Hotels Start A Road To Recovery That Could Last Until 2024
Hotel occupancies and revenues are at unprecedented crisis levels, but there are signs that what is sure to be a long, painful recovery is starting to begin.
The week ending May 2 saw national hotel occupancy drop by 58.5% to 28.6% year-over-year, according to hotel data tracker STR. Average daily room rate dropped by 44% to $74. Revenue per available room, known as RevPAR, is down to an average of $21, a nearly 77% drop. But those numbers are all improvements over a month earlier.
“Week-to-week comparisons showed a third consecutive increase in room demand, which provides further hope that early April was the performance bottom,” STR Senior Vice President Jan Freitag said. “TSA checkpoint numbers, up for the second week in a row, aligned with this rise in hotel guest activity, which still remains incredibly low in the big picture. Overall, these last few weeks can be filed under the ‘less bad’ category.”
Recovery for hotels should start next year and gradually improve until the industry returns to full strength in 2024, HVS President Stephen Rushmore said.
“No matter how far things go down in the next 12 months, we anticipate a bouncing back,” said Rushmore, whose firm is one of the country's largest hospitality consulting services.
Rushmore spoke on Bisnow's The Path Forward For Hotels webinar, which included Peachtree Hotel Group CEO Greg Friedman, Best Western Hotels & Resorts Chief Development Officer Brad LeBlanc and Aimbridge Hospitality Chief Development Officer Greg O'Stean.
“We look at this in a very optimistic way. We see this as a temporary problem,” LeBlanc said. “I look forward to the day I can get back on an airplane. And that's the human spirit. We want to move on, we want to get going.”
Panelists said they still expect the next few months to be difficult for hotel operators, and that may last until the medical community finds a vaccine.
“This is all over when there's a vaccine that we have confidence in,” Rushmore said. “While we can't really have much credible forecasting between now and that time, we are pretty confident in how the recovery will look post-vaccine deployment.”
While the sudden recession has yet to create outright distressed buying opportunities, Friedman said he expects it will only be a matter of time. Friedman said his firm is expecting to purchase hotels for up to 40% less than their pre-pandemic value.
“We are going through a reset of what the new occupancy and ADR is going to be for the next 12 to 24 months,” he said. “We are looking to buy assets right now.”
LeBlanc said hotels in the hearts of major cities may actually bounce back first — he doesn't think the pandemic will kill the urbanization movement that took hold during the past decade, especially since those regions have been the nexus of job and population growth.
“My gut tells me to watch out for the core city centers,” LeBlanc said. “I think you'll see the hotels performing quite well, quite quickly.”