290 | DAY-CATIONS: Hotels turn guest rooms into private office spaces

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Work-from-hotel an emerging business model that might remake the hospitality industry during and after the coronavirus pandemic, say experts

Last week, Arne Sorenson, president and CEO at Marriott International posted a blog on LinkedIn about the value of hospitality professionals returning to the office to work.

Like many businesses across the country, employees stationed at Marriott’s corporate headquarters in Bethesda, Maryland, pre-pandemic have worked from home for the past six months.

Marriott had about 4,000 employees at its corporate headquarters in the beginning of the year. It laid off two thirds of its corporate staff in March as the coronavirus pandemic brought travel to a grinding halt. The company has begun to call employees back to work at its headquarters while extending furloughs for others and announcing permanent job cuts for 700 employees effective this month.

In his blog, Sorenson laid out a plan that has employees easing back into working from their offices.

“While remote work will be a bigger part of our future than any of us anticipated in the past, it is increasingly clear that getting back to the office, sensibly, flexibly and in phases, is the appropriate next step,” Sorenson writes.

Those commenting on Sorenson’s blog include Yannis Moati, founder and CEO of HotelsbyDay, an online booking platform that offers hotel rooms for day use.

Moati disagrees with Sorenson’s assessment of the necessity of returning to the office, noting remote working can benefit hotels struggling to fill their rooms. “Our industry is hurting, with more vacancy than ever before,” he writes, noting the large geographical footprint of hotels. “This is the one time (sic) opportunity to re-evaluate what our industry’s mission is.”

Open for New Business

Moati is a former travel agent who lives in New York City. HotelsbyDay.com allows users to book rooms for day use via its mobile app. Since its start in 2015, more than 1,500 hotels around the world have signed up as participants. Moati was seeing a continuous increase in the program’s use before the pandemic hit.

Pre-pandemic, Moati said, more than half of HotelsbyDay customers were leisure guests; 30 percent were people who were on layover at airports; and another 10 percent booked for business use.

Almost all the layover business is gone, he said. HotelsbyDay’s business was down 82 percent in April. In September it was down by 26 percent compared to pre-pandemic traffic. “So we are climbing ourselves back up from that hole.”

A big part of the bounce back, Moati said, is the business sector. With an estimated 40 million people working from home, HotelsbyDay has seen a 35 percent increase in “work-from-hotel” bookings.

The day-use guest demographic, he said, is “hyper local,” with more than 60 percent coming from less than 25 miles away.

The trend is “suddenly opening the door of that hotel to a much larger audience than ever before,” Moati said.

READ: ‘OFFICES ARE DEAD’: Yannis Moati, founder and CEO of HotelsbyDay, espouses the business benefits of the work-from-hotel concept in this opinion piece he penned for MarketWatch. Hotel owners and operators will reorganize their business models to accommodate the emerging demand, he writes.

Hotel Companies Respond

Recognizing the boost that day use can have to a hotel’s bottom line, hotel companies such as Hyatt Hotels Corp. and Hilton have rolled out remote-work promotions. Hilton’s WorkSpaces launched this month, and Hyatt Hotels’ program, Work From Hyatt, in September expanded throughout North America.

The programs invite guests to use rooms at select full-service hotels through which they can accumulate loyalty points and avail themselves of the hotels’ amenities such as room service and the fitness areas.

Early in the coronavirus pandemic, Andrew Alexander, president of Red Roof, and Marina MacDonald, chief marketing officer at the company, returned to Red Roof’s headquarters in Columbus, Ohio, despite the fact that most of its employees were working from home for health and safety reasons.

Soon after, the economy hotel franchiser rolled out “Work Under Our Roof” campaign to give people an option to working from home, where they may not have the space or the level of quiet they need to get the job done. For $29, a day guest can use a room from 8 a.m. to 6 p.m. at select Red Roof hotels.

“It’s interesting, because when the COVID situation first hit and people started to work from home, sometimes it’s your own experience that generates these ideas,” Alexander said.

Alexander and MacDonald came back to office in April. “We realized that so many offices were close and that wasn’t an opportunity for a lot of people,” Alexander said. But he and MacDonald “knew we had to get out of our house.” They probably weren’t the only folks who felt like that.

Along with the day rate for remote workers, Red Roof also rolled out day-room promotions for long-haul truck drivers and college students displaced from their dorms when the schools closed in the spring. “We just thought about: Who are the people who were displaced one way or another and how can we use our 110 rooms at our chalet hotels to make their lives better?” Alexander said.

Growing Loyalty

Red Roof rooms are organized to cater to workers by providing large desks and strong wireless internet connections.

