Inside weekly US data: Looking at comparisons, classes
Inside weekly US data: Looking at comparisons, classes
20 MARCH 2020 8:55 AM

Compared to China and Italy, weekly performance data indicates that the U.S. may have a longer road to recovery as occupancy levels aren’t deteriorating at the same rate as other countries when COVID-19 broke out and lockdowns were imposed.

HENDERSONVILLE, Tennessee—Hotel performance across the board in the U.S. and Canada isn’t deteriorating as sharply as other countries have amid the COVID-19 outbreak, but the story in China and Italy may signal what’s to come.

During a webinar on Thursday hosted by STR, parent company of HNN, which highlighted performance data for the week ending 14 March in the U.S. and Canada, SVP of lodging insights Jan Freitag said China’s occupancy levels seem to be eight weeks ahead of occupancy in the U.S., which can be seen in the graph below.

Source: STR, © 2020 CoStar Realty Information, Inc.

“What we are doing here is looking at occupancy and when did a certain market hit a certain occupancy level,” he said.

For the week of 7 March, U.S. occupancy was “pretty high, basically almost around as high as it was for China in the week ending 18 January, implying that the Chinese occupancy deceleration may be eight weeks ahead of us,” he said.

Back when China and Italy went into mandatory lockdowns, hotel occupancies deteriorated remarkably. As of the week ending 14 March, Italy’s occupancy reached single digits (9%). During that same week, China’s occupancy actually grew, he said. China began its lockdown about two months ago while Italy began its lockdown one month ago.

“Mathematically, (China’s occupancy) has grown by 100%. It went from 9% to 18%,” Freitag said. “Still, only one in five rooms are occupied in Greater China, but the point of this is to say maybe we can get through this,” as hotels and restaurants are slowly getting back to a little bit of normalcy in China.

The U.S., however, is beginning to paint a more troubling picture as far as recovery, Freitag said.

“When you look at the United States’ occupancy, ending the week 14 March, I find this troubling,” he said. “From a hotel perspective, it is of course good to see that the occupancies are not deteriorating as quickly, but I want to point out that fuller hotels means that a lot of people do not heed the strong suggestions from the (Centers for Disease Control and Prevention) (and) from the (World Health Organization) to stay home and practice social distancing.”

In a year-over-year comparison, the U.S. industry saw occupancy drop 24.4% to 53% during 8-14 March. During the prior week, occupancy dropped only 7.3% to 61.8%.

Freitag noted the fact that occupancies in the U.S. aren’t dropping as sharply as the other countries implies the U.S. will have a much longer recovery ahead since the U.S. is not on lockdown.

Fourteen of the top 25 U.S. markets recorded absolute occupancies below 55%, with Tampa-St. Petersburg, Florida, as an outlier, recording about 75% occupancy, because of spring breakers not staying home, he said.

Freitag said he anticipates that number will soon deteriorate, “but it is sad to say that people don’t heed the advice of the CDC and that this high occupancy means that likely the virus continues to spread.”

Class performance
Large, meetings-focused hotels suffered the most in terms of revenue-per-available-room percent change for the week ending 14 March as groups canceled and new ones aren’t being added to the books, Freitag said, but steep declines in RevPAR are seen across the segments from luxury to economy.

Transient RevPAR declined 35.5% and ADR dropped 5.6% while group RevPAR dropped 58.3% and ADR fell 4%, he said. The group ADR decline is not as bad as on the transient side because group rooms were negotiated two to four quarters ago, so the room rate that “materialized last week was set in stone and put in a contract six months ago, a year ago.”

Freitag said he fully expects group ADR will follow the same trajectory on the transient side and will deteriorate further.

Looking at the top 25 U.S. markets, Seattle saw more than a 90% decline in group RevPAR change versus transient RevPAR change for the week ending 14 March, followed by San Francisco at an almost 90% drop and Houston at nearly an 80% decline. Transient RevPAR percent change is also “falling off the cliff,” he said.

Source: STR, © 2020 CoStar Realty Information, Inc.

Canada performance
Freitag said Canada’s story isn’t much different from the U.S. right now. Total RevPAR in Canada declined 26.4% for the week ending 14 March. The U.S. saw a total RevPAR decline of 32.5% during that same week.

Canada’s major markets saw a sharp RevPAR decline in the high 20% to low 30%, with Ottawa as an exception, which only decreased 4.2%. Occupancy in most of the markets is firmly below 50%, he said.

Class performance in Canada mostly mirrors that of the U.S., he said. Larger, higher-end properties with more meeting space saw significant deterioration of RevPAR for the week ending 14 March.

Click here for all STR data, webinars and presentations focused on COVID-19.

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