Hospitality CEO on COVID-19 impact on hotel industry: It's tough, it's unprecedented

Summary

In this interview, Dave Johnson, CEO of Aimbridge Hospitality, discusses the impact of the pandemic on the hotel industry, with many franchisees struggling and facing closure. He notes a slow recovery, with some signs of life in leisure travel to destinations where social distancing is easier. Johnson emphasizes the importance of cleanliness protocols and the need for a vaccine to boost confidence in travel. He also predicts a stronger future for larger hotel operators due to their ability to weather the storm financially.

Takeaways

• 🏨 The travel industry is facing unprecedented challenges with many hotels experiencing low occupancy rates or closure.
• 🛏️ Franchisees are struggling and may require government relief to survive the downturn in the hospitality sector.
• 📈 There are signs of recovery in leisure travel as some destinations like beaches begin to open, but business travel remains significantly impacted.
• 🌐 Ambridge Hospitality operates a large number of hotels and resorts, which allows them to gather extensive data on travel trends and consumer behavior.
• 🚗 There is an increase in domestic leisure travel as people prefer to drive to destinations where they can maintain social distancing.
• 🧼 Hotel brands are implementing new cleaning protocols to ensure guest safety, which is a responsibility shared by franchisees.
• 💼 Larger franchisees with strong balance sheets are more likely to survive the crisis compared to smaller operators.
• 🛑 Business travel is still very slow, and many companies have imposed travel restrictions due to the pandemic.
• 🛌 Changes in hotel amenities are being made, such as rearranging furniture to allow for social distancing, and buffets may not return for a long time.
• 🏋️‍♂️ Gyms in hotels are still closed, and the reopening process is dependent on local ordinances and safety protocols.
• 💉 The return of the hotel industry to normalcy largely depends on scientific advancements like therapeutics and vaccines, which will restore consumer confidence.

Q & A

How is the travel industry currently affected by the pandemic?

The travel industry is taking a significant hit due to the pandemic, with many hotels experiencing low occupancy rates and some even being closed.

What is the current situation for hotel franchisees according to Dave Johnson?

Franchisees are struggling, with some needing relief from the government. Many hotels that were running at 70% occupancy in January are now closed or running single-digit occupancy.

What signs of relief are being seen in the leisure travel sector?

There are signs of relief in leisure travel as beaches and leisure destinations start to open up, giving people the option to travel by car and maintain social distancing.

How does Ambridge Hospitality foresee the near-term future for hotel bookings?

Ambridge Hospitality is seeing some positive signs for bookings, especially for summer and around Memorial Day weekend, for destinations that are drivable and offer the ability to social distance.

What is the responsibility of franchisees regarding new cleaning protocols?

Franchisees are responsible for implementing the new cleaning protocols set by the hotel brands, ensuring that the rooms are as safe as possible for guests.

How does Dave Johnson view the survival of large franchisees during this crisis?

Dave Johnson believes that larger franchisees with strong balance sheets and partnerships may actually survive and come out stronger due to a flight to scale and quality in the industry.

What impact does the pandemic have on business travel and group conventions?

Business travel and group conventions are significantly impacted, with very low demand for main gateway cities and many companies imposing travel restrictions.

What are the chances of a large franchisee going under during this crisis, according to Dave Johnson?

Dave Johnson suggests that it might be the smaller franchisees that are more at risk, not the larger ones, as they may not have the financial resources to weather the storm.

What factors does Dave Johnson believe will help the hotel industry recover?

Johnson believes that a combination of scientific advancements like therapeutics and vaccines, cleanliness standards, and a gradual return of confidence among different age groups will contribute to the industry's recovery.

How are hotel amenities being adjusted to accommodate social distancing?

Hotel amenities such as pools and beach resorts are adjusting by spreading out furniture to allow for social distancing. Buffets are expected to take longer to return due to the challenges of maintaining safety.

What is the current status of gyms in hotels?

Gyms in hotels are still mostly closed, with the situation varying by state and local ordinances. Some areas are starting to open gyms with strict protocols in place.

