April Sees ‘Historic’ Hotel Profitability Drop

U.S. hotel profitability metrics cratered during April, reported STR, Hendersonville, Tenn.

During April, the sector saw total revenue per available room fall nearly 93 percent year-over-year and gross operating profit per available room fall 116.9 percent to a $17.98 loss per room.

“Whereas only the later portion of March was affected, April was the country’s first full month in the COVID-19 world, and the impact on U.S. hotel profitability was historic,” said STR Senior Director of Financial Performance Joseph Rael. “Occupancy levels hit the floor near the middle of the month, leaving many properties positioned to lose money by keeping their doors open. That led to more than 5,100 temporary closures around the country.”

Among large U.S. markets, Houston reported the steepest year-over-year gross operating profit per available room decline at negative 135.3 percent, followed by Chicago at negative 134.6 percent.

Rael noted hotel occupancy and average daily room prices have trended upward over the last six weeks, signaling the sector may have seen the worst of the downturn.

Early June brought slightly better hotel performance. Year-over-year declines remained significant, but not as severe as those seen in April and early May, STR said.

For the week ending June 6, hotel occupancy was down 45.3 percent year-over year to 39.3 percent, average daily rates were down 35.9 percent to $85.01 and revenue per available room was down 65 percent to $33.43.

“The lower end of the market continued to lead, with economy properties finally selling more than half of their rooms again, although all hotel classes were comfortably above 20 percent,” said STR Senior Vice President of Lodging Insights Jan Freitag.

Freitag said New York City and popular leisure spots in Florida, Texas and South Carolina reported the highest occupancy levels.