MIAMI – When the coronavirus pandemic disrupted daily life last year, forcing businesses to shut down and keep people at home, tourism practically came to a halt.
In casino-rich Las Vegas, the local economy has been devastated by the epidemic as more than 30% of the workforce was unemployed at one point.
Las Vegas is once again bustling with visitors and has seen an explosion in multi-billion dollar casino sales this year. The developers have pushed forward the plans for new hotels.
But the pandemic is far from over and the tourism industry has not fully recovered from the turmoil.
Gilda Perez-Alvarado, global CEO of hotel group and hotel brokerage Jones Lang LaSalle, spoke about these challenges during an interview session at the National Association of Real Estate Editors conference last week at the Kimpton Epic Downtown Miami hotel.
The interview has been edited for length and clarity.
COVID has prompted businesses around the world to shut down and shut down tourism for a while. Can you describe the initial impacts of the pandemic on the hospitality and tourism industries, and in terms of severity, how do they compare to (effects on) other service sectors that rely on face-to-face interactions with clients? clients ?
This has been disastrous for the hospitality industry. It was the first time in our history that the lights were literally turned off, and it was happening overnight. We’re finally starting to see a recovery in our industry, but it’s been very, very difficult.
At least initially after the pandemic, what happened to the pipeline of ongoing hotel sales and construction projects?
He stopped. Everyone is entrenched. We didn’t know if it was going to last a few weeks, a few months. Some transactions we were working on have been completed; others said, “Let’s wait until we buy more properties, and let’s go ahead and do asset management, let’s focus on our existing portfolios.”
What about hotel mortgage delinquencies, at least initially, did you see waves of defaults or workouts with lenders, or were you hotel owners, maybe you? ‘they didn’t need it and were fine?
We have seen the biggest wave of crime that we have ever seen in our area. In fact, it far exceeded the previous crisis. The difference, however, was that we had the most accommodating environment in our industry’s history – lenders were accommodating, governments were accommodating, brands were accommodating, operators were accommodating, owners were accommodating. No one wanted to collect the keys and have to face the realities that the owners were facing.
After the last crash, at least in Vegas, there were casino companies that filed for bankruptcy or approached it, and major resort projects were simply put on hold and left behind. Did you see this kind of systemic crash this time around?
We do not have. I think it was ingrained in our memory that some sectors may be too big to fail. Because it was so accommodating, we didn’t see the wave of distress we all expected. When the lights went out and we were all confined to our homes, we couldn’t believe what was going on. We immediately said, with all these waves of bad debts, that it was going to be a bloodbath. And it was not.
Of the major markets and tourist destinations in the United States, which cities have been hit hardest by the pandemic, and which may not have been as badly hit as some might have expected?
The cities that have been the hardest hit are those that depend mostly on demand from groups and businesses. We’ve seen how dizzying this whole back-to-office movement has been. Businesses say we’re bringing our workers back to the office this summer; then it was the fall; some are in January; and some said, “Forget it, now anyone can work remotely. These waves, these surges, these new COVID variants are not helping. So, are people going to feel comfortable attending a conference of several thousand people in a place like Las Vegas? So obviously these markets are perhaps doing a little worse than other markets like Miami, Austin, Nashville. These markets, which mainly have a demand for leisure, are going to do very well.
How do tourism levels across the country compare to pre-pandemic levels? It looks like domestic travel is going crazy, but the convention industry is only now starting to emerge from the pandemic, and international travel has faced many restrictions.
We are not yet recovered. We are far from that. Markets around the world that rely heavily on domestic travel have done very well. Markets which are based on conventions, they are not doing very well. Those who depend on international travel – it’s not that people can’t come to the United States, it’s that there are restrictions that are very onerous or confusing.
And the construction of the hotel? Do you see new plans emerging, new properties being built, more innovations?
Not at the same level we had before the pandemic, to be completely honest. Some projects are underway, but there are a lot of headwinds for construction. One is the lenders; maybe the appetite for construction finance is not there by traditional lenders. Two, we have supply chain issues, and three, the workforce. So no, we don’t see the same level of construction as before. What’s really interesting, though, we’re seeing new hotels appearing in hybrid form. They are therefore part of mixed-use properties and most of them have a residential component.
What about hotel sales? Again, since living in Vegas we’ve had several multi-billion dollar casino sales this year, often through sale-leasebacks with buyers like Blackstone. Are you seeing more hotel and resort sales globally, and more specifically, are you seeing more of these leaseback transactions?
We are still quite depressed, in terms of transaction volume compared to 2019. Obviously, we have seen a very significant improvement compared to 2020. The assets that trade the most are resorts and luxury properties , especially properties located in markets. who are doing very well, like Miami. But to answer your question about leasebacks, these are not very popular in the United States. In Europe, it’s a bit like the transaction of the day, it’s the most common way to make a transaction.
How long do you think it might take before tourism and conventions return to their pre-pandemic levels? And what do you think it takes for these industries to succeed, if they ever do?
I think they will get there just because the demand is not static. Demand is growing. There is a growing middle class, there are a lot of economies, there is a lot of wealth that was created during the pandemic, which is really interesting. So demand will come, and it will exceed demand levels in 2019. I’m sure that will. How long it takes will depend on the vaccinations, which you have seen, which is good, and government policy regarding movement of people.
When did you first notice that the deal pipeline, at least at JLL, was starting to pick up again?
I would say everything has happened probably since the middle of this year. It’s really picking up.
But it took over a year to get there.
Ah yes, for sure. We don’t just sell, for example we do a lot of asset management and consulting. We were very focused on existing hotel and portfolio owners and helping them find ways to protect their investments.