With revenue per available room down 47.5% for U.S. hotels, 2020 was empirically the most difficult and painful year ever recorded for hoteliers, according to STR data.
The final figures are in for the U.S. hotel industry’s 2020 performance, and as expected, they show the industry hitting record lows amid the coronavirus pandemic.
The latest data from STR, parent company of Hotel News Now and a division of CoStar Group, shows occupancy for the year fell 33.3% from 2019 to 44% overall. Average daily rate held comparatively stronger but still dropped 21.3% to $103.25, and revenue per available room dropped by nearly half, down 47.5% year over year to $45.48.
The figures for both occupancy and RevPAR mark all-time lows as the industry surpassed 1 billion unsold roomnights for the first time ever. The previous high-water mark for that grim statistic was 786 million unsold roomnights during the depths of the Great Recession in 2009.
“It was the single worst year in the 30-year history of STR,” said Jan Freitag, senior vice president of lodging insights at STR and national director for hospitality market analytics at CoStar.
The cause and effect for the uniquely bad year was clear, he said, noting that after the World Health Organization declared a global pandemic, RevPAR fell 80% year over year in April with “unprecedented room demand decreases and ADR deterioration.”
“The result were, if not better, less bad in the summer as travelers took to their cars and took road trips, but without the corporate business travelers and corporate meeting demand, the U.S. hotel industry had a very rough year with a rough year ahead,” he said
Mary Beth Cutshall, executive vice president and chief business development officer at Hospitality Ventures Management Group, expressed hopefulness that the next stages of the pandemic will be the final ones.
“We’re hopeful that when the COVID-19 vaccine scales, demand will come back, and [we] will see RevPAR dramatically improve,” she said. “People are ready to travel again.”
The STR outlook for 2021 boils down to continued weakness in the first half of the year followed by a projected bounce back in the second half of the year as more people are vaccinated and ready to once again hit the road, Freitag said. Whether 2021 is a good or bad year comes down to how one slice the numbers.
“2021 will be the best year ever in terms of RevPAR change,” he said. “The change will be off the charts, literally. Room demand numbers will still be very, very tough to swallow, but the change from last year will be very positive except for with ADR.”
He said rates are slated to claw back roughly 5% in 2021, which still leaves them well below 2019 levels.
Still, industry observers are hopeful for the year ahead, at least in comparison to the uniquely painful year just seen.
Michael Bellisario, director of equity research at Baird, said he’s glad the year is over, adding that “it can only get better from here.”
“Down 47.5% feels like a small win relative to the worst-case scenarios that were being thrown around at the depths of the pandemic,” he said.
Brent LeBlanc, executive vice president at Peachtree Hotel Group, agreed with others that a strong bounce back for the industry should start in the latter half of 2021, which will be driven by a strong desire for travelers to get back on the road and in the air.
“There is a huge pent-up demand for travel, and we believe leisure travel will begin to make a strong comeback later this summer as more and more people get vaccinated against COVID-19,” he said. “We predict this will be followed soon thereafter by business/group travel in the third/fourth quarter as conferences and in-person meetings eventually rebound, as well.”
Freitag said the pain of 2020 wasn’t felt uniformly across the hotel industry, with higher end hotels “hit disproportionately hard without corporate [and] group demand.”
The industry will feel the long-term effects of 2020 for some time, particularly in terms of supply growth, he said.
“In terms of the pipeline, the number of rooms in construction has been in decline since April, and it will continue to do so for the foreseeable future,” he said.
While final figures are yet to be released, STR projects the industry to turn no profit for full-year 2020.
Sloan Dean, CEO and president of Remington Hotels, said the pain of 2020 wasn’t felt equally in a geographic sense.
“The average is misleading,” he said. “Most all the public companies will be worse as they skew to upscale and above and top 25 markets. I would love to have seen the top 25 markets down only 47.5% in 2020, but they were much worse. 2021 is a new game.”
Mike Marshall, president and CEO of Marshall Hotels & Resorts, expressed a similar sentiment.
“I am very surprised that the number is only 47.5% as I know many markets that have been hit much harder than that,” he said, noting that looking at things market by market “may tell a different, albeit not better, story.”
In fact, there are markets among the top 25 that performed significantly better or worse than the national overall numbers. The Minneapolis/St. Paul market saw a 49.9% decline in occupancy for the year down to 33.3%, while Oahu Island, Hawaii, saw occupancy fall 53.7% to 39% while maintaining the highest ADR ($215.57), down just 10.5% year over year.
Compared to all markets, the top 25 had lower occupancy at 42.9% but a higher average rate at $114.09.
Copyright 2021 CoStar Realty Information, Inc. All rights reserved. From https://www.hotelnewsnow.com. By Sean McCracken.