Outlines

00:00

🏨 Impact of Pandemic on Hotels and Future Outlook

The travel industry, particularly hotels, is facing unprecedented challenges due to the pandemic. Many hotels have closed or are operating at low occupancy rates. Dave Johnson, CEO of Aimbridge Hospitality, discusses the difficulties franchisees are experiencing and the potential for relief from the government. He highlights signs of recovery in leisure travel as restrictions ease, with some destinations seeing an uptick in bookings. Johnson also addresses the new cleaning protocols being implemented by hotel brands to ensure guest safety, which are coordinated with franchisees. The conversation suggests that larger franchisees with strong balance sheets may be better positioned to survive the crisis, while smaller operators could struggle.

05:02

😷 Changes in Hotel Operations and Amenities Amid Pandemic

The script discusses the changes in hotel operations due to the pandemic, including the potential long-term closure of buffets and pools. Dave Johnson explains that social distancing measures have led to the rearrangement of furniture in pools and beach resorts. He predicts that buffets may not return for a long time, even with protective measures like sneeze guards. Johnson also comments on the current state of business travel, which remains slow, particularly in major cities. He notes that extended-stay hotels and lower-end chains are faring better, but overall demand is still very low. The conversation concludes with a look at the gradual recovery of the industry, with a focus on cleanliness standards and the potential return of business travel as companies lift travel restrictions.

Keywords

💡Travel industry

The travel industry encompasses all the services associated with the traveling experience, including transportation, accommodation, and activities. In the video, the travel industry is highlighted as being significantly impacted by the current crisis, with many hotels facing low occupancy rates or closure, which is a central theme of the discussion.

💡Recovery

Recovery in this context refers to the process of returning to a normal state of business and economic activity following a downturn or crisis. The script discusses the travel industry's road to recovery, indicating the gradual process of regaining its pre-crisis state.

💡Cleaning protocols

Cleaning protocols are the established procedures for maintaining cleanliness and hygiene, especially in the context of the current health crisis. The script mentions that hotel companies are implementing new cleaning protocols to ensure safety, which is a critical aspect of the industry's response to the pandemic.

💡Franchisees

Franchisees are individuals or companies that own and operate a franchise under the license of a larger company. The script discusses the challenges faced by franchisees, such as the need for financial relief and the responsibility of adhering to new cleaning standards.

💡Occupancy

Occupancy refers to the percentage of available rooms that are being used or rented in a hotel. The script notes a drastic drop in occupancy rates, from 70% to single digits, illustrating the severe impact on the hotel industry.

💡Leisure travel

Leisure travel is travel for recreational purposes, as opposed to business travel. The script mentions signs of relief in leisure travel as beaches and other destinations open up, indicating a potential area of growth for the industry.

💡Drive to leisure destinations

This refers to the trend of people choosing to drive to vacation destinations rather than flying, as a way to maintain social distancing and feel safer during the pandemic. The script cites examples of such destinations, like South Florida and Napa Valley.

💡Social distancing

Social distancing is the practice of keeping a safe distance between individuals to prevent the spread of infectious diseases. The script discusses how certain leisure destinations allow for social distancing, making them more appealing during the pandemic.

💡Balance sheet

A balance sheet is a financial statement that records a company's assets, liabilities, and equity at a particular point in time. The script mentions the importance of a strong balance sheet for larger franchisees to weather the economic storm caused by the pandemic.

💡Flight to scale

Flight to scale refers to the tendency of investors or customers to prefer larger, more established companies during times of uncertainty. The script suggests that larger hotel operators may benefit from this trend as the industry recovers.

💡Vaccine

A vaccine is a biological preparation that provides active acquired immunity to a particular disease. The script identifies the development of a vaccine as a key factor that could boost confidence and accelerate the recovery of the travel industry.

💡Business travel

Business travel refers to travel for professional or work-related purposes. The script notes that business travel is currently very slow, with many companies imposing travel restrictions due to the pandemic.

💡Amenities

Amenities are the services and facilities provided in addition to the primary service of a hotel, such as pools, gyms, and buffets. The script discusses changes to hotel amenities, such as the reduction of furniture around pools for social distancing and the closure of buffets and gyms.

Highlights

The travel industry continues to suffer due to the pandemic, with many hotels implementing new cleaning protocols.

