The hotel and lodging sector is showing a varied recovery, as it outperforms 2019 levels in some areas but struggles in others, according to Pebblebrook Hotel Trust (NYSE: PEB) Chairman, President, and CEO Jon Bortz.
Speaking on Nareit’s REIT Report, Bortz noted that strength in the market has tended to be concentrated in resorts, particularly drive-to resorts, which are often achieving higher occupancy and rates than seen in 2019.
The struggles, on the other hand, have mainly been in the urban environment, Bortz said. He noted that in San Francisco, Pebblebrook’s revenue is still down 80% from 2019 levels, while in Washington, D.C., revenue is down 70% over that same period.
Bortz said signs of recovery in business travel are already evident, “but it’s a very slow recovery.” He said business transient travel appears to be about 40-50% back, while business group travel is about 30-40% back. “With a lot of companies now planning to go back to the office by the beginning of the first quarter of next year, we think business (travel) should see a nice step up in recovery in the first quarter,” he said.
Other highlights of the interview include:
• Bortz sees a long-term secular trend of leisure travel growing faster than GDP, making drive-to resorts particularly attractive to Pebblebrook.
• Pebblebrook has seen a “nice increase” in the quality and volume of properties being offered on the market and a higher level than six months ago. The REIT’s unique competitive advantages put it in an optimal position to take advantage of opportunities that come about after a downturn, Bortz said.
• The last six to eight weeks have seen a “significant” improvement in the labor situation for the lodging industry.
• While some portion of business travel is likely to be replaced by technology, other types of travel could replace it, Bortz said. He noted that the increase in dispersed workforces could result in a greater need for teams to come together to collaborate or establish bonds.