The American Hotel and Lodging Association (AHLA) has released its view on COVID-19’s impact on the hotel industry, and the projected losses are nothing short of staggering. Hotels are not an insignificant part of the economy, with roughly a $660 billion contribution to gross domestic product and the millions of jobs that are tied directly and indirectly to the industry.
While this may sound obvious under a zero-travel scenario, the AHLA has said that the hotel industry is facing “an abrupt and unprecedented drop in hotel demand that is gaining pace and getting progressively deeper and more severe week by week.” The figure for the total number of jobs is nearly 2.3 million directly tied to the hotel industry and over 8.3 million when adding up the hotel employees and those who are tied to guest spending, the supply-chain and contractors. All in all, the AHLA expects that 44% of hotel employees around the nation are projected to be jobless in the coming weeks.
The COVID-19 wipeout also looks far worse than in past recessions. After the 9/11 terror attacks in 2001, some 400,000 jobs were lost and occupancy was 59%. During the 2007 to 2009 period, 470,000 jobs from the industry were lost and occupancy rates were 54%. The current occupancy expectation of 25% is forecast to see 2.8 million to 3.4 million jobs lost.
Based on current occupancy estimates looking at the immediate future, and trying to use historical employment impact rates, the AHLA indicates that a million direct jobs (and nearly 3.9 million total jobs) either have been eliminated or will be in the next few weeks. Since mid-February alone, hotels in the United States already have lost $2.4 billion in room revenue. These figures are rapidly changing, as hotels are expected to lose over $200 million in room revenue per day and over $1.4 billion every week. Most hotel operators are looking at revenue losses of more than 50% for the first half of 2020.
For further quantifying layoffs, the AHLA is indicating that major hotel managers already indicated that layoffs and furloughs are in many cases hitting 80% or more of their staff. Individual hotels and major operators now forecast occupancy rates coming in under 20% for the months ahead, and hotels may have to close their doors at an occupancy rate of 35% or lower.
It is not possible to imagine how many layoffs actually will be reported in this coming Thursday’s weekly jobless claims. Merrill Lynch had a forecast of 3 million for the week, and a prior figure from Goldman Sachs saw as much as 2.25 million jobless claims for the past week alone.