“Hotels worldwide have been haemorrhaging money due to low occupancy rates during the pandemic, which has turned out to be far worse than the ‘short-term catastrophe’ hoteliers were prepared to weather.”

Such is David Reina’s assessment, a partner in Morris, Manning & Martin LLP’s Hospitality Practice. He adds that this has created an opportunity for real estate companies to buy desperate hotel owners’ properties at a discount. These properties will then be converted into a more stable multi-family asset class.

In a recent article in Lodging Magazine, Reina explains how the financial crisis precipitated by the pandemic has left many properties shuttered – or on the verge of being so.

Many of these properties are being purchased and then converted into affordable housing – something which is not new. The difference this time is that with such a challenged hotel industry, there are more opportunities than ever.

The hospitality sector believed the storm of depressed prices and low occupancy would pass, and everything would be fine. Hotels negotiated an arrangement with lenders and followed their business plans.

However, once the short-term catastrophe extended beyond March and April 2020, many owners have felt pressured to sell. Any expected relief from the vaccine roll-out would not come soon enough.

Some new owners have sufficient resources to wait out the recovery and plan to retain the properties as hotels. However, a combination of hotel quality and an uncertain future has led many new owners to flip them into something with greater demand.

So, what does this mean for the vacation ownership industry?

With an increase in acquisitions of distressed hotels for conversion into multi-family assets, can we expect the same for legacy and independent resorts unable to weather the pandemic into 2021?

The answer could be yes. It doesn’t make sense to buy a struggling resort in the belief that it can perform better. Indeed, private equity companies looking to deploy capital built up over the past 12 months recognise the financial situation and are seeing opportunities.

But what can these struggling resorts do to remain open and viable? How can diversification away from being solely accommodation providers and take advantage of local markets? Hospitality agency StayTheNight has some diversification suggestions.

1 Offer a co-working space

The co-working concept was already snowballing before the pandemic and has only increased as companies embracing flexible working.

Many resorts already have the facilities and infrastructure to provide workspaces for their guests. This underused space can now be repurposed and monetised to generate extra revenue.

There are many options resorts can choose from:

• Flexible hot desks
• Fixed desks
• Renting out units as private offices

Resorts can charge a set monthly fee, weekly membership, a date rate or pay-by-use. Just don’t forget to include perks such as free coffee to attract local workers.

2 Integrate with your community

As the SiteMinder report indicates going local is becoming more critical. Most resorts focus on tourists, but it might be time to look closer to home.

Becoming a neighbourhood hub will create buzz around your brand, open your resort to a broader audience and increase revenue. Make sure your marketing appeals to the different segments you are targeting. Then update your website to appeal to a local market and think about your community’s needs – and then provide it.

• Host community events
• Promote your F&B
• Offer a locals’ loyalty scheme to encourage repeat visits

3 Provide experience and activities

Providing authentic experiences to your members and guests opens up a new revenue stream – and will improve your guests’ overall customer experience.

Consider running events and classes such as painting workshops and fitness classes (which locals can attend) that are tailored to your destination. If you aren’t comfortable with this, outsource the activities to local agencies and businesses.

And don’t forget to tell your members and guests about the activities before they arrive so you can pre-book, upsell and attract more potential guests.

4 Create a voucher scheme

With more people gifting experiences to loved ones, offering vouchers for future stays or activities is a simple way to increase revenue.

For resorts with a loyal member base looking to support your brand, they love buying a voucher to use when normal life resumes.

5 Offer extended stay options

In 2020 many hotels moved towards an extended stay model offering guests longer stays or co-living options at competitive rates. This concept proved an attractive alternative to many renters who could access all the property’s amenities without a long-term lease.

Resorts are particularly well-placed to take advantage of this trend. Vacation ownership properties typically include kitchen facilities, laundry and housekeeping, outdoor space, gyms and F&B – exactly what extended stay guests require.

6 Harness the power of packages

An Expedia report found that hotel guests who purchase packages spent more on their accommodation and booked more nights. They also found those who purchased a package paid around 30 per cent more in average daily room rates.

Resorts can use the same techniques for both their returning members and rental guests. Not only does this form of diversification differentiate the resort from the competition, but it also increases the perceived value of their guest experience and financial yield.

7 Utilise the time between check-out and check-in

Plug the gap between check-out and check-in with day-use bookings and allow guests to book the unit for a few hours during the day. And upsell early check-ins and check-outs to existing guests – it’s an excellent perk for direct bookings.

8 Leverage your amenities

Many resorts have facilities and amenities like a gym and pool currently unused but could be opened to locals for a fee. Consider monthly memberships for locals to use the facilities. Rent out your laundry service or parking spaces.

9 Invest in F&B

Often an afterthought at resorts, food and beverage is ripe for diversification and should be a key revenue driver – especially as consumer demand in this area continues to grow.

Think about what your target market needs first. If you are in an adventure destination, grab-and-go or self-service areas will be popular. Sustainable, healthy options and destination specialities are also in demand.

Partner with local food and beverage suppliers. It will help your members and guests feel more immersed in the local area and support the surrounding community.

10 Encourage upgrades and extras

Offering additional services not only improves the guest experience, but it also increases revenue. Offer a shuttle service to and from the airport or train station or attractions in the local area.

Offer special touches at the point of booking such as champagne on arrival or a welcome hamper add to the bottom line.

There’s myriad diversification opportunities open to resorts at this time to help them survive during this time. And in many chases, Merlin Software can be adapted to support these new opportunities.

We’d love to hear your diversification suggestions or personal experiences and we’ll share them here and on our social media. Together we can help keep the vacation ownership industry alive and well until our members and guests return.