The extent to which the coronavirus has impacted the global hotel industry is now coming into focus based on new data from HotStats, which provides further transparency in terms of the damaging impact of the disease on travel and, by extension, on hotel profitability.
The initial data point driving the hotel industry’s plunge is occupancy, which has been the accelerant for drops in total revenue (TRevPAR) and profit (GOPPAR). In China, occupancy from January to February dropped 40% points.
Full-month February data from HotStats echoes this timeline of global events when, toward the end of December, China informed the World Health Organization that an unknown virus was producing a pneumonia-like illness in the city of Wuhan. It wasn’t until January 23 that Wuhan went into a lockdown.
In January, TRevPAR dropped 29.4% YOY, which led to an overall 63.8% YOY decrease in GOPPAR. Meanwhile, labor costs as a percentage of total revenue climbed 0.2 percentage points. In February, when the virus’s shadow loomed larger, TRevPAR decreased 50.7% YOY.
The lack of revenue came against a backdrop of cost savings, a plausible outcome of hotel closings and layoffs. That month, Hilton announced the closing of 150 hotels in China, including four hotels in Wuhan. Labor costs were down 41.1% YOY, but still gained as a percentage of total revenue, because of the vast revenue drop. GOPPAR dropped 149.5% YOY in the month.
The whole of mainland China suffered drastically in February, with occupancy falling to single digits. RevPAR decreased 89.4% YOY, which is in line with major global chains — Marriott International said RevPAR at its hotels in greater China plunged almost 90% compared with the same period last year.
TRevPAR in February dropped nearly 90% to US$10.41 on a per-available-room basis. The minimal revenue resulted in labor costs as a percentage of total revenue jumping 221 percentage points, despite a more than 30% decrease on a per-available-room basis. GOPPAR in the month was negative at -US$27.73 on a PAR basis, a 216.4% drop from the same time a year ago.
Beijing and Shanghai saw similar results. Profit in both cities dropped into negative territory, around -US$40 on a PAR basis.
Across Asia, data trends were as grim, if not modestly better. South Korea, lauded for its early ability to contain the spread of the virus, achieved an occupancy rate of 43% in February, which was 21 percentage points lower than at the same time a year ago.
Of note, the country’s average rate was actually up 2.1% YOY and labor costs on a PAR basis were down 14.1% (a likely outcome of employee furloughs and layoffs), but the large losses in occupancy resulted in a -107% drop in YOY GOPPAR.
Singapore, too, which has also been praised for controlling the spread of the virus because it was quick to trace, detect and isolate patients, saw its occupancy drop, but precipitous drops in rooms revenue and F&B pulled TRevPAR down 48% YOY. Weakened revenue was complemented by overall savings in expenses, but not nearly enough to stave off a decline in profit, which dropped 80.1% YOY.
Asia was the first to experience system shocks as a result of the coronavirus. Europe and the U.S. are now feeling the true extent of this, and though February data was down broadly, the expectation is that full March data could look like Asia’s February data.
Total Europe data in February did not display the dramatic negativity that Asia’s did. RevPAR was flat, while TRevPAR and GOPPAR actually pushed out positive growth, up 0.3% and 1.6%, respectively. Hoteliers in Europe would gladly take those numbers moving forward, but the reality is that the continent only lagged Asia by weeks, and the data will likely reflect this in March.
According to Johns Hopkins University, Italy currently is behind only China in the number of coronavirus cases reported. The first reported cases in Italy came on January 31. By February, its hotel industry had already felt the weight of the virus’s spread.
TRevPAR dropped 9.2% YOY — not nearly the violent swing seen through Asia — but GOPPAR decreased 46.2% YOY, the result of revenue shortfall, even as total costs on a PAR basis were down 5.2% YOY.
London data was more in line with total Europe data. Occupancy was down 2.4 percentage points for the month, but average rate was up, resulting in positive RevPAR and TRevPAR growth, both increasing 0.5% YOY. GOPPAR was flat YOY, supplemented by flat to negative expense growth.
Much has been made of the U.S. response to the coronavirus. The first confirmed case came on January 20, just north of Seattle. Two months later, the U.S. has more than 50,000 confirmed cases.
In the U.S., February data was unexceptional — the calm before a March storm. RevPAR for the month was down 0.8% YOY, which contributed to a slight 0.2% YOY drop in TRevPAR. GOPPAR for the month decreased 0.6% YOY, even as total overhead costs on a PAR basis came down 0.6% YOY.
Seattle, where patient zero in the U.S. was identified, had a remarkably strong February. GOPPAR increased 7.3% YOY, as a revenue boost coupled with cost containment buoyed the bottom line. Total hotel labor costs as a percentage of total revenue were down 0.6 percentage points and utility costs came down 8.8% YOY.
New York achieved a similarly positive story. GOPPAR was up 15%, but the absolute dollar value was still negative at US$-3.38. February is only second to January as the worst-performing month of the year for New York City’s hotel industry on a seasonality basis and across top- and bottom-line metrics.