Hotel Sector Recovery Slows

Image courtesy of STR

The hotel sector recovery has slowed in recent months after rebounding in the fall from April lows, said Fitch Ratings, New York.

“In the near term, rising coronavirus cases and the potential for extended or broadened travel bans will limit lodging demand gains until vaccines become widely available,” Fitch said in a new report, Pandemic Creates Challenges for U.S. Lodging Industry.

Fitch said it expects hotel revenue per available room to rebound 30 percent next year to just under three-quarters of 2019 levels. RevPAR should return to prior peak levels by 2025, the report said.

S&P Global Ratings, New York, reported lodging loans account for more than half of all loans currently in or requesting forbearance in its commercial mortgage-backed securities delinquency index. “Government travel restrictions and state-mandated closures have resulted in significant declines in corporate, leisure and group lodging demands,” said S&P Credit Analyst Emile Courtney. “There has also been a dramatic decline in airline passenger miles for both international and domestic travel.”

In the report, Lodging Sector: A Slower Recovery Could Take Until 2023, Courtney said he expects a “choppy” recovery in the U.S. lodging sector, depending on both hotel type and location.

One sign of hope: STR, Hendersonville, Tenn., said U.S. hotel profitability improved slightly from the previous month. Gross operating profit per available room equaled $12.69 in October compared to $8.14 in September. The sector’s GOPPAR remained below $10 from July to September. 

“There were positives in the profitability data even as occupancy flattened and the extension of the summer leisure lift came to an end,” said STR Operations Analyst Audrey Kallman noting overall gross operating profit margin increased six percentage points from September gross operating profit per available room for airport hotels was nearly three times higher than the previous month.

“On the negative side, a lack of group business continued to stand out with upper-upscale hotels showing the lowest GOPPAR among the classes,” Kallman said. “October is usually a strong month for conferences and events, but without those significant demand generators, GOPPAR for upper-upscale properties came in more than $100 lower than this time last year.”