With the sudden pandemic outbreak in the US that led to stay-at-home orders and travel limitations, hotel stays declined says Maxwell Drever. By 2020 several hotel rooms remained empty. In the meantime, several communities all over the country have witnessed a lack of housing. And the process of renting has become highly steep.
Maxwell Drever says that low-earning households in most states usually spend over 30% of their earnings on rent. And in 2020, about 23% of the multifamily rental units had to rent more than $2,000 compared to 12% in the year 2017. Developing any new affordable workforce housing can result in specific challenges and complications. It’s because materials, land, and labor were high-priced before the pandemic outbreak. It is the reason why a few of the creative developers are considering the hotels. It seems to be a perfect match in the real estate domain.
Hotels faced ample challenges during the COVID-19 outbreak
The hotel industry got more affected by the pandemic than the retail real estate sector. According to the latest news reports, the hotel industry had witnessed a terrible year in 2020, the led to substantial job losses, low occupancy as well as hotel closers all over the globe. Naturally, it had massively affected the business. Even though the occupancy rate increased slightly as the year passed by, close to 44% of the hotels experienced occupancy in 2020, which was much below the 2019 statistics. And right after April 2020, close to 25% of the hotel rooms remained occupied. The experts anticipated that hotel occupancy might go up to 53% in 2021, but that will also be lesser than the pre-pandemic levels. As a whole, the hotel industry is anticipated to recover by 2024.
There are a few full-service hotels that start their break-even point at 50% occupancy, it doesn’t result in mortgage debt service expenses. Naturally, the majority of hotels are still beneath the break-even level.
The act of transforming distressed hotels into affordable workforce housing
Today, several developers see a potential channel of growth even in such a devastating scenario. And these buyers are actively trying to make the best of the crisis faced by the hospitality industry by capturing the foreclosed and struggling properties at a bargain price Maxwell Drever. These developers also intend to profit from the increasing demand for cheap housing from those households compelled to downsize because of the recession. The small but increased percentage of hotel conversions is a sign of the pandemic’s suffering on the hotel industry. Several properties got shut down or are witnessing massive losses because of a decline in travel.
Finally, Maxwell Drever says that converting hotels into affordable apartments is a wise decision. It is an intelligent move in a market scenario. Where the cost of studios in brand-new buildings has exceeded $1,000 every month. And all hotel rooms that got converted into new studio. Apartments today are competing by providing a discount of 20% on the rent. It allows a housing space for the people who are in need in this situation.