One Tampa expert says those days should return, but it could take awhile. And many hotels are likely to change hands.
by Susan Martin, Tampa Bay Times
Lou Plasencia was interviewed for this article published on August 6, 2020. The article is also available on the Tampa Bay Times website.
At the start of the year, Tampa Bay’s hotel market was among the hottest in the country. Occupancy rates were high, hundreds of new hotel rooms were under construction and the market looked primed for one of the best years ever.
Then came the coronavirus pandemic. Few sectors of the U.S. economy have been hit harder than the hospitality industry, with hotels forced to lay off thousands of employees as travel dried up and the number of guests shrank. As business slowly comes back, hotels are dealing with unprecedented requirements for social distancing and virus-free surroundings. For insight into the challenges facing hotels and the outlook for the future, we turned to an expert — Lou Plasencia, CEO of the Plasencia Group, a Tampa- based hospitality sales and consulting firm with offices across the nation.
How would you describe the state of the hotel industry today?
In the U.S., absolutely depressing. I don’t think anyone could ever have anticipated the impact, it was like a nuclear attack. When you look at Tampa Bay performance numbers, Tampa Bay actually fared much, much better than virtually any other market, I think because of the weather, because of the beaches and because of the basic amenities.
Is the worst behind us locally?
The absolute bottom of the trough was in mid-April. (Occupancy) was in the low- to mid- teens. The market has recovered very gradually and really you have to look at submarket by submarket. When you look at markets like the beaches, from Dunedin on the north all the way to Sarasota on the south, the water markets actually have done very well compared to more urban markets around the U.S. We’ve seen occupancy in the 100 percent range on weekends. Across the the country, leisure travel will come back faster not only in coastal areas but in the mountains and near the national parks. Those areas have done well with leisure travel.
What will be the next segment to recover?
Corporate transient — it might be salespeople, it might be technical people in to service the client, it might be new people getting hired. That segment is about 25 percent of where it was. The leisure segment is 60 to 70 percent of where it was. The worst hit segment is the group segment — conventions, conferences, larger meetings. That would be roughly 5 percent of where it was.
If a vaccine against the virus is discovered soon, how long would it take for the hotel industry to get back to pre-pandemic levels?
We believe there will be a very strong resurgence immediately as soon as a vaccine is announced and then it will flatten out and level off and it would be two or three years to the same occupancy.
What can guests expect when they stay at a hotel these days?
All of the major chains have taken very aggressive steps to provide a great degree of comfort and confidence for guests coming in. That was led by the American Hotel and Lodging Association, and I think it’s done a marvelous job of working with the hotel brands to make travel safer.
It starts at the front desk. It’s a simple as keeping the front door open so you don’t have to grab a handle. There’s keyless payment so you’re checked in from home before walking into the hotel, there’s keyless entry using your phone. Housekeeping staff has been retrained in how to clean rooms and clean areas that they may not have spent a tremendous amount of time on previously like light switches, showerheads, closet doors, wiping down every hangar in the closet. Likely there will be no room service and if there is, it will be drop and go where they bring a cart to your door, and allow you to take a tray or bag inside.
How about in common areas?
You’re not going to find any magazines in the lobby. You’re not going to see restaurants open in many cases and if they are seating, it’s very separated. If there’s a menu, it’s throwaway or the menu is a bar code that you read on your phone. All of your utensils are hermetically sealed. If you’re having a drink they are in throwaway cups. You’re going to see a lot more sanitation stations, your valet parking is probably going to go away and if you do have valet then for his/her and your protection they’re going to sanitize your vehicle and not going to touch the rearview mirror.
Any examples of Tampa Bay hotels going to these lengths?
For example, the Vinoy, the Grand Hyatt Tampa Bay, the Westin Tampa on Rocky Point.
With such cutbacks in services, especially at higher end hotels, will hotels be able to charge the same rates?
Interestingly, while occupancy numbers have declined, people are still willing to pay a good rate, especially if they feel they are walking into a safe environment. Also, in a lot of urban markets like Washington D.C. or New York or Chicago, some hotels have yet to open so it allows the hotels that have opened to maintain rates.
What about hotel rewards programs? Am I still going to be able to use my 50,000 Hilton Honors points?
I think they will survive but perhaps not at the same number of hotels and the redemption rates are going to change. It’s going to cost you more (points) to stay at a hotel.
Do you think Tampa Bay’s hotel market was getting overbuilt before the pandemic?
No. I think the demand was actually growing, what with the amenity base that we have been so careful to develop. It’s a very attractive market when you think of places like the Riverwalk in Tampa and the St. Pete Pier and the restaurants and museums in downtown St. Pete. As for new (hotel) projects coming on, I feel for those operators because they are opening into a very stiff headwind. It’s going to be tough to get larger conventions, to get back to any sense of normalcy.
Before the pandemic, a lot of people —especially millennials — were shunning brand name hotels like Marriott and Hilton for smaller lifestyle and boutique hotels. Is that going to change?
I think there will be some comfort for hotel guests going to known brands but I don’t think there will be a slowdown in lifestyle brands because people still want that different experience, especially when they visit places like downtown Tampa or downtown St. Pete. What I do think you’re going to see is a massive slowdown in the number of new hotels being announced.
Do you expect more layoffs of hotel employees?
I will say you’ve seen the tip of the iceberg. Those PPP (Paycheck Protection Program) loans are coming to an end and now that those funds are expended I think you’re going to see some major, major furloughs and layoffs over the next 90 to 100 days.
Given the state of the hospitality industry, does anyone still want to buy hotels now?
We’ve been absolutely stunned with the amount of capital that is approaching us each and every day, and it is capital that hasn’t been active in the lodging sector either ever or for the last decade. A lot of foreign investors seeking very good investment opportunities, they abound right now. We are also dealing with owners of hotels that need to sell. I think we’re going to see more hotels being taken back by lenders toward the end of the year than at any time in history. A number of hotels in the Tampa Bay area are in that condition right now where they’re either in discussion with the lender about modifying (a loan) or a potential foreclosure or that is already underway. (He wouldn’t name any specific hotels.)
How about you — do you miss staying in hotels?
When you’re used to doing it three to four days a week, yes. I haven’t stayed in a hotel since March but it’s nice to be home.