Time Bomb: Automation, STRs and staffing underpin explosive summer for hotels
According to STR, an industry leader in tracking metrics like occupancy and revenue, the hotel sector hit all-time highs for both average daily rate (ADR) and revenue per available room (RevPAR) in August 2019.
But the industry witnessed record-low occupancy rates of 24.5% in March 2020, torpedoing business travel, and bringing about a roughly 50% revenue decline for the entire year, per economic forecasting firm Oxford Economics.
By April 2020, Oxford Economics estimated that 70% of all hotel employees had been laid off or furloughed. The American Hotel and Lodging Association went as far as to say that COVID had set the hotel industry back 10 years in terms of job growth.
But two years, it turns out, can make a world of difference. STR data for April 2022 shows nationwide hotel occupancy sitting just under 70% – 12% higher than the same month last year and nearly as high as occupancy figures from last July. A promising summer could bring even more recovery in the hospitality industry.
Still, even as things continue to bounce back, the industry is hardly settling into a familiar groove. On the contrary, hotel and hospitality trends in the United States are arguably changing more now than they have at any point in the past 50 years.
In addition to the pandemic, a slew of other factors – from labor, to automation, to short-term rentals – are reshaping the way hotels do business.
To learn what these changing tides could mean for Traverse City’s tourism economy, the TCBN asked a pair of local hoteliers – Matthew Bryant, general manager of Grand Traverse Resort and Spa and Jonathan Pack, director of operations for Superior Hospitality (Brio Beach Inn, Pointes North, and Sleep Inn) – to share their thoughts on this recovering, evolving business sector.
TCBN: What are you predicting for summer 2022 in terms of traffic, occupancy and comparisons to the past few years? Do you think we’ll get back to pre-pandemic normal business levels or are we still in recovery mode?
Bryant: It’s a very, very, very strong summer season that we have projected and forecast so far – even before some of the festivals announced that they were going to go full-on this year. There’s a lot of pent-up demand from the last two summers and everybody wants to get out.
I was worried about inflation and gas prices, but what we’re seeing with the booking ratios for future bookings, you wouldn’t think that there’s inflation going on. We are booking ahead farther than we have before, the rates are higher than they’ve ever been before and group business has really been amazing. Our group business is exceeding our group blocks significantly.
So, everything that we are seeing is very strong and very positive. We are almost back to 2019 levels; we are extremely close to those numbers, which is great to see.
Pack: The awesome thing about Traverse City is that a lot of people like to say it’s recession-proof. And a lot of that is because we’ve done such an awesome job as a community to market ourselves. We’re not just a Chicago or Detroit or Grand Rapids market anymore (in terms of where people visit us from).
In good times we get people from Dallas, New York and from all over southern Ohio. We have a vast reach. On the other hand, when we go into a pandemic or a recession that restricts the economy, we get all the closer-range drive traffic. So regardless of what’s going on in the world, Traverse City seems to either expand the reach for where the guests naturally come from, or people come from a closer region, like the Grand Rapids area.
Last year was actually a phenomenally stellar year for the market. This summer, with more festivals and events coming back online, that’s fantastic. Those events draw attention to the region. But now that the region is so well established, the events are really just the icing on the cake. They give people more things to do. But also, if you can’t find things to do in the Traverse City area, then your interests just don’t align to what Traverse City is.
I think it’s going be a great summer again, just like last year. But my thing is, at the end of summer, I’ll be looking at where did those people come from? Did they come from the Dallas market, or the other big flight markets that we had built up so strongly before 2019? Are we going to have that reach again? Or is it going to be a thing where we get more of the drive market? Either way, I think we’ll still have a great summer. It’s just going to be interesting to see where the guest comes from.
What’s the biggest change you’ve seen in the industry as a result of the COVID-19 pandemic?
