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U.S. May Require COVID-19 Testing for Domestic Air Travel: Impact on Real Estate Investors

Feb 11, 2021 by Maurie Backman
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2020 was a brutal year for hotels, and so far, things aren't looking too great for 2021. The American Hotel & Lodging Association anticipates 50% of U.S. hotel rooms will remain vacant in 2021.

A slowdown in business travel is partly to blame. Those trips usually account for 65% of hotel bookings, but this year, they're expected to be down 85% through April. And business-related travel may not get back to pre-pandemic levels for another two to three years.

It's for this reason that hotels and their investors really can't afford another blow. But the Biden administration may have one in the works.

Coronavirus testing requirements could soon be a barrier to air travel

The Biden administration is considering implementing a rule that would require all air travelers to produce results of a negative COVID-19 test before being granted permission to board a plane. This requirement is already in place for travelers coming into the U.S. from overseas, but now, domestic travelers may be subject to it as well. And that's highly unlikely to sit well with many members of the general public.

Of course, the purpose of that mandate isn't to make travel more difficult -- it's to keep people safe. And given the slow rollout of coronavirus vaccines and new COVID-19 variants that continue to emerge, requiring a negative test result is just another layer of protection.

Some passengers, in fact, may embrace that requirement. But for others, it could be just the thing that stops them from booking a flight. And if more people decide not to travel in the next three to six months as the pandemic continues to rage, hotels could lose out on what limited revenue they were otherwise in line for. And that's something those who invest in hotel real estate investment trusts (REITs) should definitely prepare to brace for.

So far, a number of airlines have spoken out against the requirement for coronavirus testing for domestic travel, especially since there is evidence the risk of COVID-19 transmission is fairly low on airplanes. Others opposed to the idea of mandating negative test results for air travel argue it's akin to a logistical nightmare.

But unless things really start to improve on the pandemic front, providing proof of a negative coronavirus test could be something air travelers have to do for quite some time. And if that prompts people to cancel their travel or vacation plans and stay home instead, it will dig hotels even deeper into their current hole and put many at risk of closing down permanently.

Of course, this also brings up an interesting question: Once coronavirus vaccines become widely available, will presenting proof of inoculation be a requirement for air travel as well?

That's less likely to happen than requiring a negative COVID-19 test to board a plane, but it's a topic that's apt to come up as more doses hit the market. Some employers are already saying they'll require workers to get a vaccine before being allowed to return to the office, so it's conceivable that vaccine requirements may soon pop up in different corners of our day-to-day existence -- travel included.

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