P&L, forecasts indicate hotels not yet on steady ground
P&L, forecasts indicate hotels not yet on steady ground
19 NOVEMBER 2020 9:43 AM

Experts from STR and HVS share insights into hotel revenue declines during the pandemic and their expectations for 2021 performance.

REPORT FROM THE U.S.—Hotel industry data experts on a recent webinar examined trends in hotel expenses and revenue declines, and how those could play into forecasts for U.S. hotel industry performance in 2021.

For example, profit-and-loss data from STR, parent company of Hotel News Now, shows the worst impact from the pandemic has been on hotel food-and-beverage departments.

During the “Statistically speaking” session of the 42nd Annual NYU International Hospitality Industry Investment Conference webinar series, Amanda Hite, president of STR, said F&B profits have declined largely as a result of the loss of group business.

She added that furloughs and permanent layoffs have led to significant reductions in labor costs, but 47% of revenues are still going to labor costs now.

“F&B labor costs have been reduced the most of the labor costs,” she said. “We’ve got the (general and administrative) labor costs; they’ve been maintained during the pandemic. And most of that’s coming from the general manager who is just absolutely essential right now. We also had benefits that actually, for a period of time, were at higher levels than the overall labor cost this year. That’s because of the number of furloughed employees, where they were still being paid benefits, but that’s coming down now that we’ve seen the permanent layoffs.”

Another struggle for hotel owners is a significant rise in insurance costs, said Stephen Rushmore, Jr., president and CEO, New York, at HVS.

“The liability umbrella casualty (has gone up) 40% to 80%, sometimes even triple digits, which is just unconscionable,” he said.

Profit recovery before revenue recovery
A profit recovery could happen before a revenue recovery for some hotels, which Hite said is already happening on the limited-service side.

“We have 68% of hotels in the limited-service segment that have been able to remain profitable right now,” she said. “The 50% occupancy is certainly sort of a magic number. It seems like we have more limited-service hotels that are able to turn profitable around 40% occupancy. For full-service, it’s about 50% occupancy. But in certain parts of the U.S., it’s a very different story depending on where your hotel is. There are some hotels that while revenues are down, they are remaining profitable at this time.”

2020 revised forecasts
These factors have played into revised forecasts from STR, HVS and CBRE.

In its revised forecast for 2020, STR expects occupancy of 42.2% (down 36.1% from 2019), revenue per available room of $43.76 (-49.5%) and average daily rate of $103.65 (-21%). https://hotelnewsnow.com/Articles/305209/2020-US-forecast-upgraded-recovery-unlikely-until-2024

The chart below shows HVS and CBRE gave slightly lower projections for occupancy and average daily rate while HVS is projecting a slightly higher RevPAR number at $44.

(Source: STR, HVS and CBRE)

Hite said the beginning of 2021 is expected to be challenging for the industry.

“We’re anticipating the first half of 2021 will be where we expect to have potentially a vaccine, but control of the virus either through therapeutics or masks. (If) we are better at controlling the virus in the first half … the real pickup in business will happen in the second half,” she said.

STR expects some essential meetings and small- to medium-sized events to show up on the books in the second quarter of 2021.

“We’re forecasting 52.2% occupancy, better than where we’re going to end 2020,” she said.

Rushmore said HVS’s forecast for 2021 is similar. The industry is in “the eye of the hurricane” and halfway through the rough times, he said.

“The clarity that we have going forward in the future is a lot sharper,” he said. “I’m reasonably confident that the next six or seven months, it could be really tough for hotels, there’s no sugarcoating that. They just need to hold on tightly. But after that things will get significantly better and recover quite aggressively. Travel (will recover) quite quickly.”

The chart below shows full 2021 forecasts for STR, HVS and CBRE.

(Source: STR, HVS and CBRE)

No Comments

Comments that include blatant advertisements or links to products or company websites will be removed to avoid instances of spam. Also, comments that include profanity, lewdness, personal attacks, solicitations or advertising, or other similarly inappropriate or offensive comments or material will be removed from the site. You are fully responsible for the content you post. The opinions expressed in comments do not necessarily reflect the opinions of Hotel News Now or its parent company, STR and its affiliated companies. Please report any violations to our editorial staff.