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Hotel Industry Damage Laid Bare

Despite some business-traveler optimism, the nearly year-long demand drought is pushing hotels closer to the edge.

A figure released this week from STR puts a concrete number to the hotel industry carnage in 2020: Overall room occupancy was just 44 percent, compared to 66 percent in 2019—a 33 percent decline. Further, the occupancy rate from groups fell 67 percent, to 7.4 percent of all room-nights.

Now, the American Hotel & Lodging Association’s 2021 State of the Industry cites Oxford Economics’ estimate that 2021 occupancy will come in at about 53 percent, and about 62 percent for 2022, though the figures will likely be lower for full-service properties in urban areas. The report points out that “while some full-service hotels begin breaking even [on operating costs] at 50 percent occupancy, this does not account for mortgage-service debt costs, leaving most hotels well below their true break-even point.” And from their workers’ perspective, hotel-industry unemployment is nearly triple the overall rate for the country: 19.8 percent versus 6.7 percent.

Among buyers, though, there is eagerness to get back on the road and also a bit of optimism. In the January 2021 AHLA survey, 42 percent of frequent business travelers said they are already comfortable staying in a hotel, while 52 percent say their comfort staying in a hotel is connected to vaccination. And among all respondents, 34 percent said they are comfortable staying in a hotel right now, while 48 percent said their comfort is tied to vaccinations in some way: 

  • 11 percent will feel comfortable when COVID-19 vaccines are widely available to the general public.
  • 20 percent will feel comfortable staying in a hotel again when a majority of Americans have received a COVID-19 vaccine.
  • 17 percent will feel comfortable when they are personally vaccinated.

Interestingly, hotels are vying for business right now as vaccination centers.

For this year, 51 percent of business travelers expect to travel more for business and 62 percent more for leisure compared to last year, though they still anticipate traveling significantly less for work in 2021 compared to normal years. About 24 percent expect to take zero trips for work; 14 percent say one trip; 25 percent expect two to three trips; 16 percent say four to six trips; and 21 percent anticipate seven or more work trips. 

By April, business travel is forecasted to grow slightly given the push for vaccination, as small and medium-sized events are held. But large shifts in business travel are not projected until vaccines are successfully administered nationwide and warm weather has returned. Specifically, AHLA finds that group demand won’t even reach 25 percent of its 2019 monthly level until at least May. 

For perspective, in late November, AHLA estimated that 71 percent of hotels would not survive six more months if travel did not increase and the federal government did not make more relief-loan money available, which it did. However, if the new, more-infectious variants of the coronavirus spike the infection rate and prevent travel from resuming, the universe of business hotels available to meeting and event planners in late 2021 and beyond could be significantly smaller than what they remember.

You can read the full AHLA report here.

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