Several years ago, Red Roof must have foreseen the surging guest demand for reliable internet. It launched its Verified Wi-Fi initiative that promoted franchised properties that could guarantee they had enough bandwidth to serve every guest in need of Wi-Fi. The test of strength has turned out to be a plus in the COVID-19 age.

Pre-pandemic, Wi-Fi was the number-one guest amenity. Right now, cleanliness is the top consideration by guests, Alexander said, but reliable Wi-Fi is a close second.

“We certainly didn’t see the pandemic coming, but we did see the Wi-Fi revolution coming and that’s how we retain guests who have a high level of loyalty.”

With regard to loyalty, HotelsbyDay is tracking some trends the industry might want to pay attention to, including converting guest rooms into work lounges. Moati suggests hotels might want to remove the beds from some rooms to cut down on the cost of upkeep. Hotels that are doing this are seeing repeat customers.

RESORTING TO WORK: The Hyatt Regency Clearwater Beach Resort and Spa is among the 1,500 hotels offering rooms for day use on HotelbyDay.com’s platform. Hyatt Hotels Corp. has also rolled out its own remote-work program called Work from Hyatt.

Co-Working Passé?

Moati believes the more hotels adapt to renting rooms to remote workers by day, the more the trend will disrupt the co-working industry. “The hotel has everything a co-working company has and more,” he said, if you count amenities such as the pool, fitness room, food and beverage and the spa. “The disruption can be enormous.”

However, one hotelier Long Live Lodging interviewed isn’t seeing it that way.

Raj Chudasama is managing partner of Kriya Hotels in Dallas, Texas. It has its own hotels and it manages other properties. Earlier this year, Kriya opened Venture X, a co-working franchise.

In 2019, when Kriya Hotels was building its new headquarters, it was looking for businesses to rent office space in the building. Chudasama came across Venture X at the Hunter Hotel Investment Conference. He realized marketing co-working spaces was similar to selling hotel rooms. And who could better deliver on the promise of hospitality than a hotel operator?

NOTHING VENTURED: Kriya Hotels opened its newly built headquarters in Dallas, Texas, in 2019. In February, it opened Venture X in the same building, a co-working franchise that would have enabled Kriya to generate revenue through shared office space. A month later, the coronavirus pandemic struck and business sharply fell in both Kriya’s co-working and hotel operations.

Kriya Hotels had some agreements in place and Venture X opened in February. “It was the worst possible time to open,” Chudasama said.

His team expected to have 80 percent of its co-working space occupied by the end of this year. Because of COVID-19, occupancy is at 15 percent, the same level as Kriya Hotels’ lodging accommodations.

Those using Venture X are either laid off and seeking work or employed but working remotely and would rather not work from home. “It’s case by case,” Chudasama said, adding most customers are single users. As the business slowly re-emerges he is seeing small enterprises with just a few employees rent out large rooms in which they can socially distance workers. He believes small- to mid-size companies will be the main users of flexible work space in the coming months and years.

“Hopefully, corporate business will come back strong, but I don’t see that happening for another couple of years.”

Chudasama said along with marketing its Venture X business, Kriya Hotels also tried to promote the work-from-hotel concept at its properties near the Dallas Fort Worth International Airport. But marketing online to prospective day users these days is “extremely competitive” and requires spending to make your hotel stand out, he said.

Advertising a hotel for day use or a co-working space costs about $100 per guest. The competitive landscape forces day rates to stay at $50.

“I don’t know what’s easier, selling a room on Priceline or Hotwire or selling for day use,” he said.

LISTEN: To hear our previous report about co-working check out Episode 242 at LodgingLeaders.com/242.

Another trend Kriya Hotels believes is taking place is one in which a guest will check in for an overnight stay at the normal rate but only use the room during the day. Because of the contactless protocols that brands demand hoteliers’ provide, Kriya Hotels has no way of knowing for sure why the guest left without staying overnight, but Chudasama thinks the room was used as a work space.

In Kriya Hotels’ Venture X building, Chudasama is seeing a shift in the user demographic as companies seek flexible work options for their employees.

He’s paying attention to large nationwide companies such as Amazon, Alphabet Inc. and Microsoft that are deploying the hub-and-spoke model. The corporations are contracting with co-working companies and hotels to enable their employees to work remotely.

In other cases, employers are giving workers an allowance to use on remote-working options. A monthly allotment of $500 per employee at a hotel is a lot cheaper than renting a corporate office building for the entire team.

“I am seeing more flexibility now in everything,” Chudasama said.

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