Most Hotel Markets Are Still in a Recession or Depression
With events and group meetings not yet recovered from the pandemic, urban hotels were down 52% in room revenue in May.
While the economy is rapidly recovering from the COVID shutdowns, 21 of the top 25 US hotel markets remain mired in a depression or recession, according to a report from the American Hotel & Lodging Association.
While urban hotels are still in a depression cycle, the overall US hotel industry is in a recession. With events and group meetings not yet recovered from the pandemic, urban hotels were down 52% in room revenue in May compared to May 2019. Moreover, AHLA says business travel is not expected to return to 2019 levels until at least 2023 or 2024. Major events, conventions, and business meetings have already been canceled or postponed until at least 2022.
As an example of a market in a depression, AHLA points to New York City, where nearly 200 hotels have closed. In the process, one-third of hotel rooms (42,030 rooms) were wiped out by the COVID-19 pandemic.
However, in the dollar of revenue per room available metric, New York City has suffered the fourth most significant decline at -62%. San Francisco suffered the largest drop at -70%, followed by Boston -67% and New York -65%.
Despite problems with business and group travel (the most significant revenue driver in hospitality), the recent uptick in leisure travel for summer is encouraging for the hotel industry.
“While some industries are starting to rebound as COVID-19 restrictions ease across the country, the U.S. hotel industry is still in a recession, with the hardest-hit markets in a depression,” said Chip Rogers, president and CEO of AHLA, in a prepared statement. “While many other hard-hit industries have received targeted federal relief, the hotel industry has not.”
Rogers is calling on Congress to pass the bipartisan Save Hotel Jobs Act to help in the hardest-hit regions, especially urban markets, retain and rehire employees until travel demand, especially business travel, comes back to pre-pandemic levels. AFLA says hotels are the only segment of the hospitality and leisure industry yet to receive direct aid despite being among the hardest hit.
As AHLA asks for help, distress funds, like ones from Trinity Fund Advisors and Certares Management and Knighthead Capital Management are searching for opportunities.
Indeed, hotels are one of the few asset classes where pandemic-led bargains can be found. Last week, Lockwood Development Partners bought a portfolio of nine hospitality properties across eight states, amassing 1,550,000 square feet with a total value of approximately $225 million. Lockwood plans to reposition the properties, which have struggled during the pandemic.