China, Italy KPIs portend tough times for US hotels
China, Italy KPIs portend tough times for US hotels
19 MARCH 2020 8:51 AM

China's hotels, first to hit single-digit occupancy, show signs of beginning a slight upswing, as Italy’s hotel market has now all but bottomed out, and for the U.S., troubles are just beginning, data suggests.

HENDERSONVILLE, Tennessee—The COVID-19 impact is now clearly visible in U.S. hotel performance metrics. For the week ending 14 March, revenue per available room declined 32.5%. It is fair to assume that this is the beginning of a long slide in demand and RevPAR as Americans practice social distancing and stay off the road.

Since the hotel performance impact has been visible longer in other countries around the world, STR can now overlay occupancy results for those markets to understand what might happen in the U.S. We chose China and Italy as base cases since in those countries lockdowns were in effect, decreasing travel demand to almost zero. (STR is the parent company of Hotel News Now.)

In our normal charting, we align data sets by time to understand change in the same performance metric over the same period but in a different location. For this analysis, we changed methodology to align the KPIs to see similar patterns over distinct timelines. This allows us to understand trajectories and, more importantly, to see a possible trajectory of U.S. occupancy in the future.

Aligning occupancies, regardless of time, gives us this chart (as of 14 March):

A couple of things stand out:

  • Lockdowns caused occupancies to plummet to single digits in rapid order.
  • Italy hit single-digit occupancy this week.
  • China occupancy is now back to 18% after a period in single digits—mathematically a 100% growth rate from the low of 9%, which we interpret as a slightly positive sign.
  • The pre-COVID-19 weekly occupancy high in China was recorded on 11 January; for the U.S., it was 29 February. The difference is roughly seven weeks, but because we report data for the end of the week, it is fair to add the prior full week to the period, meaning that the China data seems to lead the U.S. data by eight weeks.
  • Because there is no official lockdown in the U.S., hotel occupancy seems to have not dropped as sharply or as quickly. This implies, of course, that people are still traveling and are not practicing the World Health Organization and Centers for Disease Control guidelines on social distancing to slow the spread of COVID-19.

The implications are clear: Chinese occupancy data is now on the upswing precisely because the spread was slowed in the early days through lockdown. The lack of a sharp decline in the U.S. implies that, while people are still traveling and ergo cases will continue to rise, the U.S. occupancy recovery will take much longer.

We will continue to monitor other country data to see which lessons we can learn and which trends seem to be applicable to the U.S. data.

*Full credit for the idea for this chart to CBRE’s Jamie Lane.

Jan Freitag is the SVP of lodging insights at STR.

This article represents an interpretation of data collected by STR, parent company of HNN. Please feel free to comment or contact an editor with any questions or concerns.

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