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COVID-19

Are Hotels Recovering Six Months Into the COVID-19 Pandemic?

Are Hotels Recovering Six Months Into the COVID-19 Pandemic?
Joe Cortez

Six months into the COVID-19 pandemic, are hotels going to recover from a lack of guests? The good news is the entire sector is seeing growth. Budget and midscale hotels are driving occupancy trends, while luxury hotels may be struggling.

With travelers still weary about flying and staying at hotels in the midst of the COVID-19 pandemic, will hotels survive and ultimately recover? Hospitality consulting company STR suggests the situation inside the hotel industry is “less bad” after six months of the novel Coronavirus outbreak.

Closed Hotels are Re-Opening, But Travelers Aren’t Flying Yet

At the beginning of the pandemic, hotels were quick to close rooms as nations locked down to prevent the spread of Coronavirus. Some nations were affected more than others: According to STR data, China was quick to close around 20 percent of their hotel capacity, but slowly reopened them as they controlled the spread. The United Sates didn’t see its peak closures until April, when just shy of 20 percent of availability was taken off the market.

Still, that number is less than Spain, the United Kingdom, France, and Italy. With the European Commission slow to reopen borders to foreign travelers, room closures ranges between 15 and 40 percent for European nations.

STR tracked the recovery of hotels in different nations. While Europe trends behind, the United States and China are leading the openings. Graph source: STR, © 2020 CoStar Realty Information, Inc.

Although Europe’s slow and controlled re-opening puts them behind in total occupancy, the United States is starting to stall due to new outbreaks of the virus. As a nation, the United States never dropped below 20 percent total occupancy – but STR notes that is because “The U.S. never locked down as a country, and 50 different governors had 50 different ideas of what was best for their state and its citizens.”

Continued flares of COVID-19 outbreaks is causing occupancy in the United States to stall, while Europe’s controlled opening puts them far behind. Graph source: Source: STR, © 2020 CoStar Realty Information, Inc.

Much of the occupancy growth is not seen at luxury properties, but rather at budget and midscale hotels. In all regions, occupancy in lower-end hotels nearly double or more, when compared to luxury and upper upscale properties. STR believes this is a combination of a lack of business travel, and leisure travelers opting to take road trips instead of fly.

 

“On the one hand, the complete lack of corporate demand and group meetings has hit hotels in the upper-upscale and luxury classes the hardest,” Jan Freitag of STR writes. “On the other side, there are individual consumers, often in their own cars, driving to destinations where they can enjoy the great outdoors while maintaining social distancing.”

Hotels Offering More Promotions to Encourage Travelers to Stay

The data comes as hotels are actively offering promotions to re-welcome guests, ranging from status extensions to bonus point opportunities. Hilton Honors is extending status for guests up to the year 2022, while offering rollover nights on select stays. Meanwhile, Wyndham Rewards is lowering their elite status requirements in the hopes of attracting more guests.

View Comments (4)

4 Comments

  1. SamirD

    August 7, 2020 at 10:47 am

    As a veteran of the industry, I really don’t know how more than 50% of lodging properties worldwide will survive. The debt service in this industry is the biggest expense next to payroll, and without at least 50% occupancy to cover those expenses, you’re in the red in a big way. And you can’t do this for more than 6 months without defaulting on obligations. We sold our first and last property in 2015 and I guess we were lucky to have gotten out before all this or we would have surely perished. Good luck to those left out there–I truly feel for you.

  2. sdsearch

    August 9, 2020 at 4:49 pm

    I think there’s a reason budget and midscale hotels are getting more guests. Those hotels which typically had complimentary breakfast pre-Covid most have some sort of breakfast now, even though it may be greatly scaled back. In the same areas, many higher end hotels have close both their restaurants and the lounges and room service, so there is no food at at the hotel. Who wants to may more for a hotel with less food available?

    Now, it’s not clear how much of this is due to Covid itself and how much is due to budget cutting. But if higher end hotels continue to not serve any food at all, many of us will continue to stay away, and stay solely in budget and low midscale-hotels where there is at least some food, or in “extended stay” properties with “kitchens” where it’s possible to make your own food.

  3. rylan

    August 11, 2020 at 10:36 am

    You can blame Covid to a certain extend, but when upper-mid to high end hotels have significantly scaled back offerings and eliminated benefits for elites, it drives customers away to other brands where you aren’t paying a premium for service that no longer exists.

    Why book at a hotel that has an executive lounge that is closed and they offer nothing instead, when you can pay half the nightly rate at a mid to low-mid hotel and possibly even get more (packaged comp breakfast etc)

  4. c502cid

    August 12, 2020 at 8:39 pm

    I’ve been on the road the past 6 weeks. The mid to higher end hotels (think HGI and Doubletrees, even Hiltons themselves) have lower rates by far than the Hampton Inn’s. Same with Courtyard and Fairfields. It really is property dependent on what they have for elite offerings. Some still offer breakfast, it’s just not a buffet anymore. The Holiday Inn Express, Fairfield, and Hamptons offer at best a grab and go bag, a packaged muffin, and old apple, and if you are really living it up, a bottle of water. It’s been wildly inconsistent to say the least though.

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