Bryant: I think housekeeping is probably the biggest single change we’ve seen, from daily service to maybe three times a week. If you’re staying a week, we’ll just provide service on the third day. But if you’re just here for two nights, there isn’t housekeeping service (during your stay) unless you ask for it. And I don’t think daily housekeeping service will ever come back. I think it’s a change in our industry that people have accepted.
That fear of the employee going into a guest’s room and getting sick, or the guest is concerned about what our employees might bring into their space. I think people feel safer with not having the intrusion of a housekeeper going in during their stay. And I think the number is very, very small, of people that request any type of housekeeping service (while they are staying with us).
The second biggest change would be technology. With the change in the number of people that are in the industry, we have focused heavily on automation with our front desk. Sales, mobile check-in, mobile checkout: Those trends are going to grow fast in the next couple of years. Right now, we have eight front desk stations. But I would think that, in a couple of years, if we have two, that’d be a lot. It’ll be like the airline industry when you go to check into a flight.
Pack: The No. 1 change is the government intervention to change how the workforce works. Before the pandemic, we always paid a good rate and worked on taking care of our employees well. During the pandemic, in order to just keep pace with government intervention – during that time when stimulus checks were going out and the unemployment bonus was in place – a private business would have to pay in excess of $26 per hour to match government funding.
I think that a lot of people don’t understand that a profit, at the end of the day, has to be maintained for a business to keep their doors open. People think ‘Hey, that business is doing so well. They’re making this much revenue.’ But people don’t know that they just had to replace three hot water heaters to the tune of $30,000 total, or a roof at a total of $70,000 total. Those are just natural occurrences with maintaining a business.
During the pandemic, the labor situation increased our costs by 40%. And we weren’t just sitting there not taking care of our employees. But when you’re facing a government that has no budget and no concern for where the debt comes from, it’s a huge issue for businesses to compete with that.
The government was really making it hard for us to get support staff for our good team members who stayed with us through the whole pandemic. And they all saw pay increases. We went across the board and changed all of our employees’ rates, and then we added anything else that we could think of to try to improve the scenario for our current employees. But you just can’t believe the effect that (government intervention) had on everything. It was very difficult, and it still is very difficult to find the support that we need.
What are your thoughts on ‘high-touch vs. high-tech’ trend? Are your hotels leaning in one direction specifically or are you incorporating bits of both high-touch service and automation?
Bryant: Food and beverage will be the next area where automation will kick in. You’ll be able to sit down at the table, pull up a QR code on your phone, order your food or your drink and it’s delivered to you. And you could be anywhere in the Resort, and with the tracking of GPS, we can deliver your order to you on location.
I think you’re going see a lot more of that technology quite quickly. The trend already is that about 15-20% of our guests are actually using the phone to check in and their phone is their room key. They don’t have to come to the front desk for anything. And that trend will continue to grow (as quickly as we) can communicate it to our guests.
We have also looked into vacuum cleaners for our hallways that basically look like (Star Wars droid) R2-D2. We’ve done testing of them, and they would go up and down our hallways like a giant Roomba. So those are the things that are coming. And when you can put a machine that will vacuum hallways and don’t have to have a person doing it, that’s a significant savings.
Pack: I can guarantee that the hotel industry is strongly putting resources into trying to get rid of front desk employees because of shortage of labor. And that’s hard for me, because I love working with people. I’ve always been adamant against (this type of automation). Ten years ago, I had an independent hotel, and we had an automation system available to us, and I said no. The guest interaction is so important to us. We love people. We want to be with people, we want to engage people, we want to share with them our favorite stuff, we want to hear their favorite stuff. I just did not like the machine style. But today, you have to find a balance. I can reduce stress on my employees by using automation, or I can continue to let them struggle through lack of support.
Our focus, through COVID, has been on the core items. When I ran Cherry Tree Inn, we did packages galore. Every guest for their anniversary got a balloon. Every guest with birthdays got balloons and treats. We were high-touch, high-impact, and wanted guests to feel very special in that sense of service.
