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Worrisome Hotel Stats Add to Coronavirus Woes

NYC hotel occupancy could drop to 20 percent -- an unprecedented figure for the city

The hotel market took a dive in mid-March, according to industry data source STR. Some hotel executives now say that it could take years for the industry to rebound both nationally and in dense, elite coastal markets such as New York City and Los Angeles.

Data from hospitality tracking firm STR shows that New York hotel room rates fell to an average of $188.59 for the week ended March 7 — an 8.3 percent drop from the same week a year ago. Occupancy rates fell to 72.1 percent — a 13.1 percent decline from the year before.

The figures are all the more stunning since they issue from the first week in March, which as before federal, state and local officials announced several severe actions to contain the novel coronavirus and COVID-19, the disease it causes.

The 72.1 percent occupancy rate compares to New York City’s average hotel occupancy rate in 2019 of 86.2 percent. STR will soon release performance data from the week ending March 14 showing steeper declines, according to Jan Freitag, its Senior VP of Lodging Insights. He noted that impacts from efforts to combat the coronavirus will be getting worse before they get better.

The first week in March, he says, will merely be the first of several evincing double-digit revenue declines. What will be keeping people out of hotels? For starters, he says, widespread declines in conferences and meetings, along with the chilling impact of social distancing measures, whether mandated by the authorities or self-imposed.

Rates will clearly decrease. And so the damage to the industry, especially in New York, could be long-lasting. It will be hard for it to recover rapidly there and in most parts of the country since, says Freitag, it takes nearly twice as long to raise rates as to cut them. Yet, some in the industry are counting on the coronavirus to plague the industry with no more than a year-and-a-half or two-year return-to-normal period, especially in the coastal urban areas.

Some analysts believe most hotels in the city would be closed “within a month,” mostly as a defensive move to try to cut the costs of staffing and operations.

In step with many other jurisdictions around the U.S., New York Gov. Andrew Cuomo ordered schools in the city to be shuttered for the month of March. And New York City Mayor Bill de Blasio an executive order that will close restaurants, bars, cafés, nightclubs. As is well known, such businesses contribute significant revenue streams to those hotels operating them. As well, Monday morning, New York City Comptroller Scott Stringer released a slate of dark projections that attempt to delineate the blow the virus could deal the city’s greater economy.

Among Stringer’s predictions, hotel occupancy could drop to 20 percent — an unprecedented figure for the city. Stringer also suggested that severely decreased hotel occupancy levels could persist through the end of 2020. Indeed, they may not recover fully until the first quarter of 2021.  

“The question over the last several weeks was not if, but when, the impact would hit,” says Freitag. “As in so many parts of the world, concerns around the coronavirus outbreak have hit U.S. hotel occupancy hard. It’s not a surprise given the amount of event-related news we have seen, but group cancellations were felt across the markets and classes in addition to consistent declines in the transient segment. ADR (average daily rate) is starting to decline as well — quite rapidly in the case of, for example, an elite coastal city like San Francisco. This is quite likely the beginning of a bad run that will, again, get worse before it gets better.”

Overall, 23 of the Top 25 Markets registered a weekly RevPAR decline, with the steepest being San Francisco/San Mateo, California ( down 45.5 percent to $134.26), due largely to the largest decline in ADR (down 30.4 percent to $212.61).

Anaheim/Santa Ana, California, experienced the largest drop in occupancy (down 27.3 percent to 59.6 percent) and the second-largest decreases in ADR (down19.9 percent to $155.14) and RevPAR (down 41.8 percent to $92.42).

Seattle, Washington, saw the second-steepest decrease in occupancy (down 26.4 percent to 52.3 percent), which pushed the third-largest drop in RevPAR (down 34.8 percent to $67.94).

Two markets saw occupancy growth for the week: Detroit, Michigan (up 1.9 percent to 62.2 percent), and Nashville, Tennessee (up 1.8 percent to 75.8 percent).  

Two markets reported ADR increases: Oahu Island, Hawaii (up 1.7 percent to $223.05), and Norfolk/Virginia Beach, Virginia (up 1.3 percent to $85.46).