Hospitality industry hopes for stronger 2022
Tournaments at the Virginia Beach Sports Center. Events at the Virginia Beach Convention Center. A busy Oceanfront boardwalk.
That was the scene in Virginia Beach during just one weekend in mid-March.
And it was the perfect “prelude” to the summer travel season, says John Zirkle, general manager of the DoubleTree by Hilton Virginia Beach. “The Oceanfront was hopping; the whole resort area was hopping,” he says. “This year it’s safe to say that we are very optimistic on the [summer tourism] season.”
Zirkle’s viewpoint resonates with hoteliers and tourism industry experts across Virginia. Tourism suffered a devastating blow two years ago when the COVID-19 pandemic began, bringing shutdowns and drastically reducing business and leisure travel. Since then, the industry has been slowly reviving, but there have been stops and starts along the way.
In some parts of the commonwealth, this could be the best year for leisure travel spending and activity since 2019. Many signs point to a springtime resurgence of travel activity, including Carnival Cruise Line’s decision to restart its cruises to the Bahamas, Bermuda and the Caribbean from Norfolk, starting in mid-May.
Still, some tourism experts believe that full recovery will not happen until 2023.
In Virginia, that’s largely because business travel has yet to return to pre-pandemic levels, dragging down hotel occupancy and travel spending in the state, says Dan Roberts, director of research and market intelligence for the Virginia Tourism Corp.
Due to the lingering pandemic and its side effects, ranging from labor shortages to remote work and videoconferencing, many businesses still are not yet back to traveling or planning conventions and large meetings.
That’s had a big impact on Northern Virginia, which has half of the state’s total hotel supply and relies heavily on business travel, Roberts says: “That whole economy is built around serving that midweek business traveler.”
As a result, compared with 2019, Virginia’s hotel room revenues were down about 18% in 2021 and occupancy rates were down 11.5%, according to the Dragas Center for Economic Analysis and Policy at Old Dominion University. The center produces reports using data from STR Inc., a division of CoStar Group Inc. that provides global hospitality market data.
Even so, Christopher Nassetta, president and CEO of Tysons-based Hilton Worldwide Holdings Inc., has said that he believes business travel will return. Presenting Hilton’s fourth quarter earnings results in February, he reflected on an improving future for the industry.
“We were pleased to see continued recovery throughout 2021, with our fourth quarter showing strong results versus 2019,” he said in a statement. “Although new variants of the virus have had some short-term impact, we are optimistic about the acceleration of recovery across all segments during 2022. We remain confident in the future of our business.”
Whether business travel will surpass pre-pandemic levels is in question, says Vinod Agarwal, professor of economics at ODU and deputy director of the Dragas Center.
Even as people restart business travel, they may opt to travel less often for individual or smaller meetings because they’ve now become accustomed to digital conferencing and other virtual communications platforms.
“They may want to meet clients in person, and in between they could do Zoom meetings,” Agarwal says. “It’s saving travel time and convenience. Face-to-face is required and needed, but not very often.”
‘This too shall pass’
Aside from corporate travel, leisure tourism is rebounding across the state.
That’s evident in Williamsburg, where revenue per available room in February was the highest it’s been since 1987, says Ron Kirkland, executive director of the Williamsburg Hotel & Motel Association.
Strong revenue in January and February typically bodes well for a successful spring season for the Williamsburg area and that leads to a good summer, he says. Despite summer 2020 shutdowns and 2021 labor shortages and capacity limits, popular area attractions such as Colonial Williamsburg and Busch Gardens will be fully open for business this summer.
And while business travel from conventions and other corporate functions has not yet returned at many Williamsburg lodging properties, Kirkland says, vacation travel spending has been providing a boost.
“Leisure tourism has been so strong, particularly over the last nine months, we’ve been able to offset any losses we would have from the group market,” he says.
Leading the rebound statewide is Hampton Roads, with the strongest market in the state for leisure travel.
In Virginia Beach, hotel occupancy in 2021 was down only 3.7% compared with 2019, according to the Dragas Center.
Despite the rise of the delta variant of COVID-19, last summer was a surprisingly good time for travel at Virginia Beach, says Zirkle, who also serves as president of the Virginia Beach Hotel Association.
He expects even more travel demand this summer, especially as pandemic restrictions have lifted and restless consumers are ready to go places. “The people who were hesitant to travel last summer are traveling this summer,” he says.
Optimism in the Virginia Beach market is one reason that plans have continued for a new Embassy Suites by Hilton, an Oceanfront hotel under construction on Atlantic Avenue as an addition to Virginia Beach hospitality company Gold Key | PHR’s Cavalier Resort. Gold Key aims to open the new Embassy Suites, featuring 157 luxury suites, in early 2023.
“The ownership group believed that this too shall pass,” says Glenn Tuckman, Gold Key’s chief operating officer, alluding to the effects of the pandemic on the industry. “We have weathered a lot of economic challenges, and they just really believed in the product and the advantages of the [Embassy Suites] going up now rather than delaying it or canceling it.”
Staffing woes persist
While hoteliers expect a strong summer, they’re still encountering staffing challenges that have plagued lodging and hospitality businesses throughout the pandemic. For instance, Zirkle’s DoubleTree opens its restaurant only for breakfast and dinner, not lunch, because of low staffing levels.
Furthermore, like many other hotels now, the DoubleTree does not clean guest rooms every day unless a customer requests it. Staffing levels are not yet high enough for daily room cleanings, plus customer demand for the service has changed.
“We have found a surprising number of people prefer you not to go into their room,” Zirkle says. “They just get some fresh towels, and we empty trash. That’s a huge saver for us.”
