2020 and 2021 mark the most challenging period in the history of any country. The pandemic created a war-like situation with people losing lives, jobs, homes, and much more says Maxwell Drever. Covid majorly disrupted anything related to people – traveling through planes, hotels, restaurants, the entertainment industry, and everything about human beings. Since the lockdown, people have been inside homes or one place, resulting in the shutting of many small hotels and budget inns. The damage is catastrophic. But alternatives are cropping up to bring back the new normal and introduced in the lives of people.
Maxwell Drever reveals the facts before explaining the possibilities
However, even after the lockdown, there is tough competition for the lodging and small hotel industry to stay afloat. According to the National Association of Realtors (NAR) reports, in the year 2020, hotel occupancy dropped to only 37% because of the pandemic disruption. Significant travel restrictions, a decrease in the entertainment and vacation options, cancellation of events – all led to the poor business of the hospitality industry.
It is a shocking fact that Airbnb has almost 4 million hosts globally, which is more than the combined number of rooms of Hyatt Hotels Corporation, Choice hotels international, Intercontinental hotel group, Marriott International, and Hilton’s worldwide holdings. The fact means that there are more small and medium hotels than star-rated ones.
On the other side, there is a significant housing shortage due to unemployment and travel restrictions on people. An average family of four spends around 12% of their annual median income on housing as rent or lease amount. But now the rate is more than double; it is 30% of the total family income. Recognizing this considerable gap, Maxwell Drever came up with the fantastic idea of bridging the gap between accommodation holders and accommodation seekers. The hotel with multiple rooms gets the transformation into a multifamily dwelling.
A NAR survey that also considered the local bodies released the key findings which support the above idea:
- More than 80% of the hotels and budget accommodations opted for conversion are small towns, suburban areas, rural areas, and outskirts. There is a lesser conversion of hospitality services that are within city center limits.
- The conversion cost of more than 50% of the motels and hotels is $25000 per room.
- The acquisition cost of 53% of the hotels and motels is around $50000 per room.
- The average rent levied after conversion by these unoccupied hotels is $1100 per room.
- More than 50% of the hotels and budget inn conversion called for rezoning.
Repurposing the shut motels into shelter homes during covid was the primary solution. But now, more hotels and budget lodging services are opting for permanent conversion of affordable housing units. Maxwell Drever suggests exploring the option of converting large resorts also into family homes. It would leverage some rental and overhead costs for survival.
The conversion of vacant hotels into affordable multifamily homes is one of the government’s best decisions in the past few decades. It is a win-win initiative for the underutilized inns and alleviates the housing demand gap.