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Hospitality Taking Off in New Directions

The news coming out of the U.S. Transportation Security Administration is more than encouraging. 

Since dropping to a pandemic-driven, all-time daily low of 87,534 individuals passing through airport checkpoints on April 13, 2020, the TSA reported its first day of checking over two million airline passengers in a single day on June 11, 2021.  And that day wasn’t a fluke: between June and October, the TSA’s daily “traveler throughput” number has hit the two million person mark 49 times, with a high of 2.24 million on August 1.

In contrast, in 2020 daily passenger counts mostly stumbled along in the 100,000 to 600,000 range. During last year’s Thanksgiving and Christmas holidays, passenger counts did crack the one million mark on several days, but these highs were still less than half the usual holiday numbers.

Now daily passenger numbers are almost back to pre-pandemic levels, which range from 1.9 to 2.4 million passengers daily.

This year’s huge increase in air travel indicates that the hospitality industry is bouncing back.

But this doesn’t mean a return to the same-old, same-old. Hotels, resorts, and entertainment venues are taking advantage of trends that were already on a roll before COVID brought everything to a halt—and are even capitalizing on new lessons they’ve learned during the pandemic.

If you’ve taken a trip anywhere in the United States in the last 18 months, you’d be hard-pressed not to notice that the hottest selling point in the hospitality industry is the word “clean.” Since the start of the COVID era, resorts, hotels, restaurants, and entertainment venues coast to coast have zealously advertised their newest sanitation procedures. Although critics have disparaged this ostentatious cleaning trend as “hygiene theater,” there is little doubt that customers are paying attention. After all, “clean” is the new byword for “virus-free” in hospitality, and most travelers are doing their best to be careful. 

Of course, “clean” isn’t the only thing attracting paying customers.

Some of the most important and lasting trends in the American hospitality industry were already on the upswing before the emergence of COVID-19. They have only accelerated since then. ELH Insights, among other sources, notes that for the last few years, vacationers have increasingly sought contactless, personalized, and sustainable experiences when they travel. Not surprisingly, since COVID, interest in contactless travel with fewer face-to-face interactions has skyrocketed. 

The shift toward contactless service goes beyond the usual online reservation systems and includes virtual tours (before guests make reservations) and augmented reality apps (after guests have arrived, when they want information about onsite amenities). Some hotels even have robot staff for check-in and check-out, carrying luggage, and room service.

Sustainability is another major trend. Customers in recent years have come to expect sustainable practices at restaurants, hotels, and entertainment venues. Keeping plastic forks out of the dining room is no longer enough. More and more guests are willing to pay a premium for vegetarian and vegan foods as well as for ethically sourced bedsheets, toiletries, and other amenities with a smaller carbon footprint. Hotels have taken to advertising their eco-friendly renovations. New and overhauled hotels are moving toward showers instead of bathtubs, since showers require fewer materials and less time and labor to clean. And many hotels are starting to replace the cute but wasteful tiny plastic bottles of shampoo and lotion in the bathroom with permanent dispensers installed in the walls.

The pandemic has actually pushed forward some of these new sustainable practices as well as some unexpected innovations. For example, many hotels have cut back on daily room cleaning, including daily changes of towels and sheets, unless guests specifically request them. (And few do—because, nowadays, who wants a stranger touching all the things in their room?) 

COVID has even spurred the reimagining of the classic hotel lobby: from a place where strangers sit to chat or read the newspaper to, instead, new retail areas that bustle with activity but where close interactions with others are minimized. Architectural Digest has even asked whether COVID has brought on “the death of the hotel lobby.”  The answer is . . . maybe. In fact, AD predicts that the replacement—with automated kiosks and other services—may be more in tune with today’s plugged-in traveler.

App-based check-in?  Limited in-room services? With this in demand, it isn’t a surprise the short-term rental market provided by sites such as Airbnb and Vrbo have hit record high levels. 

 AirDNA, an industry data provider, reported in August 2021 17.6 million nights were sold, an increase of 23.9% from August 2020.  Not surprisingly, the strongest markets have been mountain and lake destinations.  Big Bear, CA, saw an 80% increase in demand in May 2021.  The markets with the largest contraction?  New York, Boston, Los Angeles and Seattle.

According to a recent article on Hospitalitynet, an industry website,  hotels in smaller, less-traveled markets all across the United States are only three percentage points below where they were pre-pandemic, which means that Americans are streaming to new locations. 

But not all big cities are down.  Some larger cities have also done well if they have strong leisure attractions.  Houston, Dallas, Fort Lauderdale and Phoenix all saw positive growth in short-term rental in August 2021 compared to August 2019. 

In Miami, traditional hotels have been able to charge higher rates and maintain strong occupancy rates.  

According to STR, the hospitality data firm, in June 2021 Miami hotels charged visitors an average of $225.03 per night, up 49% from the 2019 pre-pandemic rate of $129.00.  This was with occupancy rates over 72%, far higher than the national average of 66%.  

The upshot is that there is good news for the EB-5 industry that tends to invest in hotels and mixed-use buildings.  

Premium brands, key cities and rural locations are doing well.  Brands that have built in residences that allow short-term stays have a strong market, even if business travel and in-person conventions are delayed.  Traditionally, these buildings have a strong record of gaining in value over time and thus repaying their investors. 

Furthermore, hospitality projects create two sets of jobs: for the workers who construct the hotels and for the direct employees who keep the hotels running after opening day. Once the hotel’s cash flow stabilizes (which typically occurs within two and five years of its first day of business), the hotel’s value as a money-generating business rapidly overtakes the expenses of building it in the first place. This means that hotels are highly likely to pay back their investors―one of the key reasons that the EB-5 and the hotel industries have maintained such a strong partnership since the beginning of the EB-5 program.

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EB-5 Program Update:

The EB-5 Program has lapsed. The US Congress is discussing the legislation that authorizes the program while USCIS reviews the regulations and policies for filing. Because of the recent court ruling that reversed the 2019 Modernization regulations, the investment level has shifted temporarily from $900,000 back to $500,000.

If the program is reauthorized before the regulations are updated, there may be another window of opportunity to file at $500,000.

LCR expects the program to be reauthorized in December, and continues to work with international families that want to explore alternative residency options.

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