact with other guests and hotel staff, will benefit in this environment. Glamping should see a bump in popularity by offering guests the opportunity to combine nature with privacy, yet without compromising on service and amenities.

What are you dealing with on a daily basis? How are hotels really doing out there?
I am working with several hotel owners to strategize how to survive and even prosper in this current environment—and for the future recovery. For example, I’m working with an owner in deciding whether to sell or hold a beachfront hotel that was damaged by flooding during recent storms. I’m also working with private equity groups that are aggressively looking to invest in the hotel segment and are looking at acquisition opportunities. And I am working with another owner in negotiating with a large hotel brand to cut costs and extend the PIP deadline.

What options do hotels have if they are facing the prospect of not being able to reopen?
Communicate with your lender if you are concerned about meeting debt obligations. Don’t wait until it’s too late to have this conversation. Have a plan for how you can raise capital or tap into reserves. Speak to the brand, if applicable, about delaying property improvement projects and reducing costs. Be candid and offer lenders and brands a well-thought-out plan. If there is no option of reopening, work with your trusted business advisor to understand your options. Can you convert the hotel to another property use? Should you sell the hotel or hold it until the environment improves? Make sure to cut cash-burn to the lowest levels in order to buy some time.

Can we take any lessons from the last downturn, or is this truly unique?
While this downturn is truly unique, we can always take lessons from the past. We know that group demand and corporate travel demand is slow to recover after most downturns. Hotel owners must be open to marketing to new demand segments, including individual leisure travels, families, and leisure group business in order to stay viable until more traditional demand segments return to the market. Adapting quickly to the new normal is imperative. By encouraging social distancing in public areas by eliminating community tables and large seating areas and offering guests face masks and sanitizing gel, in addition to other complimentary sundries, will demonstrate to your guests that you care about their health and safety. Don’t be afraid to think outside of the box.

What words of advice would you give hotel owners during this challenging time?
With hotel occupancy rates at record lows, those hotel owners that think creatively and are responsive to the new normal mindset of today’s traveler will thrive. Consider partnering with companies to offer travelers a unique experience, such as offering RVs to guests to explore the area or partnering with private airlines to provide guests with access to private air travel. With most summer camps canceled, families are looking for private destinations for family getaways. Those hotel owners that design programs catering to this segment will benefit and may also attract new demand to their hotels over the long haul. Capitalize on technology by providing guests the option of a contact-free stay by offering keyless entry, mobile phone payment options, and room service through cellphone apps. Invest in the health and safety of your guests and employees by strictly enforcing protocols and procedures, training your staff, deep cleaning public areas, having temperature-check stations upon entering public spaces, and placing hand sanitizer stations throughout the hotel.

With more than 25 years of experience, Deborah Friedland is the Practice Leader of EisnerAmper’s Hospitality Advisory Services. Contact her at deborah.friedland@eisernamper.com or 212-891-4108.

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