Today, I want to do that stuff, but I don’t have the labor to be able to do it. And at the same time, the guests, they’re happy just to have us focus on cleaning rooms, and to know that they can check in on time, and that their questions can be answered in an appropriate amount of time, and that breakfast is served well and presented well. The guests have come to expect a simpler way of hotel stays through the pandemic. There’s some that don’t, and we can work on being high-touch with those guests. But the trend is definitely toward lower-touch service.
Our area has become one of the top Airbnb destinations in Michigan. How are hotels adapting to compete with that growing piece of the market?
Bryant: Something like 20% of the state of Michigan’s Airbnbs and VRBOs are in this market. I don’t think people realize how many rooms that is. That’s about 3,000-plus hotel rooms. So, I don’t think people understand the size and magnitude of it, and how it impacts our community: How it generates revenue, but also displaces homeowners. It will change Traverse City in many different ways.
I think short-term rentals are good for competition, and I think it’s great for people coming to the region to experience it. During the summertime, we do push high occupancies and there aren’t enough hotel rooms in the area, so Airbnbs can help with that. But the off season is where I would be concerned about Airbnb: how it impacts schools, how it impacts neighborhoods, how it impacts employees not having housing so they can work. We’re a great place to come visit, but we don’t understand the impact of the short-term rental economy on the local people that are here trying to survive and provide the services and the expectation of these people coming to visit. We market a great story, but if we don’t have housing, how can we provide that service? That’s my fear.
Pack: You’re starting to see it happen that the hotels are starting to operate short-term rentals. We can do this: We know how to manage people, we can have a home and manage it, and we can provide better reporting. Now, Airbnb and VRBO, they do a good job of educating their hosts. When Airbnb and VRBO first came out, they were serving people who had absolutely no idea about the overnight stay business.
Now Airbnb is educating hosts on how to charge, saying ‘Hey, there’s a lot of people booking at this time, you should raise your rates.’ But hoteliers have known for a long time how to manage that stuff. So maybe hotels will get into operating more short-term rentals and make a profit off that side.
Bryant: At the Resort, our condos are actually targeted as short-term rentals. We have joined Marriott Homes and Villas as an attempt to communicate to that Airbnb audience. Marriott is a strong brand and has gone after that market to try to mitigate the losses that they were having with their Marriott Bonvoy members not staying in hotels. They had a great idea of basically taking Airbnb’s model and putting their brand on it. And that’s what we’ve done here at the Resort. This is our second year of being in the Marriott Homes and Villas program, so we can market to that higher-level clientele.
TCBN: What other trends are big right now in hospitality?
Bryant: Employee housing is a big trend. In June, we break ground on 40 more units for international housing right here on our property. Our plan is to continue that process next year and do another 40-60 rooms for international housing. And that’s all due to the shortage of housing and the shortage of labor in Traverse City. We will continue to grow our H2-B and J-1 visa processes (for foreign labor) and work to house those international workers here on site. It’s the only way we’ll be able to go forward for the next five to six years, until something significantly changes in the availability of low-income housing and affordable housing in this region.
Pack: If there’s one message to get out in this time when we’re so worried about expenses and labor, it’s that in the end, we still love hospitality. Hoteliers are in this business because we love people. We love taking care of people.
You hear about the old hoteliers who used to do cookouts with their guests or their employees on a regular basis, and that is still there. It’s just that we get preoccupied with some of the stuff that has made our ability to get there harder. With the labor shortages, with the competition that is unregulated – stuff like that makes it harder for us to be able to get back to the good old hospitality, but we’re still there at heart.
My favorite day is hearing of a staff member who’s earned a new promotion. Maybe I’ve been able to advance them inside the company, or maybe they found another job elsewhere, but I love hearing about team members who have advanced and done something better for themselves in hospitality. That’s the beautiful thing about hospitality. You can go from being a bus boy – like I was at West Bay Beach, the old Holiday Inn – and be able to advance, and get ownership of properties, operate properties, and just see so much.