For the week ending 28 March, the U.S. hotel industry reported an 80.3% decline in revenue per available room, which STR’s Jan Freitag said is the steepest drop ever recorded.
HENDERSONVILLE, Tennessee—The U.S. hotel industry reported negative revenue-per-available-room results for the third week in a row, and STR’s SVP of Lodging Insights Jan Freitag said this is the beginning of “a long, slow road” ahead. (STR is the parent company of Hotel News Now.)
On a weekly webinar series to go over key performance metrics, Freitag said RevPAR in the U.S. dropped 80.3% for the week ending 28 March.
“I’ve said this sentence three weeks in a row,” he said. “It is hard to fathom that the data is going to get a lot worse going forward. What I’m not saying is this is the bottom and we are now in the recovery. What I’m saying is this is going to be a long, slow road with these double-digit, 80%-90% RevPAR declines going forward for the near future.”
On Thursday, 1 million coronavirus (COVID-19) cases were confirmed around the globe according to an article from The New York Times, Freitag said, and the U.S. has one in five cases, which has “huge implications for the American economy and then therefore room demand and the American U.S. hotel industry.”
The acceleration in the number of cases correlates with the deceleration in RevPAR, he said.
Tourism Economics forecasted GDP growth to hit 1.7% for 2020 at the beginning of the year at the Americas Lodging Investment Summit, which led STR to forecast RevPAR growth of 0%. That outlook has changed since then, Freitag said.
GDP is now expected to decline 0.2%. If the virus is not contained any further, that could put more stress on the economy, which could lead to a drop in GDP of 2.6%, he said.
“The RevPAR forecast I’m sharing (-50.6% as of 30 March for full-year 2020) with you here is based on 0.2% GDP decline, understanding that we are in a recession as we speak,” he said.
The number of closed hotels also played into STR’s forecast revision, Freitag said. The company expected room supply to decrease approximately 15% for the year. A higher rate of closures is expected in April and May and is expected to lessen in the third and fourth quarters, he said.
STR is not currently releasing the number of closed hotels in the rapidly changing environment, but will release that information in the future, he said.
Recovery period for the US
It was originally thought that the U.S. was eight weeks behind China in terms of recovery, but Freitag said STR is “no longer sure if that’s true.”
“When I look at this chart, I think the occupancy in the U.S. is ‘still too high,’” he said. “And the only reason that the Chinese data is recovering now is because there was a lockdown on certain regions. There is not going to be a federal response it sounds like in the United States … therefore there’s not going to be a unified response, and therefore likely an elongated recovery that we see in the U.S. than what we see in China.
For the week ending 28 March, 8.5 million rooms were sold in the U.S., Freitag said.
There are no meetings or conventions, and RevPAR decline on the upper end is “roughly 100% or so,” he said. The RevPAR declines get less bad the further you go down the chain scale, he said. The midscale segment saw a RevPAR decrease of 67.1% and the economy segment saw a decrease of 54.8%.
There’s still one in three rooms filled in the economy segment, he added.
Looking at location types, urban resort hotels saw the steepest RevPAR declines with hotels near interstates and in small towns seeing less of a drop, Freitag said.
“This points at who is staying in hotels,” he said. “For interstate, the American supply chain is still working. The truckers still need to stay somewhere, so interstate demand is still there.”
Small town/metro hotels have historically done a little better because “they are not as susceptible to the wild swing of the top 25 or top 100 markets,” he said, so they should not “fall quite as much and recover just a little bit faster.”
The lower end of extended-stay hotels are holding occupancy, Freitag said, with occupancies around 43% to 44% for suburban, airport and interstate properties.
For the week, performance results in Canada were worse than in the U.S., Freitag said.
RevPAR dropped 82.1%, which has never been reported for Canada, he said. The absolute level of occupancy for the country was 14.8%.
Top Canadian markets are seeing steep declines in RevPAR, he said. Toronto saw RevPAR decrease 88.3% while Montreal saw a drop of 88.5%.
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