Will home-sharing and luxury hotels recover sooner after COVID-19?

Key Take Away

STR (Smith Travel Research), a leading data analytics provider for the lodging industry, conducted an opinion survey about travelers' attitudes towards different types of accommodation facilities based on their preference from the past experience. One assumption for such an analysis is that travelers tend to stick to the same kind of accommodation facility for their trips.

The short-term rental/vacation rental/self-catering segment appears to be least affected for post-pandemic travel. There was only an 8 percent-point change (29% vs. 37%) for the group who would travel less. 

For More Information

https://youtu.be/pXkF8BeIuiM

www.hospitalitynet.org/opinion/4099019.html

Occupancy fall among steepest for Indian hotels

Key Take Away

As per hospitality consultancy HVS Anarock’s Hotels & Hospitality Overview, occupancies in India declined 81% in April from a year earlier. HVS is estimating a similar decline for May as well.

In the US, occupancies during April shrank almost 64% while for the UK, the decline was 71.3% as per HVS and STR data. For China and Singapore, occupancies during the same period declined by 48.7% and 29.2% respectively.
In a note on May 27, investment information and credit rating agency ICRA said demand had declined to the lowest levels the industry had ever witnessed in India during the extended lockdown, and that it was clear that it was the biggest crisis faced by the sector.

For More Information

economictimes.indiatimes.com/industry/services/hotels-/-restaurants/occupancy-fall-among-steepest-for-india-hotels/articleshow/76143482.cms

London recorded “worst hotel performance on record” in April

Key Take Away

The UK capital suffered its worst hotel performance on record last month, as a result of the Covid-19 lockdown and global travel restrictions.

Average Daily Rates fell 38.9 per cent to £87.18, while revenue per available room fell 83.5 per cent to £19.11.

STR shows that occupancy fell to 21.9 per cent last month – down from 32.7 per cent in March 

For More Info

https://www.businesstraveller.com/business-travel/2020/05/16/london-recorded-worst-hotel-performance-on-record-in-april/?utm_source=Mailer&utm_medium=ET_batch&utm_campaign=ethospitality_news_2020-05-16&dt=2020-05-16

STR: Florida, Texas Lead Weekend Hotel Occupancy Gains

Led by Florida and Texas, 13 STR-defined submarkets showed greater than 10-point weekend vs. weekday occupancy gains for the week ending 2 May, according to data from STR.

"The first 'real weekend' with eased COVID-19 restrictions showed an obvious jump in hotel demand, especially in popular, warm-weather leisure spots," said Jan Freitag, STR's senior VP of lodging insights. "Whether or not this becomes a trend remains to be seen, but the fact that there were people instantly willing to head out for leisure activity and stay in hotels is a positive sign for the industry. We have maintained throughout this pandemic that the leisure segment would be the first to return, it is just a matter of when."

"Hotel companies, together with the AHLA, are showing commitment to cleanliness and providing guests with a safe environment within their properties. At the same time, health experts have expressed concerns that increased leisure activity in public spaces could contribute to a potential second wave of COVID-19, which would obviously present added risk for the industry."

Hotel Industry 2020 – The New Normal

 The "light and warmth of hospitality," coined by Conrad Hilton, will not be apparent upon entrance to a hotel post COVID-19. Expect acrylic covered front desks, masks and gloves, signage advising guests to use caution, frequent disinfecting of public spaces, wide open lobbies with limited seating and restaurants and bars that have six feet of separation in every direction. The good news is that we are approaching the re-opening of the economy!

According to the top prognosticators in the hotel industry, here is what we are looking at from an occupancy, average rate (ADR), RevPAR perspective:

The best case seems to point to a drop in occupancy from 66% in 2019 to 50% in 2020 and a drop in ADR from $133 to $107 resulting in a RevPAR drop of over 30% from $88 to $55. Worst case scenarios have us dropping well below 50% in RevPAR, close to Armageddon. Once STR releases an April forecast, the overall average should increase. These firms have done a tremendous job of analysis given the completely different demand generators—the bad news here is that even in the best scenarios, there are no net profits forecast for 2020.

Operations

Profits will be gone in 2020 with hopes of a return to closer to normal revenues and profits in 2021 or 2022. The implementation of completely new protocols including hospital grade sanitization, masks and thermometers will be fairly expensive relative to supply costs.

Valuation

We can expect values to decline in line with net income, but with less deals done. The real question will be when will values come back to 2019 levels and will it be a buyer's or seller's market. The latter depends on how long it will take for this destabilized market to bounce back. Over-leveraged sellers will be at risk as short-term values will take a precipitous drop. However, lenders will only foreclose on operators who do not engage in a sincere way. They do not want to own hotels. Transaction volumes will be down according to an April, 2020 Lodging Industry Investment Council survey.

