Broader economic conditions reshape the hospitality industry

The impact of the Covid pandemic no longer has much direct bearing on Connecticut’s hospitality industry, according to sector analysts and experts. However, the broader societal changes such as an increase in work-from-home positions and current economic conditions remain an important consideration.

Joshua S. Koladis, first vice president and commercial appraiser at CBRE, stated that the hospitality sector has regained its footing.

“Overall, it’s pretty stable at this point,” Koladis said. “With the exception of some of the lower tier properties, most lodging facilities are kind of back to where they were pre-Covid at this point in terms of occupancy and ADR (Average Daily Rate). ADR has actually increased quite a bit over the last couple years.”

ADR, a measure of the average revenue generated by an occupied room, is a key measure of how a hotel is performing. According to Koladis, across the region hospitality businesses have, at the least, reached equilibrium since the disruption of the pandemic. However, budget hotels serving blue-collar travelers are an exception, and urban hotels across all service levels continue to feel pain. Business travel is down in many areas, partially due to the widespread acceptance of teleconferencing solutions such as Zoom, which has raised the threshold for how important a meeting must be to justify travel.

On the longer term, Koladis warned that upgrades and renovations to lodging properties, which were delayed during the pandemic and slowed by supply chain issues, could become a pain point in the near future.

“Some of these properties have been struggling to cover the cost of renovations, which are required every five to seven or eight years just to maintain a quality level,” Koladis said. “With occupancies and ADRs being low the past few years a lot of these hotels are now trying to figure out how to recapitalize and fund their updates.”

Koladis also noted that the current environment where pent up demand for leisure travel is being released will eventually level out. As a result, reliable sources of income such as conferences and group travel will become even more vital.

“Everything’s leveling out in terms of occupancy and ADR, and people’s savings rates are declining, they’re well below what they were two years ago,” he said. “Leisure travel is probably going to be impacted in the next year or two here and hopefully business travel comes back enough to kind of subsidize hotels through that.”

Regarding the Fairfield County region, Koladis said it “goes market to market. Norwalk is a pretty strong market for business travel, but markets like Stamford and Bridgeport are probably lesser in terms of the business travel at the moment. But it really depends on what they are near, what branding they have, and if they have an affiliation with a rewards program of some sort.”

Brandon Salvatore, director of hospitality at Stamford-based RMS Companies, said his company’s portfolio of hotels seem to be in a good position.

“Our hotels in Fairfield County have been doing really well this year,” Salvatore said. “The Lloyd in Stamford has done very well after we renovated it in 2020 and it has had a strong year since. Same for Hotel Zero Degrees in Norwalk, we’re about to start a renovation on that hotel in late November.”

According to Salvatore, while the market is currently picking back up, renovations and updates are crucial.

“I think guest expectations continue to rise every year and the hospitality industry is constantly evolving in terms of technology offered throughout the hotel, whether it’s in-room technology or the check in experience,” Salvatore said, noting the renovation plans will include the implantation of new ways for guests to check in, and televisions optimized for streaming from their own devices or hotel provided options. “We’re constantly looking for ways to evolve and stay on top of trends throughout the general industry.”

Salvatore described RMS’ hospitality portfolio – which also includes another Hotel Zero Degrees in Danbury and The Blake Hotel and The Goodwin in New Haven and Hartford, respectively – as having seen improving trends in business travel on weeknights. But the stays for weekends leisure travel, in general, tend to be on the shorter side.

He also anticipated a strong spring business where large events can offset the decline in business travel that winter brings.

“Fall is generally the busiest time of year with companies, there can be travel around the holidays in the winter,” he said. “It slows down through January, it really picks back up in the spring, and in the fall, there’s weddings and graduation parties, spring and fall are two of the busiest times across our portfolio.”

Another key aspect of the hospitality industry is the kitchen. Mark Moeller, founder and president of national restaurant consulting firm The Recipe of Success, said tightening wallets means that when people do go out, they expect more.

“Capacity levels are at, or even surpassing pre-pandemic levels,” Moeller said. “The biggest issue right now is the economy. There’s a lot less disposable income for people to spend throughout the hospitality world. That’s impacting all of our future plans.”

Partially as a result of that, Moeller noted that while there is variation across regions, he has observed that for the most part hotels and restaurants are not hard pressed to find new hires.

“I’m visiting a location soon where staffing wise of the people coming through the doors and we’re looking at maybe hiring 30% of the applicants for their skills, but just a year ago the number would have been 15%,” Moeller said, adding that hiring people for entry level positions poses no challenge, even as wages rise to stay competitive. But retaining skilled staff is still vital.

“The bodies are there, but what does each business need?” he continued. “Hotels, do they really need skilled people? Maybe for some positions like engineering, absolutely. But for housekeeping, it’s not an easy job by any means, but to get started all you need is the ability to learn and follow directions.”

Technology can help fill gaps and reduce training time for staff, but Moeller stressed that human touches and interactions are what help elevate experiences in both hotels and restaurants. Creating a culture which focuses on customers instead of maximizing profits yields repeat business and can elevate demand for an establishment without requiring additional investment.

Moeller gave an example of a recent stay at a hotel in Texas where he was unable to get spinach in his omelet at breakfast one morning due to issues with a supplier. He spoke with an employee who promised to do her best to make sure that there would be spinach the next morning – but the next morning, she had to inform him that the supplier let them down again.

According to Moeller, when he discussed this with the employee, he realized that the hotel’s management could have solved the problem easily by allowing the chef to dip into petty cash and visit the closest market. But a focus on the margins had prevented that, which subsequently prompted him to rethink where he would stay during his next visit to the area.

“You’re going to have areas that stay strong really no matter what,” said Moeller, noting that areas like New York City and Disney World will always have a steady stream of visitors where a margin-oriented high-volume approach to hospitality can work. But in many areas, where the hospitality industry more closely reflects local economic conditions, a staff with better training and more independence will have both higher employee retention and greater customer satisfaction.

“I have always thought that no matter the level of hotel or restaurant, by implementing training programs for five-star service, it can deliver it,” Moeller said, describing this as the core piece of advice he provides clients.