REPORT FROM THE U.S.—Hotel management companies in the U.S. say adhering to new COVID-19-related protocols may see operating costs grow by as much as 20% because of the increase in labor and supplies while hotel room demand inches back from its early April low point.
Additionally, one-time capital expenses for facility improvements, such as automatic doors, and equipment like electrostatic sprayers, can in some cases add another six figures at certain properties.
With chain hotels and many independents adhering to protocols that have been standardized through the American Hotel & Lodging Association’s “Safe Stay” guidelines, operators have had to stock up on items such as masks and gloves for housekeeping staff; face coverings and single-use plateware and silverware for food-service operations; and hand-sanitizer dispensers, plexiglass and signage for public areas.
For some properties, some of the higher labor costs have been offset by occupied guestrooms being less likely to be cleaned during the stay because of social distancing measures.
Davidson Hotels & Resorts Chief Operating Officer Pete Sams estimated that while the time to clean a room between stays is up about 20% and more labor is being committed to keeping lobbies and other public areas disinfected, direct expenses will rise between 5% and 7% for the year.
For other properties, such as Los Angeles’s Hollywood Roosevelt, however, product and labor costs are up about 20%. Some of those expenses are tied to the hotel’s decision to deep clean and retrain staff when it was forced by local authorities to temporarily close in the spring. New housekeeping standards have pushed the typical cleaning time of a single room up about 50% to 45 minutes, said Hollywood Roosevelt Regional VP and Managing Director Don Jacinto.
“We spent a month preparing and ordering product to ensure we would be in compliance,” he said, adding that each guest receives a complimentary personal protective equipment kit upon check-in. “Our No. 1 objective was to ensure that the hotel was going to be a safe place for hotel guests as well as employees.”
Then there are amenities that luxury hotels and resorts have added to ensure safety for their guests. The 379-room Langham Huntington in Pasadena, California, which closed in early April, spent “several hundred thousand dollars” on automatic-door installations, electrostatic sprayers and ultraviolet light systems in airducts, said Paul Leclerc, managing director at Langham Huntington.
The hotel also plans to add a “pre-ambassador” near the hotel’s entrance, who will attempt to ensure that only hotel guests be allowed on property, he said. He estimated that direct costs associated with complying with new hotel, local, state and federal safety standards will be approximately 6% of revenue for the rest of the year.
“What we won’t do is relax these policies until the health professionals give us guidance that we can,” he said.
Hotel owners and managers are spending the additional funds during a time when room revenue has climbed from early-April lows but remains far below year-earlier figures because of the continued cutback in both business and leisure travel. For the week ending 4 July, U.S. revenue per available room fell 45% from a year earlier as occupancy stood at 46%, while room rates were down 21% to $101.36 a night, according to STR, parent company of Hotel News Now. Among the top 25 U.S. markets, occupancy ranged from Norfolk/Virginia Beach’s 63.4% to Oahu’s 19.4%.
Additionally, while much of the protocol has been standardized via AH&LA’s “Safe Stay” guidelines, hotels are still also contending with requirements that not only differ from state to state but even county to county. Case in point is the Langham Huntington, which had originally scheduled a 1 July reopening date but reopened on 30 July.*
“We already know the volume of questions and concerns” from hotel staff, Leclerc said. “All of those things are going to require (human resources) labor.”
Granted, larger hotel chains appear to have a greater opportunity to allow their ownership and management teams to spread the additional costs out and achieve greater economies of scale. Hilton President and CEO Chris Nassetta** estimated in June that the additional costs associated with the company’s “CleanStay” program, which includes a third-party partnership with Lysol parent RB and dictates new room cleaning and public space-upkeep protocol, have been essentially offset because rooms have been updated to make them easier to clean by reducing clutter.
“We’re also taking other things away that, when we talked to our customers, they said that they don’t care about. A lot of things, in fact, that irritate them in the room—a lot of the clutter, the notepads, the pens, the menus, all or most we can do in a digital format,” Nassetta said in a 24 June interview with the National Retail Federation. “The net is that we highly engineer these programs. CleanStay is basically cost neutral.”
That said, the full cost impact of new protocol remains in question as both coronavirus numbers, regulations and guest mix continues to evolve.
Meanwhile, Sams noted that leisure guests, who tend to require more room maintenance than business travelers, are accounting for a higher percentage of Davidson’s guests than prior to the pandemic and added that the company’s two San Francisco hotels remained closed while hotel lobbyists challenge a cleaning ordinance that was enacted earlier this month.
“Southern Florida and Dade County are far more aggressive in their stance than the entirety of the state. And with California, there are pockets that are in different phases,” Sams said. “So that’s always a moving target.”
Editor’s notes:
*This story has been updated with the Langham Huntington's 30 July reopening date.
**Hotel News Now is a division of STR, a CoStar Group company. Chris Nassetta serves on CoStar Group’s Board of Directors.