Six months into COVID-19: What does the data say?
Six months into COVID-19: What does the data say?
05 AUGUST 2020 8:39 AM

STR is monitoring several data sets that give a sense of how the global hotel industry is faring as the summer of 2020 nears its end.

HENDERSONVILLE, Tennessee—The 2020 Chinese New Year fell on 24-25 January, and just like every year, STR analysts expected a steep decline in demand as people stayed home and then a sharp uptick in leisure room demand for a week of vacation. However, it was not meant to be.

(STR is the parent company of Hotel News Now.)

Travel in China came to a halt, and as the COVID-19 virus spread around the world, air travel and room demand in Europe and the Americas cratered. Six months later, some countries that were locked down are reopening, but the pandemic is far from over as the case count in the U.S. shows increased velocity.

It is now clear that this pandemic will pass, and all eyes are on the so called “green shoots,” in other words data points that hint at a better future. Well, maybe “better” is not right word; maybe we should say “less bad.” Here are some of the data sets we are monitoring and sharing with our clients that give a sense of how the global hotel industry is faring as the summer of 2020 comes to a close.

Wheels of recovery are turning
STR analyst Robert Bauer created the following visual, which crams a lot of data into an elegant way of looking at the state of global hotel industry. It color-codes all submarkets in the world by occupancy range and shows four points in time.

Source: STR, © 2020 CoStar Realty Information, Inc.

The interpretation is clear: Green dots are “green shoots,” and there are now many submarkets with occupancies over 50% and some even with 75% and up. These are often drive-to destinations, frequented by locals since international travel of any magnitude has yet to restart. Summer vacationers choose destinations outside of the larger metros and take to the mountains and beaches. While this is certainly good news for a wide swath of global hoteliers, they—as do most school children—know that summer vacations will come to an end, and it is quite uncertain today if the drying up leisure demand can be substituted with corporate transient demand.

Closed hotels are reopening
STR analyst Brannan Doyle created a comprehensive global look at closed hotels during the spread of the pandemic. We are including here only hotels that are part of the STAR program to keep the data comparable. The complete closure of a country had, in some instances, more than 90% of hotels closed, and those that remained open likely were housing essential workers. In China, only one in five rooms was closed at the height of the lockdown.

Source: STR, © 2020 CoStar Realty Information, Inc.

The good news is that the closure rates are decreasing sharply, and more hotels are rehiring furloughed staff to service guests.

Occupancies are recovering
The lockdown in China and parts of Europe led to single-digit occupancies in those areas. The U.S. never locked down as a country, and 50 different governors had 50 different ideas of what was best for their state and its citizens, and hence the U.S. occupancy never dropped below 20%.

Source: STR, © 2020 CoStar Realty Information, Inc.

The swift reaction of Chinese authorities to new virus flare-ups has kept the growth momentum for occupancy increases alive. Likewise, the complete shutdown of some European countries and their tourism industry has led to the containment of the virus. Occupancies are recovering as Europeans are trying to salvage the remaining weeks of the summer break and the opening of the Schengen Area to cross-border traffic is helping hard-hit hotels.

ADR is increasing across the board
The steep decreases in average daily rate registered in STR’s data were likely not the result of yield managers actively decreasing rates, but rather the complete lack of corporate transient and group demand. ADRs hit bottom in April, and the ADR recovery is now in full swing as leisure travelers and some corporate travelers are back on the road.

Source: STR, © 2020 CoStar Realty Information, Inc.

The ADR increases when compared to the trough are steepest in Europe. U.S. hoteliers registered sharp ADR declines, but the initial increases in room rates were sub-10% for the first eight weeks after the low point in April. Since then, the room rates have increased, driven by the lower-end hotels with leisure demand and the reopened higher-end hotels. The Chinese hotel industry was quickly able to make up ground after ADR bottomed out, partially because ADR declines were not as pronounced elsewhere.

In the most recent weeks, however, the growth curve has flattened dramatically, hinting at the possibility of stalling ADR growth as fall begins.

Lower end hotels are driving the recovery
Despite the wide variability in the global hotel industry, one recovery trend was consistent around the world: Lower-end hotels drove higher occupancy than high-end hotels.

Source: STR, © 2020 CoStar Realty Information, Inc.

Two forces are at play here. On the one hand, the complete lack of corporate demand and group meetings has hit hotels in the upper-upscale and luxury classes the hardest. It will likely be quite a while until corporate travel managers send their teams back on the road in large numbers. On the other side, there are individual consumers, often in their own cars, driving to destinations where they can enjoy the great outdoors while maintaining social distancing.

The global pandemic has led to unprecedented demand and revenue declines around the world, but we are also now reporting on some submarkets and classes that are slowly doing better and are showing improving performance results. The recovery is ongoing, but its pace is still uncertain.

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.

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