Supply

Airbnb and short-term rentals will continue to impact hotels. With unemployment numbers at new highs, millions of Americans will need to find a way to supplement their income and home sharing may be people's means to do so. New supply for those accommodations could surge and have a negative impact on hotel room rates in general. But many cities have sued Airbnb and our original prediction was that they would become an online travel agency (OTA) by 2020. Well, only time will tell, but they have postponed their 2020 IPO.

Demand

We will start to see two separate groups emerge - those who feel they can travel freely, and those who are still susceptible to the virus. The first group is made up of individuals who have tested positive for the virus anti-bodies - meaning they had the virus and lived and those who believe they are not at significant risk. This group will be our primary source of demand, while others may continue to quarantine and limit travel. This summer, we can expect to see "pent up" demand. After being stuck at home for eight or more weeks, consumers will be itching to travel.

U.S. Hotel Profits Per Room Cratered to Losses in March

Gross operating profit per available room at U.S. hotels dropped nearly 102 percent in March, translating to an average 2 percent in losses, according to STR.

Coronavirus hotspots saw some of the worst drops in hotel profits. New York City had the steepest profit decline, with a 203 percent drop, followed by Chicago, at 201 percent, and Seattle, at 158 percent. Upper-upscale properties were the worst performing sector with a 108 percent decline in profits

The U.S. hotel industry expected a slowdown in 2020, as new supply delivered and the country entered a very late stage of its more than 10-year economic expansion. But coronavirus accelerated the predicted market correction to an unprecedented nosedive.

Hotel occupancy levels hit single digits. Demand dropped 41 percent in March and 14 percent for the entire first quarter, according to CBRE Hotels Research. The real estate firm predicts a 46 percent decline in revenue per available room, or RevPAR, for the year. The previous worst year on record was the 25 percent RevPAR decline seen in 1932.

With occupancy levels so low, it is almost impossible for hoteliers to generate enough revenue to cover operating expenses let alone debt service obligations. Many have decided to temporarily suspend operations until some level of travel demand returns. More than 5,000 U.S. hotels have closed as a result of depleted demand, according to CBRE. Mandelbaum still expects many of those to reopen.

Hotels in the Central/South America Region Steep Declines for March 2020

In its first month with a visible impact from the COVID-19 pandemic, the Central/South America hotel industry reported steep declines in the three key performance metrics during March 2020, according to data from STR.

U.S. dollar constant currency, March 2020 vs. March 2019

• Occupancy: -48.0% to 31.0%
• Average daily rate (ADR): -6.1% to US$85.61
• Revenue per available room (RevPAR): -51.2% to US$26.56

The absolute occupancy and RevPAR levels were the lowest for any month on record in the region.

Local currency, March 2020 vs. March 2019

Colombia

• Occupancy: -49.6% to 30.5%
• ADR: -0.7% to COP272,820.00
• RevPAR: -50.0% to COP83,252.00

The absolute occupancy was the lowest for any month in STR’s Colombia database. Bogotá experienced a 48.4% decrease in occupancy.

Brazil

• Occupancy: -43.0% to 32.4%
• ADR: -9.9% to BRL294.19
• RevPAR: -48.6% to BRL95.43

The absolute occupancy level was the lowest for any month in STR’s Brazil database. When looking at key markets, Rio de Janeiro and São Paulo recorded occupancy declines of 46.2% and 46.9%, respectively.

Tokyo's Olympic Hotel Gains Forecasted to Lessen in 2021

The Summer Olympics’ performance gains for Tokyo hotels are projected to be lower after the one-year delay in the event, according to the latest forecast from STR and Tourism Economics.

“We are projecting less overall demand when compared with our initial forecast for 2020, and while double-digit RevPAR growth is expected, it will come from a much lower base,” 

“Lower absolute demand levels would be linked with traveler perception based on the timeline of the COVID-19 pandemic, as well as financial challenges of a potential global recession. The still high level of demand combined with ADR growth should drive RevPAR upward, similar to the growth percentage we saw during last year’s Rugby World Cup in the market.”

Hilton closes 1,000 hotels, experiences 56% decline in revenue per room resulting from coronavirus

Hilton Hotels' preliminary systemwide first-quarter estimate of revenue per available room showed a 56% to 58% decline for March, according to the company's filing with the U.S. Securities and Exchange Commission

For the company's hotels in Europe, the Middle East and Africa, revenue per room is down 62% to 64% for March, which is slightly worse than Hilton properties in North and South America, which are down 54% to 56%.

