Skip to content

Search

Latest Stories

CBRE: COVID-19 may increase variability in hotel expenses

More use of technology adds to expenses as labor gets outsourced

MANY TRADITIONALLY FIXED expenses for U.S. hotels will become more flexible in the future as operators adjust to the post-COVID-19 “new normal” and learn to operate more efficiently, according to a new analysis from CBRE Hotels Advisory. The shift might force hotel operators to think differently about zero-based forecasts for annual budgets, as well as the outsourcing and centralization of certain functions within the hotel.

In April, a torrent of layoffs and furloughs within the leisure and hospitality industry led the U.S. economy to its worst month of job losses in modern history with more than 7.7 million industry jobs lost across the country, according to the article “COVID-19’s Potential Lasting Impact on Fixed vs Variable Hotel Expense Ratios,” by Mark VanStekelenburg, CBRE’s managing director and practice leader.


Post-COVID, the fixed expense for rooms will be 25 to 30 percent and variable expenses will be 70 to 75 percent, During the pre-COVID period, the variable expense for the segment was 60-65 percent. It was 75-80 percent during the pandemic period.

The administrative and general expense will remain more or less the same post-COVID. The variable expense in sales and marketing will remain the same, 50 to 55 percent, in the pre- and post-COVID period, but it was 85-90 percent during the pandemic period.

“Many limited-service hotels are cutting staff by more than 70 percent, maintaining less than five full-time employees on the payroll. Some of the key positions which remain actively working are the general manager and either housekeeping, security, and/or front desk supervisor. Similarly, full-service hotels are operating with limited personnel and amenities,” said the report.

Another source of possible extra expenses may be the new technology hotels will need in the post-pandemic era.

“There is the potential for the hotel room itself to be reimagined to have fewer touchpoints to promote a safer and more sanitary product. From remote controllers and light switches to doorknobs and glassware, hotels will likely find ways to mold the customer experience to limit touching of these and other items within the guestroom and public amenity areas,” the report said. “Hoteliers will be encouraged by a shift in culture to invest in innovative technologies to limit these touchpoints, such as using digital keys, digital payments via mobile phone, and replacing menus with QR codes, among others. Familiarization trips and site visits by meeting planners might partially be replaced by virtual tours to maintain social distancing and cut costs to the department.”

The report found that full-service hotels that remained open during the height of the pandemic altered their operations to mirror more closely those of limited- or select-service hotels.

CBRE points out that there will be an increase in outsourced labor across the industry as extended-stay, limited-service, and focused-service hotels adopt outsourcing practices for several operating departments.

“The pandemic has forced hotels to slash operating costs, including those traditionally thought to be fixed, such as full-time labor. Full-service, convention, and resort hotels already utilize outsourced labor for a portion of their staffing needs, such as banquets, housekeeping, and F&B,” the report said.

Sales and marketing departments will need to adapt by evolving in practices and shifting fixed-in-nature expenses to tie more into business volume and forecasting tools will become more important, it further said.

VanStekelenburg’s coauthors are Kannan Sankaran, senior director; Andy Hartley, director; and Vanessa Gonzalez, consultant. More information can be found in CBRE’s “The Weekly Take” podcast.

A rise in expenses cut profits for U.S. hotels in June, according to HotStats.

More for you

Trump reviewing 55 million us visas
Getty Images

Trump reviewing 55 million visas

Summary:

  • The Trump administration says it is reviewing more than 55 million visa holders.
  • Reviews cover a wide range of visas for law enforcement and overstay violations.
  • The administration also suspended worker visas for foreign commercial truck drivers.

THE TRUMP ADMINISTRATION is reviewing more than 55 million people who hold valid U.S. visas for potential violations. It is expanding a policy of “continuous vetting” that could result in revocation and deportation.

Keep ReadingShow less
Peachtree Funds Rio Las Vegas Renovations | $176M CPACE Loan
Photo credit: Hyatt Hotels Corp.

Peachtree originates retroactive CPACE loan for Rio Vegas

Summary:

  • Peachtree Group originated a $176.5 million retroactive CPACE loan for a Las Vegas property.
  • The deal closed in under 60 days and ranks among the largest CPACE financings in the U.S.
  • The company promotes retroactive CPACE funding for commercial real estate development.

PEACHTREE GROUP ORIGINATED a $176.5 million retroactive Commercial Property Assessed Clean Energy loan for Dreamscape Cos.’s Rio Hotel & Casino in Las Vegas. The deal, completed in under 60 days, is its largest credit transaction and one of the largest CPACE financings in the U.S.

Keep ReadingShow less
Spark Acquires Home2 Suites Wayne, New Jersey
Photo Credit: Hunter Hotels

Spark acquires Wayne, N.J., Home2 Suites

Summary:

  • Spark acquired the 120-key Home2 Suites by Hilton Wayne in Wayne, New Jersey.
  • Hunter Hotel Advisors facilitated the transaction with DC Hospitality Group affiliates.
  • The 2020-built hotel is near William Paterson University and less than 20 miles from Manhattan.

SPARK GHC RECENTLY acquired the 120-key Home2 Suites by Hilton Wayne in Wayne, New Jersey, from affiliates of DC Hospitality Group. Hunter Hotel Advisors facilitated the deal for an undisclosed amount.

Keep ReadingShow less
Global hotel construction pipeline reaches record 15,871 projects in Q2 2025, with U.S. and Dallas leading growth
Photo Credit: iStock

Report: Global pipeline hits 15,871 projects

Summary:

  • Global pipeline hit a record 15,871 projects with 2.4 million rooms in Q2.
  • The U.S. leads with 6,280 projects; Dallas tops cities with 199.
  • Nearly 2,900 hotels are expected to open worldwide by the end of 2025.

THE GLOBAL HOTEL pipeline reached 15,871 projects, up 3 percent year-over-year, and 2,436,225 rooms, up 2 percent, according to Lodging Econometrics. Most were upper midscale and upscale, LE reported.

Keep ReadingShow less
HAMA Launches 20th Student Case Competition in USA
Photo Credit: iStock

HAMA launches 20th student case competition

Summary:

  • HAMA is accepting submissions for its 20th annual student case competition.
  • The cases reflect a scenario HAMA members faced as owner representatives.
  • Teams must submit a financial analysis, solution and executive summary.

THE HOSPITALITY ASSET Managers Association is accepting submissions for the 20th Annual HAMA Student Case Competition, in which more than 60 students analyze a management company change scenario and provide recommendations. HAMA, HotStats and Lodging Analytics Research & Consulting are providing the case, based on a scenario HAMA members faced as owner representatives.

Keep ReadingShow less