To Good Health and Hospitality

Memphis hotels tackle uncertainty and brace for a future that looks full of demand.

by

Take a stroll through Downtown Memphis on the weekends, and it almost looks like the city is back to normal. That might not be quite true, but there’s no doubt that the summer months of 2021 have seen waves of people frequenting restaurants, bars, and other events. And they aren’t all locals. After months of isolation and pent-up frustration, people are looking to travel, and Memphis’ leisure market is one of the best Mid-South destinations.

That’s a good thing for the hospitality and tourism sectors, both big drivers of the Memphis economy. They’ve had plenty of experience putting health and safety protocols into place to create safe environments for guests and are preparing for an influx of tourism. But as hotels reopen and try to satisfy growing demand, plenty of hurdles remain.

Rebuilding the Numbers

It’s a long road back to peak levels of Memphis travel numbers. So what’s the benchmark when it comes to tourism? For many industry professionals, the high volume of travelers that cities nationwide saw in 2019 is a key metric. Memphis was no exception to that rule. “That year, we had 12.4 million people come to Memphis,” says Memphis Tourism president and CEO Kevin Kane. “And last year, we saw that fall to just a little over 5 million visitors. That’s a 60 to 70 percent drop in visitors, so for now, what we need to work on is getting that number back up to those double-digit visitor numbers, and then grow it back to where we were in 2019.”

But compared to the rest of the country, Memphis is currently doing well thanks to a robust leisure scene. And without a historical reliance on big conventions, many of the small boutique hotels in the city have been able to get by.

“I’m looking forward to people that were maybe thinking about going to St. Louis, Little Rock, or the Smokies changing their mind and coming here, thinking, ‘Hey, the flight voucher means we’ve got extra money to spend in Memphis.’ We’re excited about it.” — Kevin Kane

“Places like New York, Chicago, Dallas, Los Angeles are struggling,” says hotel consultant Chuck Pinkowski, owner of Pinkowski & Company. “And that’s because they have a large percentage of convention demand that wasn’t possible during the pandemic. Some of these big cities were truly devastated, with occupancy percentages down into the twenties. But that’s not as much of an issue here, since that’s not our focus. Memphis, and some of the areas around here, are coming back well.”

With people cooped at home for well over a year, many are starting to feel the itch to get away. For Memphis’ hospitality industry, that’s been a boon in the first half of 2021. Holiday weekends, in particular, have seen visitor rates soar. The 4th of July weekend alone saw a 10 percent bump over the national average for Memphis visitors. The month of June recorded almost 50,000 travellers come through Memphis International Airport, the biggest number the city has seen since the last month of 2019.

“For many of my client properties, the occupancy numbers are higher in June 2021, at least, than they were in 2019,” says Pinkowski. “Leisure travel is coming back with a vengeance.”

To build on increased travel, Tennessee Governor Bill Lee’s Tennessee on Me campaign — which provides a $250 flight voucher to visitors who book a two-night package at select Tennessee hotels — hopes to boost the number of travelers to the state even higher. But it remains to be seen how much of the revenue accrued from the effort will be funnelled to Memphis.

“The voucher will pay for itself if people come here,” says Kane. “And it will generate tax revenues that we hope to see. I’m looking forward to people that were maybe thinking about going to St. Louis, Little Rock, or the Smokies changing their mind and coming here, thinking, ‘Hey, the flight voucher means we’ve got extra money to spend in Memphis.’ We’re excited about it.”

Back in Business

The strong numbers and a healthy tourism scene have seen some hotels open their doors for the first time, and convinced others to reopen for business. The Hu. Hotel in Downtown Memphis closed when the pandemic first hit, but hotel leadership felt the time was right to make a comeback. General manager Joe White says it’s down to a combination of factors. “On our end, we’ve seen that we’re able to operate safely,” he says. “And on the customer side, we’ve seen that the general public wants to visit. Weekend leisure travel is alive and well, and I’d say after being pent up, plenty of people are kind of ‘revenge traveling’ to make up for lost time.”

But hotels won’t simply go back to business as usual, not after one of the biggest health crises that the industry has faced. Health and safety are key pillars for success going forward, but with the COVID-19 situation far from resolved, hotel operators will need to be flexible when they encounter obstacles. “I think you’re going to see things differ from market to market based on local health guidelines,” says White. “But a big change will be a broader focus on internal programming — like our Hu. Roof bar or the new Lucy’s casual cafe — because we won’t necessarily know what restrictions might look like outside.”

And pandemic travel has seen some other operational changes that both hotels and customers are growing accustomed to. Many establishments cut down on the frequency of housekeeping services, unless specifically requested, to reduce the number of people entering a room. “Some people don’t necessarily make their bed or wash their towels every day,” says Pinkowski. “And customers didn’t want extra people coming into their rooms during the pandemic. So what some hotels realized is that this was expense-saving in terms of labor and supply costs.”

