From the desks of the Hotel News Now editorial staff:
- Casino hotel company Sun International to cut 3,300 jobs
- Hedge funds set sights on empty hotels
- New California projects likely won’t finish for years
- Strong year-over-year gains for extended-stay hotels
- Labor Day road travel expectations
Casino hotel company Sun International to cut 3,300 jobs: South Africa-based hotel and casino company Sun International announced it plans to eliminate 3,300 jobs in South Africa and Chile in conjunction with a restructuring plan to withstand the COVID-19 pandemic, Reuters reports.
The announcement comes as the company reported a “half-year headline loss of 885 million (South African) rand ($53.26 million) on Monday,” the newspaper notes. Management was already reviewing employee structures at some operations in addition to the cost base before the pandemic hit.
“The COVID-19 pandemic required us to undertake a deeper review as we anticipate that it will take some time for our properties, in particular our hotels and resorts, to recover,” Chief Executive Anthony Leeming said.
A total of 2,300 job cuts have been proposed for the company’s South Africa operations, while its Chile properties have already undertaken a voluntary retrenchment process involving 1,000 employees, with 451 already accepting the offer, according to Reuters.
Hedge funds set sights on empty hotels: Bloomberg reports hedge funds and other types of short sellers are starting to eye a “U.S. credit-derivatives index with outsized exposure to hotel debt as the pandemic sinks the hospitality industry into distress,” a move that follows a rash of delinquent hotel property loans.
Market participants noticed in some trading flows these firms are beginning to build up wagers against the synthetic index, called CMBX 9, instead of challenged malls in the U.S., the news outlet writes.
“In the last month there has been more selling pressure on the CMBX 9 than any of the other CMBS indices,” said Dan McNamara, a principal at MP Securitized Credit Partners, a hedge fund focused on shorting commercial mortgage bonds. “That’s because some hedge funds are actively looking to play the short side on the Series 9 index due to its significant hotel exposure.”
Approximately 25% of hotel loans in commercial mortgage-backed securities are now delinquent, the news outlet reports.
New California projects likely won’t finish for years: California hotel development pace slowed for the first six months of 2020, but the full impact of the pandemic on new projects likely won’t be realized for years, writes Hotel News Now’s Bryan Wroten.
According to the latest midyear hotel development survey from Atlas Hospitality Group, California hotel construction and openings declined significantly during the first half of 2020 compared to the record-setting pace in 2019.
New projects in planning grew by 9% compared to the first half of last year, however. Atlas Hospitality Group President Alan Reay said several hotel projects were completed during the first half of the year, but openings were delayed. The group is now watching projects being deferred or abandoned.
Those delayed projects include Hyatt Hotels Corporation’s partly built Andaz Palm Springs that is now in bankruptcy; the incomplete Hotel Indigo Coachella that has been shut down; and the Tova Hotel in Palm Springs that has been put on pause.
Strong year-over-year gains for extended-stay hotels: According to the latest data from The Highland Group, extended-stay hotels were the first segment to report higher demand than one year ago.
Economy extended-stay hotel demand in July grew 1.2% compared to 2019, “the first such gain in demand reported by any segment of the hotel industry in the last six months,” the report states. The segment also posted its smallest monthly revenue per available room loss since March, when the metric first began to decline.
“It will be several months before the overall hotel industry reports positive monthly change in demand compared to the previous year and economy extended-stay hotels achieving that last month is a very welcome start,” Mark Skinner, partner at The Highland Group, said in the report.
Labor Day road travel expectations: Labor Day holiday road travel is projected to be down 5.3% compared to 2019, with an estimated 42.5 million Americans expected to hit the road this weekend, according to a study by Arrivalist.
The study analyzed daily road trip activity exceeding 50 miles by residents of all 50 U.S. states, and includes year-over-year data dating back to January 2019.
“Americans continue to seek respite on the road,” Arrivalist founder and CEO Cree Lawson said in the release. “These latest projections are a promising sign for the travel industry.”
Compiled by Dana Miller.