Home Commercial Tomorrow is Another Stay: First Impacts of COVID-19 on the Hotel Industry

Tomorrow is Another Stay: First Impacts of COVID-19 on the Hotel Industry

Kinzer Partners, Seattle, Bay Area, Smith Travel Partners
Image Courtesy of Vlad Tchompalov

By Jena Thornton

The Black Swan has arrived. 

Definition of black swan: An event or occurrence that deviates beyond what is normally expected of a situation and that would be extremely difficult to predict. 

The impact from the coronavirus is different from anything the hotel industry has encountered, and we’ve endured tremendous turmoil over the past few decades. This black swan has come swiftly and dealt significant shock to our cash reserves, to the well-being of our employees and to our ability to see light at the end of the tunnel. 

What we know 

First, let me start with what we do know thus far.  

  • The the impact the coronavirus is having nationally and worldwide is staggering.  This is just the beginning and it will get worse before it gets better. 
  • Hotels across the country are shutting their doors – albeit temporarily – and the impact these closures will have on our employees will be much longer than the timeframe that these hotels will be closed.  
  • No one knows how to tackle these rapidly emerging challenges.  From lenders, to operators, owners, insurance providers, unions, brands, politicians, school districts, healthcare systems, first responders, (and the list goes on) the speed in which this has complicated our daily lives has taken us all by surprise.   
  • It will get better and people will travel again – we just don’t know how long this will last.

Vital statistics 

  • Here are some meaningful comments and statistics, provided by Smith Travel Research (STR):

Performance declines were uniform across chain scales, classes and location types.

“To no one’s surprise, the hurt continued and intensified for hotels around the country,” said Jan Freitag, STR’s senior VP of lodging insights, on a recent webinar shared with the hospitality industry. “The performance declines were especially pronounced in hotels that cater to meetings and group business, which is a reflection of the latest batch of event cancellations and government guidance to restrict the size of gatherings.

“The questions we are hearing the most right now are around how far occupancy will drop and how long this will last. Through comparative analysis of the occupancy trends in China and Italy over the past weeks, we can with certainty say that we are not yet close to the bottom in the U.S.,” Freitag said. 

“However, the timeline for that decline and the eventual recovery are much tougher to predict because there is still so much uncertainty around the COVID-19 case numbers in the U.S. and how serious citizens are when practicing social distancing. China and Italy saw a more abrupt decline in occupancy because of stricter lockdowns. That will dictate the speed of recovery.”

Kinzer Partners, Seattle, Bay Area, Smith Travel Partners
Image Courtesy of Vlad Tchompalov  

Each of the top 25 U.S. markets registered double-digit occupancy and revenue per-available room (RevPAR) decreases for the week ending March 14. Average daily rate (ADR) was also down in each market.

  • Seattle saw the steepest declines in each of the three key performance metrics: occupancy (-55.0% to 32.9%), ADR (-24.7% to US$109.28) and RevPAR (-66.1% to US$35.97).
  • San Francisco/San Mateo posted the week’s second-largest drop in RevPAR (-63.3% to US$68.56), due to the second-steepest decreases in occupancy (-51.6% to 38.9%) and ADR (-24.2% to US$176.38).
  • New York City experienced the third-largest declines in occupancy (-43.9% to 48.8%) and RevPAR (-54.6% to US$88.29).
  • New Orleans posted the third-steepest drop in ADR (-22.8% to US$138.11).

What can we do?

In order for our industry to weather this storm, we must work together and we must continue social distancing. There are many questions without answers at the present time.  We need to hear from lenders, servicers, and local and federal government on resources available to us as we endure the situation.  

The American Hotel and Lodging Association (AHLA) and key industry leaders met with President Trump, Vice President Pence and other Administration officials at the White House on March 17 and delivered the Hospitality Workforce Relief Proposal to Congress. As you’ll see in the Hotels Act alert below, the request was made in three parts:

  • Hospitality Workforce Relief Fund ($100 billion)
  • Provide Flexibility in Lending ($50 billion)
  • Access to Loans for Hotel Owners

With the Senate in session and the House likely to come back soon, your urgent outreach to your Senators and Representatives is appreciated. Please engage any connections with elected officials and their staff, and also use AHLA’s HotelsAct call to action for Congressional engagement.

In terms of resources for business owners, the US Small Business Administration is offering low-interest federal disaster loans of up to $2 million for working capital to small businesses suffering “substantial economic injury” as a result of the virus. The SBA has so far earmarked $50 billion for immediate disaster assistance aid. These loans may be used to pay fixed debts, payroll, accounts payable and other bills that can’t be paid because of the disaster’s impact. The interest rate is 3.75 percent for small businesses and 2.75 percent for non-profits.

One flickering, far-away light for hoteliers and travel personnel is the possibility of greater demand for travel – once it’s safe to do so – from millions around the world who have been cooped up for weeks on end. Freitag said initial surveys of Chinese travelers indicated that 50 percent had a stronger desire to travel after the coronavirus outbreak is contained. About 20 percent said their desire to travel was the same as before, and 30 percent said they wanted to travel less. 

“We’re going to go through this and say, ‘I’ve been at home for however many days, I need to get away. I need to travel,’” Freitag said during the webinar. 

We will continue to report on the impact of coronavirus and do our best to share resources and communicate reliable information from industry leaders across the country.