Social and professional norms will forever change due to COVID-19.

From how people work, to how we socially interact and to how we live.

This pandemic will go down in the history books as the cause of permanent change in various sectors, such as health, life, travel and commerce. 

Looking at real estate, I am anticipating this to be the precise moment when residential, retail, commercial and hotel asset classes are to be revolutionised in terms of use, design and concept. 

If you have been following the real estate market closely during this crisis, you have probably heard this people say "Hotels will be the hardest hit asset class because of COVID". . "Hotels valuations are going to drop significantly because of COVID", and "How can Hotels survive the aftermath of COVID?".

These are paraphrased examples of statements I have come across over the past few months.

Statements that I simply cannot agree with.  

COVID has forced owners and operators alike to evolve, not only when it comes to their service offering.

For instance, many high-end hotels will commence retrofitting medical-grade filters to their properties to ensure guests feel absolutely at ease to microscopic dangers.

Although most respectable operators already have high clearance hurdles on cleanliness, housekeeping has evolved with much more stringent processes, increased frequency, and more effective cleaning equipment.

Some have also implemented room break seals to provide a level of certainty to guests that no one has accessed their room whilst they have been out.

Hotels are likely to bounce back stronger because they are well resourced from a HR perspective to deal with the needs of future travellers.

Compare this to short-stay platforms, such as Airbnb, that have little to no control over third-party cleaners and managerial supervision.

To put it frankly, travellers and guests will feel safer and more at ease in a proper hotel than a makeshift one.

And the so-called business that these platforms had taken away from hotels (this is another debate altogether!) will likely return.

Post-Covid

There is no surprise that hotel occupancies are currently at record lows, but that is no different to office spaces, which has been as low as five per cent in Melbourne CBD.

However, once we enter into a new normal post COVID, are all the naysayers suggesting travellers will remain in isolation and not travel?

I have a hard time believing that.

In fact, we are already seeing hotel occupancy rates increase as domestic travel in safe states is now allowed.

Data from Marriott International shows a rise in occupancy rates from four per cent to 30 per cent in June - A figure that is predicted to continue to stabilise in the coming months. 

The main difference between an office dweller and a traveller is that a traveller has nowhere else to stay other than a form of short-stay accommodation, whereas businesses may realise they could save a significant amount on their fixed office costs by having a portion of their workforce rotating from home.

Or as we are seeing out in the United States, even work from home indefinitely? 

We have already seen signs of a hotel industry that is bouncing back after restrictions have eased in European countries and in the middle east.

After opening its international borders earlier this month, Dubai is now experiencing an 80 per cent hotel occupancy rate. 

So, let us be frank here, if there is any medium-term impact on valuations for a real estate asset class, it will not be to hotels.

Perhaps the current limelight on hotels is due to the uncomfortable fact that large format office spaces could be something of the past. 

Final thoughts

COVID has already changed life as we know it and a new normal will take precedent.

No doubt my view is a bias one, but one that I feel is justified.

By no stretch of the imagination am I suggesting office space will entirely disregarded.

Far from it, it will still be needed – just in a renewed form.

As humans, we crave social interaction and it is very hard to do any form of meaningful teambuilding over the likes of Zoom. Nor can you confidently drive new business that way either.

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