The hospitality industry in Virginia lost 88,000 jobs at the start of the pandemic and 51,000 of those jobs remain unfilled, says Eric Terry, president of the Virginia Restaurant, Lodging & Travel Association. Due to lack of staff, he says, “we still have a lot of restaurants that used to be open seven days a week and are now open five days a week.”
This summer, however, hoteliers and restaurant owners across the nation expect to see some staffing relief thanks to an international work exchange program. The J-1 visa program, which brings international college students to the United States to work in hotels and restaurants for the summer, is back up and running after the Trump administration suspended several types of foreign worker visas in June 2020.
The Biden administration lifted the pandemic-related ban on foreign workers in March, but, by then, some visa applications were stalled and not approved in time for the summer season.
Typically, 30 to 40 college students work at the DoubleTree as housekeeping, restaurant and front desk staff on J-1 visas during the summers. Last year, only two J-1 students made the deadline and worked at the DoubleTree, Zirkle says.
Participants under the J-1 visa program dropped by 98% in Virginia and 95% across the United States in 2021, according to the Alliance for International Exchange. In Virginia, there were 116 summer work exchange students in 2020, compared with 4,621 in 2019.
“The J-1 students are a game changer,” Zirkle says. “Having them this year will be a huge benefit.”
One factor that could negatively impact tourism in the commonwealth is ongoing crime and violence in Hampton Roads, a problem that seemed to be worsening in the early months of 2022. An April shooting at Norfolk’s MacArthur Center shopping mall killed one person and injured two others. And in March, a Virginian-Pilot newspaper reporter was one of two people killed in a shooting outside a restaurant and bar in downtown Norfolk. Last year, in March 2021, a spate of shootings one night at Virginia Beach’s Oceanfront tourist area left eight people wounded and two dead, including one of superstar musician Pharrell Williams’ cousins, Donovon Lynch, who was killed by police.
Kurt Krause, president and CEO of VisitNorfolk, has been talking with city officials about how to create a safer environment in his city. He’s worried that increases in crime could deter tourists. “The savvy traveler will look at it,” Krause says. “We need to make sure that we are addressing all of those needs. We have to create the environment that people feel safe to walk the streets at night.”
Rising gas prices could pose another challenge for hospitality businesses this summer, potentially impacting consumers’ travel plans. Nationally, the price of a gallon of gasoline hit a record high of $4.33 on March 11, just after Russia’s invasion of Ukraine, according to AAA. In Virginia, the average per-gallon price for regular gasoline was $3.94 on April 14.
Agarwal says the surge in gas prices likely will impact air travel more than vehicle travel this year, because airline ticket costs are increasing. Also, travel by vehicle is a small portion of a family’s travel budget, he says.
Still, consumers may make different travel choices. For example, due to higher fuel costs, vacationers from New England may drive a shorter distance and decide to stop in Virginia Beach rather than venturing farther south to Myrtle Beach or Florida, Agarwal says.
Landon Howard, president of Visit Virginia’s Blue Ridge in Roanoke, says he expects these kinds of travel adjustments to benefit Southwest Virginia.
“People have the money to travel; they want to travel,” he says. “Many of our feeder markets are within a 3- to 4-hour drive from us. A lot of people will look at us as an alternative, rather than those longer travel trips.”
‘Reasons for optimism’
Tourist attractions and cultural organizations like the Thomas Jefferson Foundation, the nonprofit that owns and operates Monticello, Jefferson’s historic home in Charlottesville, are closely watching gas price increases and already seeing strong visit trends.
Linnea Grim, the foundation’s vice president of guest experiences, estimates that visits to Monticello now are at about 70% to 75% of 2019 visitation numbers. “We have seen a really steady rebound over the course of last year and into this year,” she says. “People didn’t get out as much as they wanted with the omicron surge. We are expecting some local and regional travel” to Monticello.
Meanwhile, tours at Monticello are back to full capacity and school groups, some as far away as the West Coast and Texas, are beginning to book trips there again.
“We see a lot of reasons for optimism,” Grim says.
Similarly, the American Shakespeare Center, a Staunton performing arts theater that features a re-creation of Shakespeare’s indoor theater, is back with a full season of live shows. It suffered COVID-related interruptions in 2020, and its 2021 fall season was canceled due to internal staff conflicts and allegations of a toxic work environment that led to the resignation in February of Artistic Director Ethan McSweeny. He was replaced by Heathsville native Brandon Carter, ASC’s first Black artistic director.
Now fully reopened, the theater requires audience members to wear masks and present proof of vaccination or a negative COVID test. It also offers a certain number of performances with socially distanced seating.
“The audiences are coming back, compared to this time last year and this time two years ago,” says Jo Manley, spokeswoman for the center. “We are performing live on stage, which is a blessing, and no plans to curtail.”
Back on Virginia’s waterways, now that both Norwegian and Carnival cruise lines have restarted cruises from Norfolk, it could be smooth sailing for the city’s tourism market.
Nauticus, a maritime discovery center whose Norfolk campus houses Virginia’s only cruise terminal, says it expects to welcome about 150,000 passengers and 62,000 crew members in 2022 from all cruise lines, its highest yearly total ever, says Rehn West, Nauticus development director.
This year marks Norwegian’s first return to the port in two years, and it plans to make 25 stops in Norfolk this year.
“It’s surreal to go from a relatively empty pier throughout 2020 and 2021 to our busiest season ever in 2022,” says Stephen Kirkland, executive director of Nauticus, in a news release.