Hotels show signs of life with long-awaited travel boom in sight amid vaccinations

“It’s like we’re a sailing boat in the middle of the Atlantic Ocean,” said Colin Reed, chief executive of Ryman Hospitality Properties. “The good news is the breeze is blowing in the right direction. But we haven’t yet felt the massive breeze that’s going to take us back to where we were 12 or 18 months ago.”

Not many companies were set up worse for a pandemic than Ryman, a real estate investment trust that owns big-box hotels and live music venues in Nashville. Both of those businesses were slammed as trade groups and bachelorette parties canceled trips.

Now groups are rebooking events, and local governments are loosening restrictions on music venues and meeting places. Cost-cutting efforts designed to help Ryman survive the pandemic could lead to better margins when the business bounces back. There are other small positives to arise from the calamity: The company brought its concert venues online and probably will continue to make money streaming events from the Grand Ole Opry and Ryman Auditorium once things return to normal, Reed said.

Investors have noticed, with shares climbing about 20{d54a1665abf9e9c0a672e4d38f9dfbddcef0b06673b320158dd31c640423e2e5} since the start of the year and more than tripling during the past 12 months. That puts Ryman’s rebound among the best for publicly traded U.S. hotel owners. A Bloomberg index of lodging REITs has jumped 27{d54a1665abf9e9c0a672e4d38f9dfbddcef0b06673b320158dd31c640423e2e5} in the past three months.

Growing confidence in a lodging recovery has also helped spur acquisitions. Blackstone and Starwood Capital Group said March 15 that they were teaming up to take Extended Stay America private in a $6 billion deal, the largest hotel-industry transaction since the crisis took hold.

It followed an announcement last week from Hilton Grand Vacations that it was acquiring a timeshare competitor from Apollo Global Management in a stock deal with an equity value of $1.4 billion.

Slow comeback

Optimism for the industry comes with caution. Corporate travel is a long way from coming back, and some hotels are still closed in key markets. New York had a 47{d54a1665abf9e9c0a672e4d38f9dfbddcef0b06673b320158dd31c640423e2e5} lodging occupancy rate last week, according to STR, but that figure excludes shuttered properties. When closed hotels are accounted for, the occupancy rate was 30{d54a1665abf9e9c0a672e4d38f9dfbddcef0b06673b320158dd31c640423e2e5}, about a third of what it would be in a typical year.

And REIT stocks might be overheated considering some of the lasting damage the virus has wrought on the property market, according to a report this week from Green Street, a real estate analytics company. Hotels could be hurt if the government’s stimulus turns out to bring little more than a “sugar high,” the firm said.

“Signs are now appearing that investors may be focusing too much attention on the bright light at the end of the tunnel,” wrote Green Street co-founder Mike Kirby and managing director Peter Rothemund.

But for hotel owners, any prospect of rising consumer demand is welcome, and some lodging companies are now scrambling to staff up. Omni, which owns and operates about 60 hotels across North America, has outsourced recruiting for the first time in its history, CEO Peter Strebel said in an interview. The company, which had 22,000 workers before the pandemic, is employing less than half that number.

“We’ve had to recruit a lot of new talent,” Strebel said. “Our biggest challenge isn’t going to be business volume; it’s going to be getting our people back.”