Open for Business: Hotels Post-COVID-19

With the exception of retail, there is no commercial real estate sector that’s been harder hit by the effects of the COVID-19 pandemic than hospitality. Hotel owners and investors are reeling, facing occupancy rates that in some cases have dropped to zero as hotels around the nation shuttered, leisure and corporate travel came to a virtual halt due to shelter-in-place orders and group business evaporated—and is not expected to come back until at least the fourth quarter of 2020, experts say, when confidence returns to traveling conventioneers.

According to STR, a hospitality-industry data benchmarking and analytics firm based in Hendersonville, Tenn., the U.S. hotel industry reported significant year-over-year declines in three key performance metrics during the week ending April 25, 2020, the latest period for which data is available.

Compared to the same period a year prior, hotel occupancy dropped 62.2 percent, to 26.0 percent nationally. Average daily rate—the average income from paid, occupied rooms—was down 42.9 percent, to $73.61, and revenue per available room (RevPAR) declined 78.4 percent, to $19.13.

STR also reported on April 29 that U.S. hotel gross operating profit per available room (GOPPAR) plummeted in March 2020—by 101.7 percent—due to the virtual standstill of business travel and leisure activity.

Currently demand, when it exists for hotel rooms, is mostly attributable to frontline workers—doctors, nurses, first responders, construction workers—who prefer to stay in hotels rather than risk exposing their families to possible infection.

“Even in this challenging environment, some types of hotels are demonstrating a bit more durability,” said Skyler G. Cooper, national director of the hospitality division of Marcus & Millichap. “Compared to a national hotel occupancy rate in the low-20 percent band, lower service-level, extended-stay hotels are reporting an average occupancy of about 50 percent.”