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LA-area hotels look for a turnaround after occupancy plummets

The nation’s hotel industry has seen business plummet as a result of the COVID-19 pandemic, but a new report offers some light at the end of the tunnel.

CBRE’s Hotel Horizons forecast predicts hotels will benefit from a “relatively rapid economic turnaround” in 2021 and 2022 with a return to pre-COVID levels by the end of 2023.

The forecast might seem promising, but it doesn’t lessen the pain hotel owners are dealing with now.

A drop in occupancy levels

Hotel occupancy levels in the greater Los Angeles region are projected to drop to 47.9% in 2020 — a year-over-year decline of nearly 40%. A modest recovery in 2021 will boost occupancy levels to 65.1 percent, the report said.

The L.A. region’s occupancy rate of 47.9% this year compares with 41 percent nationwide.

“The greater Los Angeles and Southern California region is a very popular lodging and hospitality market — especially with leisure travelers,” said Brandon Feighner, managing director of CBRE’s Los Angeles-based hotels advisory division. “We have sensed and are now beginning to see pent-up demand from people who are eager to get out of the house and enjoy a little time away.”

Job cuts, furloughs and pay cuts

The demand may be there, but for many hotel workers, it comes as too little, too late.

On Tuesday, Hotel chain Hilton Worldwide Holdings said it would cut 2,100 jobs or about 22% of its corporate workforce. Marriott International and Hyatt Hotels also have laid off or furloughed thousands of employees as bookings plunged.

Hilton announced it is also extending previously announced furloughs, reduced hours and corporate pay cuts for up to three additional months.

“Never in Hilton’s 101-year history has our industry faced a global crisis that brings travel to a virtual standstill,” company President and CEO Christopher J. Nassetta said in a message to investors. “Hospitality will always be a business of people serving people, which is why I am devastated that to protect our business, we have been forced to take actions that directly impact our team members.”

Stringent guidelines

Leisure and business travel virtually ground to a halt amid the health crisis, although things have loosened up. Air travel is slowly gaining traction, and California hotels are now allowed to reopen, providing they adhere to stringent guidelines to protect employees and guests from the spread of COVID-19.

That includes social distancing, the use of face coverings and frequent sanitizing of high-contact areas. Hotels with large meeting rooms, banquet halls or convention centers are still advised to keep those areas closed.

ZOOM technology

What’s left to be seen is whether businesses curtail travel and opt for more virtual meetings.

Many businesses have turned to ZOOM technology for meetings during the pandemic, which has saved them time and money. But Feighner doesn’t expect such virtual spaces to become the norm once the health crisis is over.

“Certain deals and client interactions are just not the same on ZOOM,” he said. “There is something to be said about being in the same room with people and seeing their body language. The death of business travel is overstated.”

Southern California’s recovery likely will outpace that of other regions of the state, Feighner said although the process may take longer.

“The Los Angeles region is such a dynamic area with the entertainment industry and a high degree of international travelers,” he said. “I think L.A. will be able to roar back better than the average market, but it will take the reopening of amusement parks and other venues. Disneyland is supposed to reopen next month.”

Disneyland officials announced the park will reopen Friday, July 17, the theme park’s 65th birthday.

Will hotels offer deep discounts as the economy ramps back up and people feel comfortable traveling again?

“It seems like there is some discounting in every recovery, but it’s not necessarily the best way,” Feighner said. “It really goes back to someone who is still scared to travel. A heavy discount won’t be the impetus for them to go.”

Source: Orange County Register

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