COVID-19 Devastating to Hotel Industry

In less than six months, the COVID-19 pandemic has dealt a devastating blow to the hotel and lodging industry according to a recent report (Aug.31, 2020) from the American Hotel & Lodging Assn (AHLA).

The report singles out five key issues now facing the hotel and lodging industry due to the pandemic:

Four in ten hotel employees still out of work. The AHLA reports that, at the peak of the pandemic, nine out of ten hotels had to lay off or furlough workers resulting in 7.5 million jobs lost. The re-opening of restaurants and bars has cut the layoff number to 4.3 million jobs, but the accommodations sector still has a 38% unemployment rate.

Nearly two-thirds (65%) remain at or below 50% occupancy.  According to the AHLA, 50% occupancy is the threshold at which most hotels can break even and pay debt. The trough of the pandemic’s effect occurred in April when occupancy fell to 24.5%. Despite a small recovery, “Thousands of hotels are at the risk of closure or are unable to re-hire staff due to continuing, drastically low occupancy rates,” according to the AHLA report.

Consumer travel at all-time low. The report shows that only 33% of Americans have traveled overnight for leisure or vacation since March, and only 38% said such leisure/vacation travel is in their plans before the end of 2020.

Urban hotels, the industry’s leading employers, face collapse. Crippling low occupancy rates have particularly hurt the urban hotels, which are major employers because of their size. With occupancy rates of 38%, the AHLA reports that jobs at urban hotels are unlikely to return without a drastic increase in occupancy. This might require action from Congress, according to AHLA.

COVID’s impact on hotel industry has produced a ripple effect. The sudden decline of the industry has not only jeopardized the future of hotels, but is also having a dangerous effect on local, state and federal tax revenues.

SFGATE, the San Francisco-based news website, in a September 17, 2020 article entitled “Hotels facing a painful wave of permanent closures” reported:

• The Omni Berkshire Place, a classic business hotel at Madison and 52nd St., has “permanently closed.”
• The 44-floor, 478-room Hilton Times Square, has also closed for good.
• The 1,600-room Palmer House in Chicago, operated by Hilton, has defaulted on its mortgage, closed since last spring and management does not know when it will reopen.
• Four Red Rock hotels in Las Vegas have closed.
• The new Virgin Hotel in San Francisco, opened in 2019, has closed.

The AHLA also reports that the metropolitan region with the greatest delinquency rate was Houston at 66.2%, followed by Chicago (53.8%), New York (38.7%), Seattle (36.1%), and Austin (35.7%).