Travel & Hospitality

The Infrastructure Investment and Jobs Act: A major boost for the hospitality industry

By Kunal Shah, Yadin Teitz, and Paresh Bhandari

Nov. 12, 2021 | Article | 5-minute read

The Infrastructure Investment and Jobs Act: A major boost for the hospitality industry


After months of debate, the U.S. Congress passed a monumental $1.2 trillion infrastructure plan known as the Infrastructure Investment and Jobs Act. A centerpiece of President Biden’s domestic agenda, the legislation will annually generate an estimated 2 million jobs over the next 10 years and promises to greatly improve existing road networks and promote access to crucial services such as drinking water and the internet. The impact of a bill of this magnitude will affect a whole host of industries—from construction, engineering and logistics to hospitality.

How does this bill impact the hospitality sector?



Our initial assessments suggest the infrastructure bill has the potential to generate between 50 and 100 million room nights over the next decade. The major driver of these room nights will be private-sector construction and logistics companies whose employees will be deployed across the country to support infrastructure-related projects. This business will tend to be largely concentrated across economy, mid-scale and upper mid-scale hotels. Extended-stay properties in suburban or interstate locations are especially well-positioned to see a direct uplift in demand as a result of the bill. However, properties outside these categories also may benefit from the infrastructure bill, especially if they adopt creative approaches to pursuing portions of the ensuing demand that their properties may be uniquely positioned to target.

“Greater accessibility will drive new development, new investments and new opportunities for brands to establish footholds in additional cities and regions.”


Once construction work is complete, we expect upgraded national infrastructure to stimulate both business and leisure travel, with changes most keenly felt by properties that previously were less reachable due to inadequate infrastructure. Greater accessibility will drive new development, new investments and new opportunities for brands to establish footholds in additional cities and regions.

 

The bill consists of many initiatives across areas as diverse as revamping U.S. airports, ports and waterways to strengthening the power grid and developing battery recycling plants. Lodging demand, driven by the modernization of transportation networks, will drive the bulk of room nights, followed by that from water improvement programs. But other peripheral initiatives such as the promotion of widespread adoption of electric vehicles and government incentivization of sustainable practices will present hotels and brands with the opportunity to establish a unique value proposition for eco-conscious travelers and differentiate themselves in the longer-term.

Modernizing transportation networks



This bucket consists of widescale road surface and network improvements such as expanding and repairing existing highways, improving emergency access to rural areas and renovating and stabilizing landmark bridges. Also included are significant enhancements to passenger and rail transportation, with the largest investment in Amtrak since its founding. Among other things, these investments will facilitate system-wide maintenance and spearhead work on overhauling the Northeast corridor. We estimate projects in this bucket have the potential to generate between 40 and 75 million room nights during the construction period, largely driven by the construction crews deployed across the country to build and/or upgrade transportation networks.

Improving drinking and wastewater resources and facilities



This bucket is comprised of $55 billion allocated toward comprehensive drinking water improvement programs. Undertakings encompassed in this category include the replacement of all lead service lines across the country and rigorous water network reconstruction programs, primarily centering on expanding water treatment capacity and extending services to rural and tribal areas. We expect demand from such projects could amount to an estimated 10 to 25 million room nights throughout construction. This impact will favor properties in proximity to existing facilities and pipeline networks.

So where should hospitality companies start?



If they haven’t already, hospitality companies—especially those prominent in the economy to mid-scale segments—must kick-off dedicated strategy and planning workstreams to ensure they’re well-positioned to capitalize on the opportunities created by the bill.

 

While transforming law into action may seem like a lengthy process, major government-led initiatives tend to speed up once ratified. We expect the projects contained within the bill will begin being implemented almost immediately, thanks to well-established federal grant and loan programs that can be leveraged by private-sector partners. Once the construction contracting process is underway for the various projects across the country, construction companies will begin their sourcing processes, including securing lodging contracts for their crews. We recommend hospitality companies begin internal discussions and high-level planning efforts focused on the specific impact this bill can have on their business. 

 

With opportunities spanning across multiple stages and regions, hospitality leaders must invest in forming dedicated multi-disciplinary teams؅ consisting of representatives from sales, marketing, revenue management, hotel development, hotel management/franchise services and procurement to focus on developing and executing a strategy with clear milestones and success metrics.

 

Major projects can be the impetus for catapulting smaller regional companies into juggernauts, making them attractive partners for hospitality companies in the short- and long-term. So, while most hospitality companies deploy commercial resources focused on the construction and logistics vertical today, they also must amplify those endeavors in designing a clear go-to-market strategy focused on the construction industry. Given the nuanced procurement and fulfillment characteristics of the construction vertical, hospitality companies must invest in their expertise and commercial efforts targeted at this sector.

 

In summary, this bill will add tremendous value to the hospitality industry across brands and chain scales, but companies that design and execute a disciplined and committed approach targeted at identifying and maximizing opportunities stand to benefit disproportionately and win more than their fair share of the pie.

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