Pinkowski also points to what he calls “vanity creep.” That’s the inclusion of additional incentives to remain competitive with other hotels, such as expanding the quality of services like complimentary breakfast. While pre-COVID saw an increasing number of options, safety protocols saw breakfast meals reduced to bundles of pre-packaged items, like a fruit bar and an apple. “Those hotels will still offer some sort of complimentary breakfast,” he explains, “but it probably won’t be near the level we saw previously. With other things like complimentary cocktails, those were cut, and we may not see that come back at all. These are all cost-saving measures after hotels took such a big hit.”

One of the biggest remaining challenges, though, is staffing. The hotel industry, like the hospitality industry in general, is facing a much-reported labor shortage. As a result, many hotels are unable to run at maximum occupancy due to a lack of available staff members. And even significantly raised pay scales haven’t quite been enough to bridge the gap. “Call any manager in Memphis,” says Pinkowski, “and I guarantee they’ll say they can’t find the labor to staff the hotel at normal levels.”

According to Kane, the scenario in Memphis is that a hotel that can easily sell, say, 400 rooms a night will only be able to operate 300. “That’s kind of the growing pain we’re facing right now as we reopen. On the flip side, there are plenty of high school kids getting their first jobs in the industry at a much higher pay rate than is normal. And many places have to hire these kids with no experience so they have enough people to run. All the major cities are dealing with this right now.”

White and the Hu. Hotel are currently onboarding new employees in preparation for the August relaunch, but he agrees that recruitment is harder than it has been for a while. “It’s a very competitive marketplace right now,” he says. “The expectation on the associate side has changed. They want to make sure their employer is committed to a safe and healthy workspace, that there is PPE available, protocols in place, and monitoring programs that measure how we’re enacting those protocols.”

Another factor could be unfortunate timing. According to June’s ADP National Employment Report, the country’s private sector added 692,000 jobs, with 332,000 of those positions coming in the hospitality and leisure industry. But with hotels all vying for the same diminished pool of workers for the peak summer months, the competition is fierce, and not all are going to make the hires they need. Coupled with health risks and, for some families, a lack of available childcare, and it may take a little longer for hotels to be fully operational.

Convention Kickoff

Tourism and leisure numbers are looking up, but the last piece of the puzzle for Memphis to hit that 2019 benchmark is when large businesses and corporations recommit to traveling. And while in the past Memphis hasn’t had to rely on conventions to bring extra dollars to the city, the $200 million modernization of the Renasant Convention Center is poised to make a big impact.

The onset of COVID-19 scuppered what should have been a triumphant initial launch of the center, but the finished product stacks up to other convention centers around the country. “It’s really something to be inside it and see the difference, the way they’ve opened up the exterior walls and all the glass to see the river and be able to overlook Downtown,” says Pinkowski. “And what they’ve done with the meeting space, it’s just really high quality and is extremely competitive with other cities. The city can be really proud of what we’re done with that building. The next step is to get the Loews Hotel there to help attract big businesses, and I know Kevin is working real hard to make that happen.”

When corporations do finally decide to resume travelling, the Renasant Convention Center will be waiting to accommodate them. In the business world, sometimes all it takes is the first domino to fall for the rest to follow suit. But after seeing lower expenses due to reduced travel costs, will they resume normal service?

“Corporate America kind of follows the leader,” says Kane. “They probably saw the travel and entertainment budget and were drawn to the bottom line in 2020 since they didn’t travel as much. But as soon as one finds that it lost a big account because someone else made the effort to meet with a company president and win that business over at a conference or trade show, you’ll start to have them view it differently again. Someone spent money to build the bottom line and build a relationship.”

New technology like Zoom calls will undoubtedly keep a place in a post-COVID world, but it won’t completely replace many of the practices that were in place before. Kane still believes Memphis and the larger industry is at least months away from businesses going all in on travel again, especially with international travel much more restricted. But on the local level, the Renasant Convention Center has already landed its first major client, and it’s a Fortune 500 to boot. AutoZone announced that it had booked the convention center to host its national sales meeting this coming September, which will bring around 3,000 attendees to Memphis and generate an estimated $2 million economic impact for the area.

And that’s just the start. “We’ve had a lot of meeting planners looking at the building,” says Kane. “We’re really getting back to what we do. We’ve got a few events in the pipeline that will bring in tens of thousands of attendees.”

So what’s the prognosis for Memphis hospitality? It’s not safe to give out a clean bill of health just yet. Continued high rates of tourism require a complete health and safety buy-in from visitors, residents, and companies, with plenty of additional challenges along the way. But barring another lockdown, it looks like the worst has passed, and the city is on track to get where it wants to be. “We’re going to continue to see things that will generate a lot of impact for the city,” says Kane. “There’s a lot of demand, and that will boost Memphis as we look towards the future.”