Where does hospitality go from here?

Some thoughts from a hotel connoisseur…

The hospitality industry was thriving in a pre-COVID-19 context. While true that the hotel industry was arriving at a possible peak of the cyclical real estate cycle, the global industry produced top flight numbers in 2019 including a record $550 billion in room revenues (according to STR’s 2019 Global Hotel Study). Demand, while beginning to show some signs of decline, remained relatively strong and supply was in the pipeline. And then the worst case situation happened. An event such as a global pandemic - forcing the complete and government-mandated shutdowns of economic activity - blindsided perhaps one of the most, if not the most, high-touch industries.

With minimal time to respond to the situation, hotels were forced to take critical staffing decisions and seek funding to continue operations. An industry which rents rooms to business travelers and leisure seekers would certainly cease to exist in a world where businesses are able to function virtually and families are prevented from traveling (either by fiat or fear). As the world reopens, or even closes again for some areas facing second coronavirus waves, those fascinated by the industry must wonder how lower occupancy rates and higher operating costs are sustainable (even for the short-to-mid-term).

Do we need governments to ensure that the industry keeps its head above water until we have a vaccine? Do hotels begin to think about transitioning towards a more mixed-use development? And, if so, how can those costs possibly be kept under control? Lots of questions. Lots of uncertainty. Not much in the way of answers… yet.

I have my eye on a new hotel set to open in the Fulton Market District of Chicago. The Nobu Hotel. This branded property is part of a wave of new Nobu hotels representing the brain child of famed Japanese restauranteur Nobuyuki Matsuhisa and almighty actor Robert De Niro. Since this concept combines an upscale restaurant with a luxury hotel offering, it will no doubt face immediate headwinds upon its July 1 grand open. An opening surely not visioned for the middle of a pandemic imposing limitations on occupancy and expectations of cleanliness standards that even some of the highest-end hotels probably weren’t ready for. If Nobu Chicago can endure the initial tundra of a Chicago winter in its summer months due to the impacts of this virus, perhaps it may be able to serve as an example for other high-end concepts opening in such uncertain circumstances. I for one, am hoping for the best. I just hope that “hope” is enough.