COVID-19: U.S. hotel stocks, RevPAR in decline

U.S. RevPAR declines begin in earnest

RevPAR in the United States was off a staggering 32.5% during the week of March 8-14, according to new STR data, showing how much COVID-19 is impacting the hotel industry. Occupancy was down 24.4% to 53%, while ADR showed a 10.7% decline to US$120.30. Analyst Patrick Scholes at SunTrust Robinson Humphrey opined on Wednesday that it is possible that RevPAR may be down over 50%, with some hotels running occupancy in the single digits to teens, versus a long-range average pre-virus of 66%. The performance declines were pronounced in hotels that cater to meetings and group business, according to STR. Among RevPAR declines, Seattle, Washington, saw the steepest, with a 66.1% dip; San Francisco/San Mateo, California, posted a 63.3% drop; and New York City experienced a 54.6% decline.

Updated travel data losses

Coronavirus will cost the U.S. travel sector 4.6 million jobs by the end of April, according to updated analysis released Wednesday by the U.S. Travel Association. Earlier projections released by U.S. Travel foretold catastrophic losses of US$355 billion and 4.6 million travel-related jobs this year. But the latest data shows that US$202 billion in direct travel spending and all 4.6 million jobs will disappear before May.

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Getty Images

Hotel stock values plunge as broader markets fall

U.S. stock markets continued to fall Wednesday, with the S&P 500 index down 27% on the year as uncertainty regarding the economic fallout from COVID-19 mounts. In a news conference, President Donald Trump said the hotel sector might receive relief for employees, but later in the day hedge fund manager Bill Ackman said on CNBC that hotel values could go to zero.

According to Seeking Alpha, as of 1 p.m. EST Wednesday, the biggest decliners included Wyndham Hotels & Resorts (-42.7%), Hyatt Hotels (-41.5%), Park Hotels & Resorts (-30.9%), Wyndham Destinations (-42.7%), Marriott International (-32.2%), Hilton (-28.2%), Choice Hotels International (-28%) and IHG (-18.1%). Expedia was down 14.3%.

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Marriott withdraws 2020 guidance

Marriott International also withdrew its 2020 guidance, noting that while RevPAR increased in most regions, it was down nearly 25% through February in most of Asia, with greater China seeing declines of more than 50%. The company said there were signs of early improvement in greater China, with the number of closed hotels at 30 down from more than 90 a month ago. Occupancy still is under 15% but improving. Occupancy in North America and Europe, however, are below 25% in the past few days.

“The company could see further erosion in performance in the weeks ahead and does not expect to see material improvement until there is a sense that the spread of the virus has moderated,” according to a press release. At the property level, the company said it was implementing contingency plans including closing F&B outlets, reducing staff and closing floors or even entire hotels, and it has deferred brand standards.

At the corporate level, steps to mitigate the impact include “significant cuts” in senior executive salaries, requiring temporary leaves in North America, shortening work weeks around the world and cancelling non-essential travel and spending, which the company estimates will reduce corporate costs by at least US$140 million so far. The company is holding a conference call Thursday morning.

Read the press release

Other 2020 outlooks pulled

Wyndham Hotels & Resorts and Choice Hotels International both withdrew their full-year 2020 outlooks, which both hotels had estimated last month. The two companies said they would provide updates during their first-quarter earnings calls. 

Chinese risk management prompts re-evaluation

According to Horwath HTL, the COVID-19 outbreak has put the risk management capability of China’s hotel industry to the test. The industry eventually will recover from the downturn, but the impact of the virus will force investors to reconsider their strategic planning in hotel investment and asset management. According to Horwath, investors should refocus on the essentials of hotel investment: to evaluate assets from a corporate development standpoint and to build a more rational evaluation and development plan for the investment, management and exit strategies of those assets.

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Travel industry cuts ad spend by 50% in early March

Advertising by the travel industry fell by 50% in the first two weeks of March versus a year ago, said Marketing Dive, citing data from MediaRadar. On a monthly basis, TV spending fell by 69% and digital spending fell by 62% from February. Prior to the virus outbreak, eMarketer estimated last year that the travel industry was forecast to become one of the top five advertisers in digital media by this year, with estimates that U.S. travel-related companies would spend about US$13 billion on digital media in 2020.

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All Las Vegas hotels, casinos close

All Las Vegas hotel and casino properties will shutter following Nevada Governor Steve Sisolak’s statewide order applying to non-essential businesses. The last properties to close include Sahara Las Vegas, Caesars Entertainment properties, Boyd Gaming properties and Treasure Island Hotel and Casino.

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Transcript of White House meeting

The White House released a transcript of its meeting with hospitality leaders, including the CEOs of Marriott, Hilton and Best Western, detailing the impact of the virus on business. The Trump administration said it is working with Congress on relief for workers and industries, including paid sick and family medical leave and nutritional assistance. The Small Business Administration announced disaster loans, which provide individually impacted businesses with loans up to $2 million and will lend up to $50 billion overall for small businesses. The IRS will defer tax payments for affected individuals and businesses.

Read the press release

EU bars non-European visitors for 30 days

The European Union voted to bar non-EU visitors for 30 days as it struggles to contain the COVID-19 virus. European citizens and residents coming home are excepted from the ban, although some countries were asking them to self-isolate for two weeks, in some cases away from their families, according to the New York Times. 

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Event cancellations

Two hospitality technology events are rescheduled from their traditional June time frame. The North American Hospitality Industry Technology Exposition and Conference, or HITEC, is rescheduled to October 26-29, while the co-located HSMAI ROC Americas will take place October 26-27… HD Expo + Conference, which had been scheduled for May 5-7 at Mandalay Bay Las Vegas, has been officially cancelled. The next HD Expo + Conference is scheduled for May 4-6, 2021, in Las Vegas. 

Job cuts mount in New York

Between 20,000 and 30,000 New York City hotel workers are likely to lose their jobs over the next month, according to industry insiders. At least 14,000 city hotel jobs are already gone since the coronavirus hit, sources told the New York Daily News. As many as 20,000 jobs in the hotel and casino industries have been lost statewide since the start of the pandemic, according to the industry source. Of those 20,000, roughly 6,000 are casino workers and 14,000 work in city hotels.

Read New York Daily News report

Contributed by Barbara Bohn, Debbie Carlson and Jeff Weinstein