These numbers are all better than the hotel's revenue per room in the Asia/Pacific region, which declined 74% to 76% in March.

As of April 14, 1,000 Hilton Hotels have suspended operations, which accounts for 16% of the chain's total global properties.

Marriott hotels also expect to report a decline of at least 23% in revenue per room for the first quarter. 

About 25% of Marriott's 7,300 hotels around the world are temporarily closed as a result of coronavirus travel fallout, according to a business update from the company

Hotel occupancy, average daily rate and revenue per available room were down significantly year-over-year for the week of April 5-11, according to a report from STR, a firm that analyzes hospitality industry data. 

More than 15,000 hotels signed up for a new American Hotel and Lodging Association (AHLA) initiative called "Hospitality for Hope," which matches hotels with government agencies in need, offering temporary housing for emergency and health care workers amid the pandemic.

Hotels may be in a position to offer rooms near a hospital they have a relationship with. When relatives of sick patients come to an area, hotels reach out to hospital leadership to offer a discounted rate.

Abu Dhabi Hotels Show Significant Year-over-year Declines for March

Reflecting the circumstances around the COVID-19 pandemic, STR’s preliminary March data for Abu Dhabi shows significant year-over-year declines in the three key performance metrics.

Compared with March 2019 data:

• Occupancy: -32.9% to 55.1%
• Average daily rate (ADR): -32.6% to AED333.92
• Revenue per available room (RevPAR): -54.7% to AED183.86

Daily data for the month showed 31 consecutive days of double-digit decreases in each of the three key performance metrics.

STR continues to monitor the COVID-19 impact on the hotel industry. 

London Hotel Industry Shows Significant Year-over-year Declines

London hotel occupancy fell 57.8% to 34.5% in March, according to preliminary STR data. ADR decreased 10.4% to £124.15 ($153.70) and RevPAR declined 62.1% to £42.88 ($53.09).

Reflecting the circumstances around the COVID-19 pandemic, STR’s preliminary March data for hotels in London shows significant year-over-year declines in the three key performance metrics.

Comparison with March 2019:

• Occupancy: -57.8% to 34.5%
• Average daily rate (ADR): -10.4% to GBP124.15
• Revenue per available room (RevPAR): -62.1% to GBP42.88

Daily data for the month shows 31 consecutive days of double-digit declines in occupancy and RevPAR.

STR continues to monitor the COVID-19 impact on global hotel industry performance.

U.S. Hotel Industry Reports 21.6 Percent Occupancy for Week Ending April 4th - 2020

Reflecting the continued impact of the COVID-19 pandemic, the U.S. hotel industry reported significant year-over-year declines in the three key performance metrics during the week of 29 March through 4 April 2020, according to data from STR.

In comparison with the week of 31 March through 6 April 2019, the industry recorded the following:

• Occupancy: -68.5% to 21.6%

• Average daily rate (ADR): -41.5% to US$76.51

• Revenue per available room (RevPAR): -81.6% to US$16.50

  Aggregate data for the Top 25 Markets showed steeper declines across the metrics: occupancy (-74.7% to 19.4%), ADR (-47.0% to US$85.61) and RevPAR (-86.6% to US$16.57).  

  Among those Top 25 Markets, Oahu Island, Hawaii, experienced the largest decrease in occupancy (-90.7%) and the only single-digit absolute occupancy level (7.0%). The decline in occupancy resulted in the steepest drop in RevPAR (-93.7% to US$10.83). 

  Minneapolis/St. Paul, Minnesota-Wisconsin, posted the largest decline in ADR (-57.0% to US$68.23). 

  Of note, occupancy in New York, New York, was down 79.1% to 18.3%. In Seattle, Washington, occupancy dropped 73.3% to 19.5%

Hotel Stocks Experienced one of Their Worst Months on Record in March

The Baird/STR Hotel Stock Index dropped 36.0% in March to a level of 2,748. Year to date through the first three months of 2020, the stock index was down 47.9%.

“Hotel stocks experienced one of their worst months on record as investors contemplated worst-case liquidity scenarios for hotel companies driven by the COVID-19 demand shock and potential hotel closures,” said Michael Bellisario, senior hotel research analyst and director at Baird.

 “In the U.S., occupancy levels have fallen to unprecedented lows, and we are forecasting a 50.6% drop in RevPAR for the year. The industry will be positioned for recovery once concerns are abated, but there is obviously great uncertainty on when that time will come.”

March performance of the Baird/STR Hotel Stock Index posted greater declines than both the S&P 500 (-12.5%) and the MSCI US REIT Index (-22.2%). 

The Hotel Brand sub-index decreased 34.5% from February to 4,712, while the Hotel REIT sub-index declined 40.0% to 702.