12% of US rooms are closed; economy keeps some demand
 
12% of US rooms are closed; economy keeps some demand
10 APRIL 2020 8:37 AM

A total of 665,000 rooms have closed across the U.S., according to STR’s count, as the hotel industry copes with weekly revenue decrease of more than 80% on a year-over-year basis.

HENDERSONVILLE, Tennessee—While there has been consistent anecdotal evidence of hotel closures across the U.S. in reaction to the spread of COVID-19, STR provided the first look at just how widespread the phenomenon has been.

(STR is parent company of Hotel News Now.)

As of 9 April, 12%—or 665,000 rooms—out of the total U.S. room supply of 5.4 million were closed as a result of the new strain of coronavirus.

Jan Freitag, SVP of lodging insights at STR, said that number is expected to grow as the pandemic evolves. He noted it took some digging to get reliable numbers on closures.

“As you can imagine, if you’re closing your hotel, calling STR is not on the top of your priority list,” he said. “So, it took us awhile to get this to this number.”

Reaching a pandemic normal
Freitag noted year-over-year revenue-per-available-room decreases in the range of 80% will be the norm for the hotel industry as the country continues to largely shelter in place to stem the spread of COVID-19.

That was indeed the case for the week ending 4 April, with a RevPAR decrease of 81.6%, fueled by a 68.5% drop in occupancy to 21.6% and a 41.5% drop in average daily rate.

“I think we should all wrap our head around minus-80%, minus-85% RevPAR declines going forward as the new normal,” he said.

The canary is dead
During his presentation, Freitag harkened back to research conducted by STR analysts showing a recession is likely once the change in RevPAR went negative in 43.5% of the submarkets around the U.S.

This data point, which he referred to as the canary in the coal mine, has been rendered moot as 100% of the country’s 645 submarkets are new reporting RevPAR declines.

“We expect that, absolutely, to go forward for the foreseeable future,” he said. “Now we will track this number very, very closely, because obviously eventually somewhere a submarket will show positive RevPAR growth.”

Lower classes outperforming
One of the silver linings in the pandemic storm has been the ability for economy and midscale hotels to hold on to a more significant portion of their previous demand, especially compared to nearly vacant luxury and upper-upscale hotels.

For the week ending 4 April, economy hotels had 34.8% occupancy, while midscale had 24.5%. That’s significantly better than the 9.1% and the 9.2% seen at luxury and upper-upscale hotels, respectively.

Freitag said it’s likely a significant portion of that demand for economy and midscale hotels comes from emergency responders.

Unemployment casts doubt on recovery
Record-setting unemployment figures likely mean there will be a slower-than-hoped-for recovery period for travel even after the initial wave of the pandemic passes.

He noted that over a two-year period there were 8.6 million unemployment claims in the U.S. around the time of The Great Recession. In the past three weeks alone, there have been 16.8 million claims.

“Of course, that will have a huge impact on leisure demand rebounding,” he said.

But the situation isn’t completely hopeless, as Freitag said he does believe people are itching to travel as they quarantine.

“I do think since we’re all cooped up at home now for four weeks, eight weeks, 12 weeks or so, when the all-clear is given … even people who don’t have a lot of disposable income will try to go somewhere,” he said.

Click here for all STR data, webinars and presentations focused on COVID-19.

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