‘It’s A Complete Bloodbath’: D.C. Hotel Industry Suffers Unprecedented Damage
Hotel owners in D.C. have never experienced a crisis as severe as the one they face today.
With the coronavirus pandemic causing event cancellations and grinding tourism and business travel to a halt, D.C hotel owners have experienced a dramatic drop in revenue. The lack of revenue has led owners to lay off staff and consider temporary closures, and owners say they don't know if they will survive without significant help from the government.
"It's a complete bloodbath," said Foxhall Partners Managing Partner Matt Wexler, whose company owns multiple D.C. hotels. "It's beyond ugly. There is zero demand. The entire economy has come to a standstill."
The most recent hotel data for the D.C. Metro area shows it experienced roughly 50% occupancy during the week of March 8 to March 14, a 33% drop from the prior year, according to hospitality research firm STR. D.C. Chief Financial Officer Jeffrey DeWitt said at a D.C. Council hearing Tuesday that hotel occupancy in the District during the week of March 8 was around 40%, and that the industry expects it to drop below 20%.
Donohoe Hospitality President Thomas Penny, whose company owns a portfolio of hotels throughout the region, said he has seen business drop by 75% to 90%. He called it the worst crisis he has seen during his career, and he said the company has been forced to lay off a significant percentage of its staff.
"All of us in the business don't have enough hours to support the team we normally would have," Penny said. "There is not a hotel team in the city or the region that is staffed at the same level it was before this crisis."
The crisis comes at a particularly bad time for the District, Penny said. The period from March to May tends to be one of the city's busiest for hotel demand, with attractions like the National Cherry Blossom Festival, and with Congress still in session and drawing visitors before its summer recess.
"There is a convergence of different demands upon D.C. from March to May," Penny said. "These are three of the four busiest months of the year for the region."
D.C.'s hotel industry is also particularly vulnerable because of the surge in supply it has experienced over the last several years, Penny said, with developers adding thousands of new rooms to the market. This supply surge had caused the market to experience stagnant revenue and rates before the crisis began. Now, it could make it more difficult to recover.
"That creates challenges as we look to ramp back up, because there are more hotels to support," Penny said.
Frontier Development & Hospitality founder Evens Charles said the loss in revenue during the crisis has led him to lay off about 75% of his staff. He said he is letting many hourly employees go and having salaried staff, such as general managers, work shifts such as the front desk, cleaning and laundry.
"We're laying off a significant amount of people," Charles said. "We're trying to figure out what does it look like to be bare bones."
The occupancy at Frontier's hotels, which are largely in the suburbs, is around 25% to 30%, Charles said. He said they have been able to capture specific pockets of demand including airline employees at its hotel near Baltimore/Washington International Thurgood Marshall Airport and displaced residents at an extended stay hotel in Largo, Maryland.
There has also been some demand from the military and from first responders, Charles said. But he is evaluating the financial performance of each hotel and is considering temporary closures.
"If occupancy is low enough, it may better to be closed," Charles said.
The Hay-Adams Hotel announced last week it would close until at least May 1, Washingtonian reported. The Trump International Hotel on Pennsylvania Avenue has about 5% occupancy and roughly 95% of its staff are not working, the New York Times reported Friday.
Two major hospitality properties in the Maryland suburbs have closed temporary and begun to institute mass layoffs. The MGM National Harbor filed a notice Wednesday that it was laying off 85 people after Gov. Larry Hogan mandated the closure of casinos.
The Hotel at UMD in College Park announced Wednesday it would close temporarily, and Thursday it filed a notice that it is laying off 150 people. A spokesperson said it is still working on ways to support its staff and the notice was a proactive measure to ensure laid off employees can file for unemployment.
"The hospitality industry in the region is going through a very bad time," Prince George's County Economic Development Corp. CEO David Iannucci said. "It has an effect on our regional economy that is going to be very painful. [Hospitality] is an important part of our economy. The job losses are particularly painful."
Monday, Hogan announced the temporary closure of all nonessential businesses, but the lodging industry was included as an an essential one that can remain open, WAMU reported.
Montgomery County Economic Development Corp. CEO Ben Wu said he hopes to keep hotels open so they can support medical personnel. He said he has received requests from healthcare providers for the county to work with hotels to house members of their staff.
"We’ve been asked to see if we could help align our hotel industry to help the hospitals by providing rooms so that their healthcare workers, the frontline folks, might be able to stay at a hotel instead of driving long distances," Wu said. "We’re working with the hospitality industry on that. Right now there aren’t any tourists so there isn’t much need for the average hotel. They’re really hurting."
Bethesda-based Marriott International, the world's largest hotel company, has furloughed thousands of employees as it looks to cut costs and navigate its way through the crisis. Marriott CEO Arne Sorenson said on an investor call last week that hundreds of hotels are either closing or considering closing.
Sorenson was one of several hotel CEOs and industry leaders who met with White House officials last week to discuss recovery solutions, according to the American Hotel & Lodging Association. Hotel owners and local officials agree that a major federal government stimulus is needed to keep the hospitality industry alive.
The Senate failed to move forward Sunday with a proposed stimulus bill as members of Congress continue to debate the details of a package that would inject more than $1 trillion into the U.S. economy. AHLA said in a notice to members on its website that it supports the bill that was considered Sunday but wants to see three major changes: allow furloughed workers to access unemployment insurance, offer tax credits to employers who maintain health insurance benefits for furloughed employees and expand instant access to Small Business Administration lending programs.
“The impact to our industry is already more severe than anything we’ve seen before, including September 11th and the great recession of 2008 combined,” AHLA President and CEO Chip Rogers said in a release. “The White House and Congress can take urgent action to protect countless jobs, provide relief to our dedicated and hardworking employees, and ensure that our small business operators and franchise owners — who represent more than half of hotels in the country — can keep their doors open.”