The COVID-19 pandemic has been devastating to the U.S. and global economies. While some industries have managed to thrive, it is a very unequal recovery. The travel and tourism industry has been crushed, and on top of the questions for airlines and cruise lines, the hotel industry is continuing to face some daunting challenges at the same time the industry already was undergoing major competitive changes.
Data benchmarking group STR claims to have built the world’s largest hotel performance database, and it sees some continued pain lasting throughout 2020 and persistent weakness lasting much longer. While people are traveling again, the hotel industry is seeing far fewer business travelers and those who are traveling are spending less.
According to STR, the revenue per available room is expected to be down 52% for all of 2020. Similar to other travel industry data providers, its view is that hotel spending will not get back to pre-pandemic pricing until 2024.
This is not just a U.S. issue either. In Europe, STR noted more than a 70% drop in revenue per available room. STR sees only 72% of European cities having recovered to pre-pandemic levels of international visitors by 2024.
If these numbers do not sound ghastly, it’s a lack of understanding business history. STR revealed that the U.S. hotel industry experienced its lowest third-quarter occupancy level on record. The occupancy rate of 48.0% was down 32.2% from a year earlier, and the average daily rate of $101.25 was down 24.1%. As for U.S. revenue per available room, that was down 48.5% to $48.58.
One lingering issue, beyond extended lockdowns and reopenings, has been rise of Airbnb, Vrbo and other sharing accommodations. The industry was facing the same dire prospects as the hotel industry in the immediate aftermath of the pandemic, but the home sharing and short-term rentals recovered rapidly as people started traveling by car and wanted not to stay around several hundred strangers, sharing restaurants and elevators and so on.
Airbnb is expected to conduct an initial public offering soon, and travelers taking trips closer to their home is working rather well for the short-term home rental business. This remains a top IPO to watch in 2020.
Of the leading hotel chains by market cap, Marriott International Inc. (NYSE: MAR) stock is still down by more than one-third of its peak value, and Hyatt Hotels Corp. (NYSE: H) is still down 40% from its high. Hilton Worldwide Holdings Inc. (NYSE: HLT) is between the two in size, with a $24 billion market cap, and its shares down just under 20% from its pre-pandemic high.
What is obvious in the tourism industry is that a vaccine and a simple treatment for COVID-19 is needed. As for the hotels (and airlines and cruise lines for that matter), is that they have to hope a vaccine or cure arrives before consumers become overly used to being able to show up at a house and enter on demand without having to wait in a lobby with check-in lines, elevators and so on.