Hotels are hoping for an upswing in travel and want you to know your experience will be safer, and cleaner, during the coronavirus pandemic.
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The hotel industry, like all others in the travel space, is facing an unprecedented crisis like never before – a truth that’s starting to show teeth as companies release financial reports for the first quarter. But there are signs of hope that the industry will recover quicker than its chief peers, airlines and cruise lines.
“I feel spectacularly good about the long-term for the industry,” Hilton CEO Christopher Nassetta said on a conference call with analysts after the release of its first-quarter earnings. He said, however, that the industry needs time to rebuild, and that a full recovery could take several years to return to hotel demand levels seen in 2019.
Based on prior economic recoveries, with some nuance, he sees a return to leisure, business then meeting travel as the pattern that will take place as the crisis fades.
Hilton CEO: ‘Travel at a virtual standstill’
Nassetta said that travel demand is at record lows, and operations are currently suspended at approximately 950, or 16%, of hotels around the world. This is about 10% of hotels in the Americas, 60% in Europe, the Middle East and Africa and 15% of hotels in the Asia-Pacific region.
During the first quarter, revenue per available room fell 23%. In March alone, this figure dipped 57% as the virus spread across Europe and the U.S.
“Overall, we do not think our first-quarter results provide clear insight into the current environment,” Nassetta said. Translation: It’s not going to be a pretty second quarter.
“With travel at a virtual standstill, we expect systemwide revPAR (revenue per available room) decline roughly 90% in April,” Nassetta said.
That said, travel is beginning to resume and economies are reopening. In China, nearly all 150 hotels that have been closed due to the pandemic have since reopened. Occupancies reached more than 50% during the May Day holiday this past weekend, up significantly from 9% in early February.
The U.S. and Europe are preparing sensible and staged reopenings. Temporary hotel suspensions have plateaued, Nassetta said, and reopening requests are coming in. Hilton is also seeing double-digit increases in digital traffic and booking activity across all its segments, and global occupancy levels have gone from a low point of 13% to 23%.
Going forward, HIlton is trying to work closely with its ownership community to define a hotel operating model of the future that keeps customers safe and drives profitability while continuing to deliver services that customers will pay premiums for.
HIlton has relaxed brand standards in the interim during the crisis but Nassetta said customers staying in hotels, like frontline workers, have been OK with a temporary suspension of these perks.
“I do think Q2 is going to be very bad,” he warned. The third and fourth quarters will seem like a decent snapback, but he clarified, “I don’t want to be Polly Anna-ish.” Getting back to levels of occupancy like in 2019, which were in the low to mid 70-percentage points, will take time.
As people start to feel like their environment is safe, they are going to go back largely to their old behaviors. “I would bet a lot of money on it, and that’s what history would tell you.”
‘Airlines are way behind,’ Hilton CEO says
While hotels may be seeing a slight pickup, air travel is far from a recovery.
“I think the airlines are way behind,” Nassetta said. “Those that are willing to travel are only willing to go so far from home.”
He said this aligns with a natural human reaction to a time like this. First, you go out to your neighborhood, then throughout your region, thae across the country, then around the world.
“We will likely show, I think, recovery at a faster pace because we can accommodate types of demand that don’t require air travel,” Nassetta said. But, he noted, “Ultimately, we need the airlines. We need people to get on planes to get to the nirvana which is back to more normal patterns of demand.”
He anticipates demand for air travel will pick up this summer.
IHG sees ‘historic lows’ for occupancy levels, though hints at US resilience
InterContinental Hotels Group, whose properties include Intercontinental, Holiday Inn and Kimpton, saw “historic lows” for occupancy levels in March and April as social distancing and travel restrictions took hold around the globe. Revenue per available room in the first quarter dipped 25%, with a 55% dip in March alone. April is expected to be down about 80%.
However, in the U.S., its 3,750 mainstream franchisees saw a smaller revenue per available room decline than the rest of the industry. At the end of April, roughly 90% of these hotels were open.
“Our business is also weighted towards non-urban markets that are less reliant on international inbound travel and large group meetings and events, which provides a level of resilience during this difficult period,” Keith Barr, CEO of IHG , said in a statement.
What hotel occupancy looks like in the US right now
Hotel occupancy is down more than 58% year-over-year, standing at about 29% the week of April 26 to May 2, according to data firm STR. This is higher than previous weeks, but still remains a large decline.
Occupancy has climbed steadily since the week of April 5 to 11, when it stood at 21%.
“Week-to-week comparisons showed a third consecutive increase in room demand, which provides further hope that early April was the performance bottom,” Jan Freitag, STR’s senior VP of lodging insights, said in a statement.
“At the same time, this past week was the first to show solid evidence of leisure demand as weekend occupancy grew in states that have significantly eased mitigation efforts,” Freitag said. “As we have noted throughout the pandemic, the leisure segment will be the first to show a demand bounce-back. In weeks prior, the more reasonable conclusion was that hotels were selling mostly to essential worker types.”
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Source : USAToday
