Wuhan, China, where hotel occupancy has resurged from nearly zero to above 70%, reveals next phase for U.S. hotels: As regular guests filter out, coronavirus patients will flood in.
HENDERSONVILLE, Tennessee—U.S. hotel occupancy was 53% and revenue per available room declined 32.5% for the week of 14 March. As operators furlough or lay off staff, owners are trying to wrap their heads around “zero-revenue” scenarios and what that means for debt service payments, while some hotels, such as the large Las Vegas resorts, are closing.
These facts are also clear: According to the American Hospital Association, just under 1 million hospital beds are available, and those are on average two-thirds filled, leaving roughly 300,000 beds available. If even just 1% of the U.S. population is infected and needs treatment, 3.3 million beds will be needed.
The U.S. hotel industry has 5.4 million rooms. Owners, desperate for any type of cash flow, will be ready to take any sort of occupancy, even if it is to quarantine former (or future) hospital patients.
The question on everyone’s mind is: “How long will this last?”
STR clients have requested data from China to gauge if there is indeed a recovery underway. This chart from Wuhan, the epicenter of the COVID-19 outbreak, seems to indeed indicate a recovery:
But how can it be that in the market that is synonymous with the virus outbreak, occupancy stands at 70%-plus just six weeks after the Chinese New Year 2020 and the following lockdown of the city.
The answer is simple and provides a blueprint of what will likely happen to the U.S. hotel industry. The government stepped in and commandeered the rooms, because they make ideal quarantine shelters. They allow patients dismissed from the hospital to rest and make sure they are indeed better. In addition, people who had close contact with confirmed cases and mild cases were sent to hotels for quarantine. Also, healthcare workers from other provinces were shipped in to assist and needed accommodation. The government does pay a per-diem rate for the hotel rooms they use.
I do not think it is too farfetched to assume that the current pandemic will upend the industry we work in and move operators from being hoteliers to being caretakers in the truest sense of the word. We best get mentally prepared and operationally ready for this outcome.
Jan Freitag is the SVP of lodging insights at STR.
This article represents an interpretation of data collected by STR, parent company of HNN. Please feel free to comment or contact an editor with any questions or concerns.