Franchisees are struggling and may need government relief, with some hotels closed and others running at low occupancy.

Aimbridge Hospitality CEO, Dave Johnson, discusses the unprecedented challenges faced by the hotel industry compared to past crises.

There are signs of relief in leisure travel as beaches open up, but business travel and group conventions remain significantly impacted.

Aimbridge Hospitality operates 1,400 hotels and resorts globally, providing valuable data on travel trends and bookings.

Positive signs for summer travel are emerging, especially for drive-to leisure destinations where social distancing is possible.

Hotel brands like Hilton, Marriott, and Hyatt are leading the way in setting new cleaning standards for franchisees to follow.

The responsibility for implementing new cleaning procedures falls on franchisees, who must adhere to brand standards.

Smaller franchisees may struggle to survive the crisis due to lack of financial resources, unlike larger operators with stronger balance sheets.

The hotel industry's recovery may be gradual, with a focus on cleanliness and safety protocols to build consumer confidence.

A vaccine or therapeutic treatments would significantly boost confidence for travelers and the industry's recovery.

Different demographic groups, such as Gen Z and Millennials, may recover travel habits faster than older generations.

Business travel remains slow, with many companies imposing travel restrictions and favoring remote work.

Extended-stay hotels and lower-end chains are faring better in terms of occupancy compared to downtown hotels in major cities.

Amenities within hotels are changing, with pools and beach furniture being rearranged to allow for social distancing.

Buffets are unlikely to return soon due to hygiene concerns, and gyms remain closed or have limited access based on local regulations.

The interview concludes with a discussion on the potential long-term changes to hotel amenities and services post-pandemic.

