The hotel industry was one of the hardest hit by the COVID-19 pandemic.
The National Association of Realtors®’ 2021 Case Studies on Repurposing Hotels/Motels into Multifamily Housing report stated that in December 2020, hotel occupancy was 36.7% compared to 66.1% in 2019, and revenue per available room fell 60%. While the hotel industry is posed to make a full recovery, it is not expected to be until 2024, according to the American Hotel and Lodging Association. Therein lies opportunities for all these empty hotel rooms.
With occupancy rates and bookings down, some hotels have been converted into a variety of different types of housing, including multifamily housing, workforce housing, housing for veterans, housing for healthcare workers, senior housing or assisted living, student housing and housing for homeless. Some hotel or motel facilities have been repurposed into the health field, like quarantine facilities or hospitals.
The report analyzed 29 hotel or motel conversions. The majority of these developments were in the suburbs, small town, rural or resort areas, with most conversions being multifamily. With a lack of inventory on the housing market right now, an influx of multifamily properties becoming available could free up some much-needed housing.
“The hotel industry is facing low occupancy, it continues to face headwinds,” said Senior Economist and the Director of Housing and Commercial Research with the Research Group of the National Association of Realtors® Gay Cororaton. “It will not solve the housing industry problem of low inventory, but very old, dilapidated hotels they could be refurbished.”
Most of the hotel and motel rooms cost buyers less than $50,000 per room, while conversions cost less than $25,000 per room. While full-service rooms, those with a small kitchenette and slightly more room, are more desirable, the report also found that there is a desire for just regular rooms. With more people working remotely, there is a higher-than-usual demand for longer-term stays. As for the cost to renters, 35% reported a mix of affordable and market rate, 35% reported completely market rate and 30% reported 100% below market rate. Rent has become increasingly more unaffordable, the report stated, noting that 22.7% of multifamily rental units rented for over $2,000 per month in 2020, compared to only 12.3% in 2017.
“In general, with the vaccines rising, overall, we’re looking at better times for the hotel industry. But there will be some that will not survive and we’re just saying that the best use for hotels that are struggling is converting them to affordable multifamily housing,” said Cororaton.