The state of hospitality

By: J. David Chapman/June 3, 2021

The hospitality industry is very important to the commercial real estate sector. Whether it is hotels, restaurants, or local attractions, they occupy our buildings, create amenities, and provide “place” that is so vital in our communities. We recognize the risk in leasing to hospitality tenants, but appreciate the wonderful tenant-mix they provide.

I got a firsthand view of the hospitality industry Memorial Day weekend traveling to the Grand Canyon on a family vacation. Starting in Oklahoma, traveling through Texas and New Mexico, and winding up in Arizona, we stayed in four different hotels and ate in numerous restaurants in four states. As the rest of the U.S. recovers from COVID, one thing is obvious – the hospitality industry (hotels, restaurants and attractions) is struggling. They were the hardest hit by shutdowns and most have lost efficiencies in process as they reinvent themselves and rehire after mass layoffs.

Oklahoma and Texas have opened indoor seating in restaurants to 100%, while New Mexico and Arizona are still restricting restaurants to 50% capacity. It is probably just as well, because pandemic benefits, at both the state and federal level, may be discouraging workers from returning to the industry, thereby creating a severe worker shortage. The good news is most have signs not requiring masks if patrons are fully vaccinated for COVID.

The hotel experience is even more bizarre. We stayed in national-chain hotels and all had significantly limited amenities. All guests were required to wear masks anytime in public spaces, creating a very sterile environment among guests. All employees were wearing masks even though they were isolated behind Plexiglas at all times, again making the communication difficult. The Airbnb, at our destination, was the most comfortable and normal experience during the trip without the corporate restrictions of the hotel chains.

The most affected were the attractions such as museums, monuments and national parks. Ironically, they have seen a large influx of visitors, setting new records. Most have limited services with some or all guest centers, restaurants and public bathrooms shut and transportation limited to 50% capacity. Again, it appears difficult to hire seasonal-workers necessary to staff these attractions and there is still an abundance of caution in place.

We had set our expectations properly and had a wonderful family vacation. The weather was great and the Grand Canyon is one of the most beautiful places on earth. I encourage my readers to get out there and explore, but do so with patience.

J. David Chapman is an associate professor of finance and real estate at the University of Central Oklahoma (jchapman7@uco.edu).