HotelAVE data predicted a five-year recovery to 2019 levels of occupancy, revenue and profitability. HVS’ “The Impact of COVID-19 on Hotel Values” puts EBITDA recovery between 2024 and 2025. The pace of recovery shifts into a different gear depending on whom you ask. With many countries starting to ease restrictions throughout May, though, it’s time for an update.
The next 12 to 18 months could see occupancy returning to pre-COVID levels. Or not. Good news first: STR’s research may point to a shorter path than seemed viable in March. While the week ended May 2 showed the third week of consecutive gains in occupancy, the U.S. average was still just 28.6%. But as Jan Freitag, STR’s senior vice president of lodging insights, said in the release, TSA checkpoint numbers were also up for the second week in a row, and STR research shows occupancy in China hit 50% over its early May Labor Day holiday.
Not everyone is that much of an optimist. “Occupancy troughed in February at 10%,” said C. Patrick Scholes, managing director, lodging, leisure and gaming equity research, SunTrust Robinson Humphrey. “As of March, the good news was that it was improving; the bad news was that it was 30%.”
He’s not holding his breath. “We won’t see normal occupancy until 2022.”
Andrea Kracht, owner of Zurich’s Baur au Lac and chairman of The Leading Hotels of the World, takes a less optimistic view, citing occupancy projections in the 15% to 20% range for the next few months. From his perspective, 20% to 30% looks like a best-case scenario.
Paul Slattery, director of consultancy Otus & Co., takes a bearish view on the U.K. market. “We’re not just going to be recovering from COVID-19, but from Brexit as well,” he said. “That won’t be a walk in the park.”
And international resort destinations without domestic demand, such as Cyprus and Malta, will also struggle even as the rest of Europe cautiously opens up, he said (Ireland has banned gatherings of over 5,000 until September; Germany’s mass-gathering ban holds until October 24, for example).
What will happen to rate?
Rate is one obvious elephant in the room. “The movement on ADR unfortunately is going south and hasn’t bottomed out [as of March],” said Douglas Dreher, president and CEO, The Hotel Group, which owns, manages and invests in hotels. “We’ve had local corporate accounts, airline crews and the like reaching out for reduced rates and sadly as we’ve seen before, hotels in down cycles often manage revenue to the lowest common denominator.”
Sloan Dean, president and CEO, Remington Hotels, sees rate cuts across sectors as inevitable. Like Dreher, he’s had corporate accounts asking for discounts — and given them. Dreher sees better revenue management as a key takeaway from the pandemic. Dean is taking this time to focus on cost control.
Ask Homi Vazifdar, CEO of Canyon Equity, about the impact of COVID-19 on rate and you’ll get a different perspective. “The pandemic will have minimal to no rate impact in the ultra-luxury segment,” he said.
Not so fast, says Ali Kasikci, founder and CEO, Bentley Management. “People says luxury is less affected because people have more money, but a dollar is a dollar, and the wealthy will still be affected,” he said.