Occupancy rates are slowly inching back up, but regional tourism leaders say it will take years for hotels to make up for lost profits caused by the COVID-19 pandemic.
While the pandemic initially caused occupancy rates to nosedive and hotels to reduce staff and cut rates, ongoing limited indoor gatherings have cramped another key source of revenue: business meetings and conventions. The end of summer tourism is exacerbating the concern.
“We’re really hoping the governor will provide us some guidance in the near future on how we can re-engage meetings and events,” said Peter Beukema, CEO of Hudsonville-based Suburban Inns. “Without a path or timeline to reopen, there is no pipeline. Even the bookings going into next summer are really scarce just because there’s no path back to normal.”
Suburban Inns — which operates eight hotels, most in West Michigan — has had about 170 wedding groups and events canceled since April, Beukema recently told MiBiz. Its hotels are now at around 50 percent occupancy, which industry officials say is roughly the break-even point.
Doug Small, executive director of Experience Grand Rapids, said April was the worst month for hotels in Kent County as companies reported an 18 percent average occupancy rate. The rate was 66 percent in April 2019. The occupancy rate improved to about 43 percent by July, but that’s compared to 71 percent in July 2019, Small said.
“Each month we’ve been climbing the ladder but with that, rates have fallen, too,” Small said. “The end result is room revenue has fallen off dramatically, and that’s how (Experience Grand Rapids) is funded.”
CVBs face revenue hit
Visitors bureaus are often funded almost entirely from revenue at area hotels, which is the case in Grand Rapids, Holland, Kalamazoo and Muskegon. Because of that direct funding tie to hotels, all of the West Michigan tourism organizations have had layoffs in varying degrees and are operating on fractions of the usual budget.
Nearly 90 percent of Experience Grand Rapids’ budget comes directly from hotel sales, Small said. Pre-pandemic the agency forecasted an $11.7 million budget for 2020, which has since been revised to about $6 million. The agency laid off 11 of its 32 full-time employees.
The uncertainty of a potential second pandemic wave, future shutdowns and whether a vaccine is available has made it difficult for both hotels and tourism organizations to plan and budget for next year.
Experience Grand Rapids is forecasting a 30 percent budget decline for 2021, though it could be bigger, Small said. The ability to pivot and be “fluid” from a budgeting standpoint is crucial, he added.
The Holland Area Visitors Bureau is stretching its budget with a new marketing strategy focused less on print advertisements and more on radio, cable TV and music streaming platforms in 2021, said Interim Executive Director Linda Hart.
Discover Kalamazoo’s marketing strategy includes planning for activities that may be reopened next, said Interim President and CEO T.J. Waldofsky.
“We see leisure travel driving occupancies, which will hopefully be followed by sports,” Waldofsky said. “The third thing to come back will be meetings and events. The final segment we have a little less control over is business travel.”
Business travel uncertainty
Because of public health concerns and the widespread shift to remote working, the future of business travel is filled with uncertainty, which is trickling down to tourism agencies, lodging operators and airports. If business travel ever returns to 2019 levels, it may take several years.
“I don’t know if we’ll ever return to normal, and I think the industry has probably changed at least in the short term for the next three to five years,” said Bob Lukens, community development director for Muskegon County. “Leisure travelers will be coming back, but meetings and conventions will take a while to come back.”
Tory Richardson, president and CEO of the Gerald R. Ford International Airport, echoes the sentiment. Airlines are now servicing more “sun and fun” destinations and fewer business markets, he said.
“We just aren’t seeing the business travel come back yet,” he said, adding that a recent airport survey of West Michigan businesses suggests a return in early 2021, though that’s below expectations at the national level. “We certainly hope it will come back soon so we can go back to the airlines and tell them we’re connected back to the business market.”
The airport also bottomed out with passenger travel in mid-April, reaching a 96 percent decline in passenger travel compared to April 2019. Those numbers have gradually increased, though. In August, the airport had 138,287 total passengers, which is just less than half as many as the same period last year. Year to date, the Grand Rapids airport has had about half as many passengers as last year.
“For the most part that is because passengers do feel confident in the ability to fly and do so safely,” Richardson said.
Allowing safe, in-person meetings with social distance and mask protocols remains crucial for the hotel industry, Lukens said.
“In-person meetings are important to businesses and I think we’re moving in that direction,” Lukens said. “Hopefully we won’t backslide with the winter here and the virus and meetings will be able to open, even at half capacity.”
No closures, some openings
Despite furloughs and budget reductions, area visitors bureaus report that no major hotel has permanently closed because of the pandemic. However, most hotels can’t sustain for too long at less than 50 percent occupancy, Small said.
As many as 15 hotels in Kent County closed temporarily this summer. Amway Corp.-affiliate AHC Hospitality — which operates the Amway Grand Plaza, JW Marriott, Courtyard by Marriott and AC Hotel in Grand Rapids — had called back about half of the 1,200 employees it furloughed in April by late July.
Despite the guarded outlook, some hotels have actually opened during the pandemic, including a $49 million, 155-room Canopy by Hilton in downtown Grand Rapids.
The eight-story hotel in Studio Park was originally set to open in June, but construction was delayed because of COVID-19. It opened on Sept. 8.
“The plan for the hotel was in place a long time before everything was going on with COVID-19,” said Tricia Shangle, director of sales and marketing at Lodgco Hospitality. “Our management company felt it was important to still open and be a shining light in this time.”
Also because of the pandemic, the hotel didn’t hire as many staffers as originally planned, which helped avoid layoffs, Shangle said. The hotel employs 44 and is hiring for six more positions.
“We’re going to make the most of this,” Small said. “I see us gaining a couple 2 to 5 points of occupancy each month. That’s a big victory, we’re making an impact. I want people to know we have a staff that’s grinding away and we’re going to be better for it.
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