Find out what it will take for U.S. hotels to make it through the coronavirus crisis.
The hotel industry has been among the hardest hit by COVID-19. Early on, U.S. hotels experienced severe economic impact because of lockdown orders. Even after they were lifted, many people still felt uncomfortable staying in hotel rooms, so business in the hospitality industry didn’t really pick up.
Vacations aren’t something most individuals and families are considering these days. Business travel is down, as well. This has resulted in a significant reduction in hotel bookings. That has left hotels lagging far behind their usual occupancy rates even as other industries are recovering from the impact of COVID-19. Because of this, the hospitality industry is on the brink of collapse.
According to a recent report about the state of the hotel industry from the American Hotel & Lodging Association (AHLA), when COVID-19 essentially shut down the economy earlier this year, the hotel industry was one of the first impacted. It’s now among the last to recover. This includes all parts of the sector, from industry leaders Hilton and Marriott to small operations.
Even as the latest news shows an uptick in travel in some parts of the United States, hotel bookings are not keeping up because many people are turning to alternate forms of lodging they consider safer. These include renting homes through Airbnb and camping.
The AHLA report, which reflects data from STR, Inc., a leading hotel industry data resource, highlights five issues the hospitality industry is dealing with today.
1. The hospitality industry is experiencing record unemployment.
According to the study, four out of five hotel employees has experienced a job loss during the last six months. At the height of the pandemic, nine out of ten hotels were forced to layoff or furlough workers. Overall, the leisure and hospitality industries lost 7.5 million jobs early in the pandemic. Despite some improvement, mostly because of restaurants and bars reopening, the sector is still down 4.3 million jobs when compared with pre-covid levels.
Today, the hotel industry is experiencing a 38 percent unemployment rate compared with the national average of just over ten percent. On top of this, hoteliers are worried that experienced workers could jump ship and find work in other fields. This could cause serious problems when the travel industry returns to normal and they need to staff up again.
2. Hotels and motels are experiencing low occupancy rates because of COVID-19
Currently, 65 percent of hotels remain at or below 50 percent occupancy levels. This is an increase over the historic low hotel occupancy rates of just under 25 percent many experienced earlier this year. However, the number of available rooms is too high for most hoteliers, which is making it hard for them to break even, much less pay off their debt.
This is leaving thousands of lodging establishments at risk of closing. For those that are able to stay open, reduced hotel demand and low occupancy rates are making it impossible for them to hire back their workers or deliver the quality pre-pandemic experience their guests had come to expect. This also doesn’t take into account the squeeze they’re experiencing because of the added expenses related to protecting employees and guests against coronavirus while being unable to raise average daily rates. In other words, their revenue per available room (revpar) is down because expenses are up and there is little they can do about it.
3. People are unwilling to travel due to COVID-19.
Only one third of people in the United States have travelled overnight for leisure since the start of the pandemic, which is a historic low. What’s worse, only 38 percent expect to do so before the end of the year. At the same time, business travel is down because companies don’t want to be held responsible for employees getting sick while traveling for business. Business travelers are unlikely to hit the road again until coronavirus pandemic fears are eased. Add to this the travel restrictions in place for international travel, travel in North America and between states. All this means the industry won’t be able to expect much in the way of improvement before 2021.
4. Urban hotels are doing worse than others.
Hotels in cities are typically among the country’s busiest and it’s biggest employers. However, they are currently performing worse than those in other areas, with occupancy rates of only 38 percent, on average.
The reason for this is because major cities like New York, Los Angeles and Atlanta have been particularly hard hit by the pandemic, keeping leisure travelers away. In addition, a lot of the core business for these properties, including conventions, trade shows and events, is currently on hold and will be for the foreseeable future.
Unless something about current travel patterns changes dramatically, which is unlikely, or Congress takes action to prop up the travel industry, which is possible, many of the urban hotels that make city life what it is could disappear.
5. Travel industry problems will become state and local revenue problems.
For many people, a hotel closing is just a hotel closing. A lost job is just another lost job. During a crisis period like today, it’s easy for statistics to start blending together and become meaningless.
The truth: Hotel taxes and the taxes lodging employees pay on their incomes have a major positive impact on the quality of life of communities. They help pay for things like schools, roads, parks, public transportation and more. On the reverse, unemployed hotel workers can become a drain on their communities because they collect unemployment and may need food, housing and other support. On top of this, a closed hotel could become an eye sore that has a negative impact on the quality of life of its local area.
Once tourism is shut off, the things that make a community a great place to live, such as museums, restaurants and music venues are negatively impacted, as well. It’s becomes a domino effect that can significantly harm the value of local real estate.
What tourism means to the U.S. economy.
The hospitality industry will play a central role in getting the United States and local economies back on track after the pandemic. It supports millions of jobs all over the country. The jobs also represent significant spending power and tax revenue.
A full recovery in the travel industry is dependent on a coronavirus vaccine and therapies, which could be months or years away. That’s why the American Hotel & Lodging Association believes Congressional action is urgently needed to keep hotels open, return employees to work and help the industry make it through the coronavirus crisis.
The AHLA and hospitality industry leaders are recommending that Congress extend the Paycheck Protection Program (PPP), the small business loan forgiveness program that expired back in August. The group is also proposing the establishment of a commercial mortgage backed securities market relief fund. They also recommend making changes to the Main Street Lending Program, a mid-sized business loan initiative, so more hotel companies can take advantage of it.
It’s critical that Congress act quickly because a slowdown in travel after the labor day weekend, during the typically less busy fall and winter months, could exacerbate the current crisis. This would have a ripple effect across the country. Bipartisan Congressional action now could help prevent a crisis it could take years to recover from. The AHLA is recommending that hoteliers call their congressional representatives or reach out to them via email and social media to get them to take action.