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Hotel 2.0 Lies at the Intersection of Work and Play

Real Estate - Commercial property
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COVID has put us all on the defensive, with $400 million in daily losses forcing a drastic change in thinking. The hospitality industry is one of the hardest hit. Hotels have not been able to rely upon the single biggest driver of demand: travelers.

Arne Sorenson, the CEO of Marriott, recently wrote about “dusting off the welcome mat” at the Marriott headquarters. It’s got me thinking about how the future of work and the future of hotels have collided during the pandemic. Outside of the office, hotels have long been secondary workspaces. How many of us have worked from our hotel rooms in-between sessions during a conference? Or had drinks with colleagues in a hotel lobby? Interestingly, hotels have somewhat maintained that place during the pandemic, become secondary workspaces outside of the home, rather than the office.

So, as folks like Arne welcome workers back to the offices, where do hotels land in all of this? With spaces built for collaboration (meeting rooms), inspiration (conference space), networking (F&B) and focused work (guest rooms), should the hotel maintain its place as a secondary workspace to home or office? 

Or should the hotel establish itself as an ideal primary workspace that blends the best of home, office and hotel? 

As someone who’s been working to expand the way we use hotels, I clearly think that hotels should be seen as purveyors of flexible experiences tailored not just to travelers but also to locals. Hotels are a perfect complement to remote work, providing not just a place to escape “work from home” but also a place to collaborate, connect and create. Remote teams need spaces outside of the home—and hotels are ideally suited to deliver. 

Hotels 2.0 and the Local Guest

The hotel’s financial obligation to optimize real estate will force it to target a new audience of local residents, a much larger pool of potential guests. Last year only 1.5 billion people traveled the world, ushering in disruption to multiple industries.

The 2.0 hotelier will take a page from the airlines industry and will intelligently monetize every single corner of their box with a hyperlocal resident to offset betting the house solely on travelers staying the night.

The hotel has a pool? Great! Guests love to spend the day by the pool…and will pay for a day pass. This opens up new incremental revenue streams, since most people will order drinks and food as they enjoy the poolside atmosphere. The pool then becomes another lever for revenue management and further sets hotels apart from Airbnbs, who may not be able to offer comparable services to its guests. 

The hotel has a gym? The reality is that this gym sits empty for the majority of the day. To better optimize that sunken cost the hotel could offer day passes (or monthly subscriptions). At the right price, the hotel gym could become a viable alternative to the megabox gym full of weightlifters and people. The smaller hotel gym actually becomes more valuable to guests, who prioritize smaller crowds, affordable pricing and accessibility across a broad network of hotels.

The hotel has excess parking? These spaces become additional revenue opportunities, more levers for the director of revenue to pull when pricing rooms based on local demand, such as major events.

The thread here is that hotels can monetize their physical spaces to provide services far beyond the traditional overnight stay. Access and amenities can be curated and packaged, building entirely new revenue streams that can transform the hospitality industry. With enough focus, creativity and savvy, hotels can capitalize on new demand sources to become even more resilient in the long term. 

Hotels 2.0 and the Future of Work

The mother of all disruption is that hotels now sit at the perfect crossroads of booming demand and shortening supply: remote workers who need a place to work peacefully away from home, as well as remote teams that need office-like collaboration space. 

It’s been in the headlines for some time now: some of the most prestigious and overly inflated co-working companies are shrinking rapidly in size and footprint. Many secondary and tertiary office markets are now co-working deserts, and at a time in which more people are working remote than ever before COVID-19 has transformed the way we work and it most certainly should transform the way we hotel. 

The future of work is blended, a post-pandemic fact that Arne Sorensen acknowledged in Marriott’s own plans to re-open their corporate offices with a more flexible work-from-home policy. This future’s so bright that it may change how hotels are built, structured and operated forever.

After all, hotels are quite similar to co-working spaces.  They have reliable wifi, inviting ambiance, fresh coffee, and the social buzz of daily foot traffic. Hotels also have ample workspace, from individual “private offices,” communal lobby tables and business centers to  conference rooms that can accommodate remote teams and corporate off-sites. Hotels also feature upgraded amenities on par with the fanciest of offices: in-house IT support, on-site food and beverage, gym, pool and space to enjoy after-work activities.  

Of course, working at a hotel isn’t new. The lobby at the Ace Hotel in New York became an instant hit after opening in 2009, setting into motion a trend that became a core part of a new work lifestyle. But, just like everything else in the world of COVID-19, the trend has accelerated. In this particular case, it opened a new segment for hoteliers. A cooped-up ‘Work From Home’ workforce without an office attachment is ready and willing to switch to ‘Work From Hotel’ activities. 

With strong brand promises in service, protocols of cleanliness and general duty of care, hotels have a massive role to play in this blended future of work. Hotels will become satellite offices widely distributed near remote workers’ homes, as they serve more locations than major metropolitan areas. They’ll offset their widely fluctuating performance-based room night rates into recurrent membership-based monthly rents. 

We’re already seeing this trend solidify with Citizen M’s corporate subscription program and Hilton’s Workspaces. These initiatives show the potential and longevity of the remote work trend. These major global brands aren’t just nibbling around the edges here; they’re diving in with full products geared towards the remote worker. 

Remote work is here to stay and with hotels far more evenly distributed than most co-working brands, the category is well-placed to become an ally in the productivity and mental health of our growing remote workforce. 

To capitalize on the mainstreaming of remote work, asset owners and hoteliers should undertake a wholesale review of each property to take steps to satisfy this new market. For instance, you could convert some floors to be fully ‘Work From Hotel,’ with a shared kitchen and lounge on each floor. You could also convert some suites into premium private offices for monthly rental, allowing you to diversify revenue streams and build a more resilient business model. Or you could test a subscription product to offer access to lobby spaces for day use co-working. 

In the doldrums of distressing occupancy rates, hotels have a tremendous opportunity to expand beyond their core business and become blended assets that enable revenue growth and greater resilience to economic cycles. With demand temporarily depressed, now is the time to adapt to this new paradigm and rethink how we build and operate hotels. Then, once demand returns towards the end of 2021, the industry will come back stronger than ever, with an entirely new segment of customers to build on. I, for one, am excited to participate and accelerate this exciting transformation!

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