The 2020 AAHOA Virtual Convention & Trade Show continued yesterday afternoon with a panel entitled, “A View from Young Professional Hoteliers: Driving the Future of the Industry Beyond COVID-19.” Speakers included JR Patel, president and CEO of Helix Hotels, Harshil Patel, vice president of Champion Hotels, Jatin Desai, managing principal, CIO/CFO, Peachtree Hotel Group, and Raj Patel, chief development officer of Hawkeye Hotels, and the panel was moderated by Teague Hunter, president and CEO of Hunter Hotel Advisors. Everyone brought to the panel their own insights and experiences, but they all agreed on one thing: This is an unprecedented situation. “It’s a different world. How we operate, how we transact, we keep hearing over and over that it’s unprecedented times, and it really is. We’re rewriting the book,” said JR Patel.
Loss of Lending Options
Hunter jumped right in, asking Desai what the hotel investment market looks like in 2020. Desai explained that the spread of COVID-19 has shifted industry investment, noting that capital and debt are more expensive than they were in the past. He added that government assistance has served as a “stepping stone” for many businesses, helping them get through this tough time.
JR Patel added that loans that were previously a go-to for hoteliers, such as SBA and CMBS loans, are no longer a viable option. As such, hoteliers seeking loans that were not necessarily on their radars until now. “I think the oddballs are now coming to light, but the conventional [loan] is gone. CMBS is gone, at least for the foreseeable future.”
The panel discussed at length how the industry is doing as a whole. Raj Patel said that the past few months have been extremely difficult for the hotel industry, even for people who had done everything “right.” “We thought we had done everything right to prepare ourselves for any storm that was coming our way. We were building properties in great markets, great brands, great locations. We were doing the proper due diligence and felt great about our development pipeline. Overnight, we are now building hotels at peak pricing with a trough in the market. That’s not a good place to be,” he said.
One of the biggest issues facing hoteliers now, the panelists agreed, was hotel workers’ reluctance to return to work. Everyone had encountered issues with workers not wanting to come back, in part because of the $600 unemployment benefit, but also because the work wasn’t consistent. Harshil Patel explained that in his properties, occupancy is no longer consistent and spikes on the weekends, but it’s hard to predict when they might need staff, such as housekeepers. “It’s just not stable for them, so we can’t blame them for wanting to go somewhere else and do different types of jobs,” he said.
JR Patel noted, however, that the worst is hopefully behind everyone, “The hotels are doing better. I think we definitely saw the bottom [of low occupancies]. We’re starting to see a bit of a plateau across our portfolio and I think the industry is seeing that as well.”
Righting the Ship?
While everyone acknowledged the difficulties that have arisen from the virus, Raj Patel also said that even though occupancies were high, the hotel industry wasn’t in the best place prior to the pandemic. “COVID aside, there was already the saturation issue, the over-supply issue, the too-many-brands-coming-out issue, overabundance of operators and developers, overabundance of cheap capital. When you [put] all that together, we were already headed toward a downhill slope.”
While the hotel industry is eager to look beyond the COVID era, the panelists admitted that no one quite knows what that will look like. “I don’t think anybody has any clue,” said Harshil Patel. “Obviously, we’re all hoping for the best. We’re hoping occupancies keep rising.”
Desai said that industry recovery hinges on the introduction of a vaccine. “There is an end date to all of this. When a vaccine that comes out that’s effective and efficient, travel will come back.”
Raj Patel added that despite this hard time, there is reason to be hopeful. “There’s no country in the world that’s more resilient than the United States, and our industry—hospitality, lodging, and restaurants—it’s a very resilient industry,” he said. “The operators and developers who are meant to stay in the industry, they will grow stronger from this. They will pick up habits that will stick with them for a very long [time]… So, that’s my vision for the future. I think we’ll grow out of it strong.”