Source: Hotel News Now
By Jan Freitag
July 30, 2020
HENDERSONVILLE, Tennessee—COVID-19 cases are surging and the full impact on the U.S. hotel industry has yet to materialize.
Of course, we saw the full impact of the threat of the virus in STR’s April data. Now the reality of new cases is here and will likely play out in our data going forward. (STR is the parent company of Hotel News Now.)
- RevPAR decline takes the bronze
June revenue per available room declined 60.6%, the third-steepest decline ever. The only positive about that number is that it is not an 80% decrease, as we had reported in April, or May’s 71% decline. We have basically reported that RevPAR change is getting 10 percentage points better month over month.
July will also be better because the Fourth of July comparison was helpful, and the first two weeks of RevPAR change are better than a 60% decline.
- Stock market performance continues to surprise
If you had invested in Baird/STR Hotel Stock Index companies in January, your portfolio would have been worth 35% less as of 16 July.
Timing is, indeed, everything. Watch for further stock market gyrations, especially on the hotel and cruise front, as news of possible vaccines emerge. The reasoning goes that with a vaccine, corporate travelers will be more inclined to go to group meetings, helping the large owners (REITs) and hence the large parent companies (C-corps) that collect the franchise fees.
- International travel is kaput
The U.S. used to welcome between 2 million and 3 million foreign visitors per month, and in May that number was under 40,000.
As the number of COVID-19 cases surges, it is not unreasonable to assume that foreign leisure travelers will stay away, and foreign corporate demand dries up completely. This is going to hurt coastal markets and the larger metros disproportionally. Adam Sacks from Tourism Economics makes the point that since U.S. travelers will not be going overseas, there is an actually a possible net positive effect: When you take all 2019 outbound vs. all inbound travelers, there were more outbound trips, and if all those stay in the U.S., that could be a net positive.
- Class data
The lower-rated properties continue to outperform full-service hotels, and economy-class hotels actually filled over half their rooms for the month. Given these very low occupancies, there is no compression—and no pricing power—and therefore the ADR and RevPAR declines are steepest at the upper end and will be for a while.