Hotels Suffer From COVID-19 Fallout

Analysts say the hotel sector is showing further economic effects of the COVID-19 pandemic.

STR, Hendersonville, Tenn., and Tourism Economics, Wayne, Pa., recently updated their joint hotel sector forecast to account for the COVID-19 pandemic. They now project the sector will see a 50.6 percent decline in revenue per available room this year.

“The industry was already set for a non-growth year; now throw in this ultimate ‘black swan’ event, and we’re set to see occupancy drop to an unprecedented low,” said STR Senior Vice President of Lodging Insights Jan Freitag. He said STR has tracked hotel metrics since 1987 and the lowest occupancy it has seen was 54.6 percent during the financial crisis in 2009. “With roughly six of 10 rooms on average empty, already wavering pricing confidence will take a significant hit and drop average daily rates to a six-year low.”

CBRE Senior Managing Economist Jamie Lane said the lodging sector faces two headwinds: a contraction in overall economic activity and the need for social distancing that discourages traveling. “This will cause a severe decline in lodging demand in the U.S., as it has in other countries,” he said.

Before COVID-19 reached U.S. shores, CBRE had forecast a 0.1 percent decline in RevPAR this year. CBRE now estimates RevPAR will decline 37 percent in 2020, with a 60 percent-plus contraction in the second quarter.

“The expected declines in RevPAR will be worse than experienced in the 2001 and 2009 economic downturns combined,” Lane said. “However, given the expected quick rebound in economic growth and historic resiliency of travel demand, we forecast a strong hotel revenue recovery in 2020 and 2021 and that RevPAR could recover to prerecession levels by 2022.”

Tourism Economics President Adam Sacks noted travel has come to a “virtual standstill,” but said he expects the market to begin to regain its footing this summer. “Once travel resumes, the combination of pent-up travel demand and federal aid will help fuel the recovery as we move into the latter part of this year and next year,” he said.