Recently, a dividend distributed by one of Israel’s largest lodging companies, Isrotel, to its shareholders has been receiving enhanced media attention. Public backlash has been noted in response to the 25 million ILS (approximately $7.8 million) dividend, and that is because just a year ago, the hotel chain had received tens of millions in government aid, due to the COVID-19 crisis. “There’s a difference between our revenue in 2020 and the numbers this year,” Isrotel’s CEO Lior Raviv said when defending this decision, but eventually the company decided to give up on the idea, and postpone the dividend to an unknown time.
While the outcry from the Israeli public can certainly be understood, there is a point to what Raviv is saying. 2021 has been, so far, exceptionally kind to the hospitality industry in many regions, especially those easing restrictions. While international tourism is not back to its pre-pandemic dimensions, enhanced domestic travel has stemmed as a result – and people are dying to go on vacation, after such a long time of being stuck at home.
Another important factor is the fact that the hospitality industry, with the help of local authorities, has found a way to get back in business, without making compromises regarding the safety and well-being of guests. As a matter of fact, many epidemiologists claim that staying at a hotel can be a low-risk activity under certain circumstances for vaccinated people – and vacationers are quick to adopt that approach, apparently.
Alt-text: Check-in counters across the world have certainly been busy this summer.
Good news for the markets
News coming from the mega-chain Hyatt is that it is in talks to acquire the travel and hospitality conglomerate Apple Leisure Group for around $2.7 billion, as part of its expansion plan. Officials have claimed that Hyatt plans on using $1 billion cash at hand for the purchase, along with a $1.7 billion financing commitment from J.P. Morgan. The hotel giant’s stock is currently trading at around $73.5 – much better than its April 2020 low of $40, but still a bit far from the pre-pandemic high of $92 in February 2020.
Medium-sized hotel groups, operating in regions like Europe or North America with little or no restrictions currently imposed, are certainly enjoying the fruits of 2021. Skyline Investments, for example, holds lodging properties in the US and Canada and it is partially owned by the real estate investment group Mishorim, controlled by Canadian entrepreneur Alex Shnaider. Among its more noted hotel locations, one can find the Bear Valley Ski Resort in California, the Horseshoe Resort in Ontario, and the Renaissance Cleveland Hotel.
Domestic tourism in North America has driven Skyline’s profit up in 2021, causing Mishorim as a whole to report a profit of almost $4 million in Q2 of 2021, as opposed to a loss of $12 million in Q2 of 2020. Just to break it down, Skyline’s hotels in the US and Canada finished Q2 of 2021 with a revenue of around $20 million, which is almost four times the figure of Q2 of 2021 (approximately $5.5 million). Numbers for Q3 are naturally not in yet, but the July occupancy report released by the company shows that the Deerhurst Resort near Huntsville, Ontario (also owned by Skyline) has already managed to surpass the figures of summer 2019.
“I believe there’s room for optimism here,” said Alex Shnaider in regard to the data. “People are learning not only to live alongside the pandemic but also not to let it prevent them from doing things that make them feel good, like taking a vacation.”
Good news for guests?
With that in mind, many hotel chains have already announced plans to expand. CitizenM is not yet one of the big names in the game, being founded only 16 years ago, but it already has 20 locations in nine countries. The surprising news is that, according to the company’s website, it is already working on doubling that number in the next few years.
Alt-text: The CitizenM hotel in London, UK.
“As soon as any measures were lifted in some of our markets, we saw the customer come straight back,” remarked Ernest Lee, Head of Development and Investments at CitizenM’s North American division. “It’s just natural. This is a fantastic opportunity for us to expand.”
However, lodgers are complaining that the growth in revenue is a result of unfair pricing on behalf of hotels, since the option of travelling abroad is almost blocked for many. While in August 2019 the average rate for a room in the US was $135 (and in August 2020 it dropped to $100), this August the average price has risen to $141. The biggest change was noted in the leisure hotel sector, as opposed to urban hotels, more suitable for travel and business.
“We’ve all had a hard year,” said Melissa Gardenbecher, a vacationer staying at one of the more luxurious resorts in the town of Kahului in Hawaii, “and I don’t understand why these hotels are taking it out on us. Especially after they demanded and received plenty of government aid.” Her husband Malcolm added, “we understand that that’s how the markets work, but still, they could have shown a bit of compassion.”