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Hospitality’s Great Sea Change

Company Hospitality’s Great Sea Change

Phone-based apps are shaking up the hotel and short-term rental industry 

Prospects for commercial real estate are quickly improving after a challenging year. But the market that’s emerging from the COVID-19 pandemic is permanently changed. This is especially true of the hard-hit hospitality industry. 

Hotel assets were the property type most deeply affected by the pandemic. Last year was the worst one on record for U.S. hotels as the occupancy rate dropped to 44% and revenues were nearly cut in half, according to STR. In recent months, with the health crisis easing, the fortunes of hotels have rebounded significantly, but the industry as a whole has had to adapt. 

Social distancing and travel restrictions have forced hotel owners to reimagine the hospitality experience and to adopt new technology to reassure and attract guests. Travelers no longer necessarily want to stay in downtown areas. People have been moving away from big cities and need a temporary place to stay. Meanwhile, technology platforms are making it easier for multifamily and hotel owners to rent rooms for short-term stays using mobile apps. These properties are now able to draw from a wider pool of guests. 

For commercial mortgage brokers, it is worth staying on top of the ways in which the short-term rental market is changing. Lenders are certainly paying attention to any trends that might improve an asset’s performance and lower the risk associated with a hotel loan.

Adopting technology

Although traditionally slow to adopt new technology, hotels hurried at the start of the pandemic to offer solutions that comply with social-distancing requirements and reassure guests. Contactless technologies, such as remote check-in services, keyless entries, and virtual concierge service, will likely endure after COVID-19 dissipates. Not only do these tech tools reduce a hotel’s overhead costs, but many consumers have come to expect these conveniences.   

The typical hotel guest has already grown accustomed to using on-demand apps such as Uber and Postmates, so they were ready for these changes. They will continue to expect the convenience and privacy of apps in more areas of their lives, including researching and booking where they vacation and stay. Whether it is to create a keyless entry to a hotel or to book a stay in a nontraditional setting, properties that offer convenience via apps will appeal to investors, tenants, and travelers alike.

Consumers were using apps to find and book places to stay prior to COVID-19, but the pandemic accelerated this trend. As consumers sought privacy and social distancing in the past year, more people looked for options beyond traditional hotels. People are booking rooms away from downtowns and typical tourist areas. Phone apps can make this process much easier.  

The pandemic also has changed the operational and business models for some hotels and multifamily properties. Some traditional hotels have been converted into multifamily units. Some apartment buildings are being converted into short-term rental units that cater both to vacationers and to people who are moving into cities. 

Many apartment renters are looking for more flexibility with leases and for hotel-style amenities. Hotel owners can convert underperforming assets into short-term, leased apartments that cater to people who 

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