Booking.com plans for layoffs after landing US$4B loan
In an internal memo, the OTA Booking.com has told employees that layoffs from the company are “probable,” just days after it was reported that the company had received a US$4 billion loan in bonds from investors to fend off effects caused by the coronavirus crisis. One of Booking.com’s key competitors, Expedia Group, has already been forced to make 3,000 employees redundant (approximately 12% of its workforce).
U.S. construction pipeline highest ever
The U.S. hotel industry recorded 214,704 rooms under construction in March, the highest end-of-month total ever reported by STR. The industry’s previous construction peak occurred in December 2007 with 211,694 hotel rooms in construction. That level was slightly surpassed in February 2020 at 211,859 rooms in the final phase of the development pipeline.
“The number of rooms in construction will likely remain high, just as it did during the pre-recession peak,” said Jan Freitag, STR’s senior vice president of lodging insights. “Because of the coronavirus pandemic, the industry is no longer operating in a record-setting demand environment, so there isn’t the same rush to open hotels and tap into that business. In addition to a lack of guests awaiting new hotels, there are also limitations around building materials and potential labor limitations from social distancing. With all of that considered, projects are likely to remain under construction for a longer period.”
Florida REIT’s sale of Austin hotel falls apart
Florida-based REIT Xenia Hotels & Resorts pending sale of the Renaissance Austin Hotel in Texas was terminated after the transaction didn’t close by the extended closing date of April 16. Xenia retains the US$2 million deposit previously released from escrow. Since the start of the COVID-19 pandemic, the REIT has temporarily suspended operations at an additional seven hotels, bringing the total number to 31 properties. Its remaining eight properties are running at reduced levels.
Expedia Chairman Barry Diller has described the current state of the world as “cataclysmic” in a recent interview with CNBC. Diller sits in a unique position amid the COVID-19 crisis, leading one of the world’s largest travel companies while also overseeing internet and media giant IAC. He says he doesn’t expect normalcy until at least the fall.
A spotlight on hospitality
A positive within this crisis, according to Horwath HTL, is that for the first time, the travel and tourism industry has been named specifically as vital in any functioning economy. The hospitality firm will create a weekly report making a comparative compilation of benefits extended by several nations for the hotel sector, and for tourism. The compilation will be updated for information from other countries as sector specific information becomes available.
In Australia, some regional hotels remain open
Horwath HTL Singapore, in partnership with AHS Advisory, has conducted a sentiment survey to gauge the impact of the COVID-19 pandemic on hotels across Australia. Key takeaways:
• The majority of hotels in the survey (67%) are planning to remain open. This is a higher ratio than had initially been expected heading into the survey. A greater proportion of hotels located in regional markets (69%) are planning to stay open compared to their state capital counterparts (65%) despite the fact that a greater proportion of participating regional hotels have already closed.
• The majority of survey participants expect the impact of COVID-19 to be long-term, thus, occupancy performance is expected to start rebounding only in Q4 2020. There is no noticeable difference in the trend of occupancy expectations among properties, regardless of location, although hotels in Melbourne expect Q3 2020 to record lower performance than Q2 2020. This could be due to the looming amount of new supply to enter the market.
• Unsurprisingly, domestic-sourced demand segments are expected to recover faster, since there is more uncertainty surrounding the return of international travel. This strongly aligns with Australia being a predominant domestic hotel market.
Thailand’s appeal as a post COVID-19 holiday market
A new survey of consumers in China’s first-tier cities concluded that 53% of respondents would like to travel overseas within 2020. The newly released China Thailand Travel Sentiment Survey 2020, conducted in mid-April by C9 Hotelworks and Delivering Asia Communications, focused on key demand factors in the country’s reopening of the tourism economy. A strong positive message from the research is that 71% of Chinese consumers said they would like to visit Thailand. Using the China survey as a forecasting tool for the hotel industry, an interesting shift in a segment traditionally leveraged in the mass market is that 83% of potential visitors would choose independent travel versus a group tour. The top five preferred booking channels for Chinese travelers to Thailand are Ctrip (61%), Fliggy (16%), hotel websites (9%), Booking.com (5%) and WeChat (5%).
U.S. travel jobs experiencing massive losses
The U.S. travel industry is experiencing a total impact from coronavirus that is nine times greater than the 9/11 attacks, according to new data released by the U.S. Travel Association and the analytics firm Tourism Economics. By the end of April, declines in travel will cause eight million jobs to be lost out of approximately 24 million for the entire U.S. economy, according to the report. Travel spending losses are on track to top half a trillion dollars by the end of 2020.
Elsewhere: Starwood Capital affiliate discloses Extended Stay America stake
A Starwood Capital Group affiliate disclosed that it acquired 15,121,847 paired shares of Extended Stay America and its ESH Hospitality unit for about US$136.8 million cash. SAR Public Holdings LLC bought the shares, which represent an 8.53% stake in Extended Stay, in open market transactions between March 4 and April 15 for investment purposes.