Transcripts

the travel industry now continues to

take a hit as we head toward the road to

recovery many hotel companies like

Hillen are implementing new cleaning

protocols here discuss how franchisees

will be able to keep up with that demand

is the CEO of third party management

company aim bridge hospitality

Dave Johnson Dave good good to talk with

you here we recently spoke with the

Hilton team CFL Kevin Jacobs and CEO

Chris Necedah and one takeaway for me is

that franchisees there they're hurting

and they may need a good bit of relief

from the government what are you hearing

from the franchise each community are

they getting any relief and what's the

outlook for well thank you Brian good

morning and it's it's tough it's

unprecedent times you know I was I let a

company through 9/11 I let a company

through the Great Recession and and what

we're experiencing right now is

unprecedented

you know hotels that in January running

seventy percent occupancy and now we

have 25 30 percent of our hotels that

are closed and the other ones are

running single-digit if we're fortunate

we're seeing some signs relief in

leisure travel with the beaches opening

up what but it's a it's a very difficult

time right now for franchisees Dave any

idea what the near-term future might

look like I mean are you getting folks

inquiring about bookings when they

anticipate their state reopening so

let's sort of talking about maybe end of

summer into early fall are you seeing

any bookings pick up there it's a great

question we operate about 1,400 hotels

and resorts in 20 countries 49 of the 50

states we've got great data

forward-looking and what we're seeing

signs of some some positive signs for

summer and even Memorial Day weekend our

drive to leisure destinations places

like South Florida with the beaches

South Texas places like Sedona also

places like Napa Valley and Colorado

where people I think feel comfortable

you can get in their car and drive as

opposed to getting an airplane there's

still a lot of fear there and also the

fact that they can social distance

outside on a golf course or on a beach

on Napa Valley etc so we are seeing some

signs of life as it relates to the

business travel and any kind of group

convention of meetings still very very

important and what about the the

cleaning protocols which I mean are

really unprecedented

I would imagine cleanliness is always

top of my

but now these these hotels are

implementing new procedures does that

burden fall on you as a franchisee to

buy those those items and to do the

cleaning yes it's our responsibility but

we take direction from the brands you

know brands set brand standards and hats

off to Brian so you spoke with Chris

Necedah Hilton's been a real leader

Marriott's done a fantastic job Hyatt

IHG where most of the brand's largest

franchisees so we're walking step in

step with the brands to really assure

the traveling public that are you know

that our rooms are as safe as your as

your home Dave there are some large

franchisees and these in these hotel

networks I don't tell you that what are

the chances that one large one goes

under or does not survive this I think

that's one of the main concerns from

from an investor's standpoint

yeah Brian I think it's gonna be the

opposite actually you know in our world

I think the small ones 10 12 years ago

Ambridge was small we ran 50 to 100

hotels under franchise license I think

those are the ones that don't have the

balance sheet to weather the storm

actually think the larger ones are the

ones that may survive unfortunately a

lot of my competitors they're smaller

our good friends and they're struggling

right now they may have you know 60 to

90 days of runway they got a little bit

of relief from the federal government in

the cares Act but that's that's a 90-day

kind of relief companies like mine that

have a strong balance sheet strong

partners were private we can weather the

storm but I'm think we may come out of

this thing a stronger organization

because there's a flight to scale and

there's my ownership there's a flavor

scale in a flight to quality so there's

a lot there's probably over 350

third-party operators the United States

but probably 275 operate under under 100

Hotel so they don't have a balance sheet

to weather the storm Dave what gets the

hotel industry out of this is it as

simple as to say we need a vaccine so

people feel confident that they can go

out and stay in hotel they can take a

plane they can go out and take a

vacation yeah I mean science is a big

part of it you know I mean you've got

science you get therapeutics that could

potentially come out to treat it we

obviously a vaccine would be a would be

a home run we got our finger on the

pulse we're already seeing signs of life

airline employments are going up but but

obviously they were drastically low

I think cleanliness standards but I we

really look at it in three tranches I

actually think in speaking with people

Gen Z and Millennials I think that

they're the first ones to get on a plane

the first ones again on a cruise ship

take a vacation etcetera Lee I think the

elderly obviously for fear of what can

happen in all the statistics we see it's

gonna be awhile before they come back

but yes to your point of vaccine would

be fantastic but I think it's gonna be a

gradual comeback for our industry you

know and I think a lot of us you know I

love the protocols at the airlines are

putting in place because people feel

safer the fact that everyone's gonna

wear a mask I think most business

travelers are more worried about the

person sitting next to them and they are

themselves so the fact that everybody's

gonna be wearing a mask I think gives a

little bit more comfort for somebody to

get on that point deep what are you

seeing in terms of demand from business

travelers which we know is really the

bread and butter of the hospitality

industry hotels and airlines alike are

you seeing that kind of coming back now

because more and more people than ever

are working from home and many companies

may say you know what this is working

out okay we don't need to send somebody

someplace to get a deal done in person

you know business travel is still very

slow if you look at the main gateway

cities like San Francisco New York LA

Chicago

it's still very very low on demand a lot

of the drive markets lower end with you

know trucking companies people who need

to stay drive markets we're see it's a

very positive if you look at certain

chains extended Stay America with the

lower end extended stay they're still

running occupancy in the 50s and 60s

chain wide we look at any hotel that's

in downtown New York LA Chicago beer

either closed or you're running

single-digit occupancy especially

midweek so still still very very slow

from that standpoint like a lot of be

with companies you know there's still a

lot of people that are desiring to

travel but their company has said we're

putting restrictions on travel so until

those restrictions are lifted

I think demand will be very low Dave

last before I let you go how does the

amenities change inside of Hotel how

long is the buffet just not going to be

open or the pool will be closed you know

I think in our pools we drove half the

furniture so that from that standpoint

you can have social this

cool same thing if we have beach resort

locations we're spreading the furniture

out you know that we put out every day

buffets I think it's a long time before

the phase come back even with sneeze

guards and things like that I think that

the time of the buffet is you know you

know you know in a hotel breakfast

rephase think we see like that or alarm

going well III what about jinns what

about the jinns in the hotels gyms are

still closed man obviously it's a

state-by-state municipality county by

county ordinance we're just making sure

that we follow you know whatever the

local ordinances are but again gyms are

starting help I live in the state of

Texas

we're opening gyms here and I think the

protocol that these companies are using

are actually very very good all right

let's leave it there Dave Johnson CEO of

Ambridge hospitality I'll just say this

I'm really going to miss my hotel buffet

but root for it to come back for sure

thank you brother preciate alright we'll

talk to you soon hey investors sach

Guzman here are you interested in

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