(This is the second of three articles examining how the pandemic is affecting the hospitality industry. Read the first here, about how the industry is struggling to adapt.)
Even as the American economy continues to emerge from the shock of the coronavirus pandemic and economists predict strong growth this year, the forecast for the hospitality industry remains bleak.
One industry report does not see a full recovery in the hospitality sector until 2024.
By one standard measurement of the industry’s health – revenue per available room, or revpar – a full recovery is unlikely until 2024, according to a joint report by STR and Tourism Economics.
“Even with the encouraging vaccine news, this pandemic and the subsequent economic impact will continue to limit hotel demand generators into the second half of next year,” Amanda Hite, president of STR, said in November. “Business demand won’t return at a substantial level until caseloads are better contained, and in the meantime, recovery is going to be primarily driven by lower-tier hotels in the leisure-driven markets with outdoor offerings.”
The reality is one of a rough road ahead as the vaccine’s rollout has proven difficult.
Adding to the difficulty is a lingering wariness among travelers, who would like nothing more than to travel more widely. The drive-to destination segment has continued to hold up as the pandemic has progressed, but true industry-wide recovery is dependent on the public confidence in airlines, rental car firms and rideshare companies.
The outlook for airlines reflects this wariness. With weaker-than-expected holiday demand, December brought the reduction of domestic travel routes to more than 40% for all airlines, with fourth-quarter cuts compared to a year earlier at 42%. Cuts in the first quarter are projected at 40% as holiday demand disappoints and business demand remains muted.
Airlines’ continued dependence on leisure travel is a strong signal of continued distress for business travel and questions over whether it can return to pre-pandemic levels. October trends in airline ticket transactions and fares are pointing to an airline recovery that is heavily anchored by younger, cost-driven leisure travelers.
Total ticketed transactions in October were down 44% compared to 2019 for online travel agencies, while non-corporate physical travel agencies had a 75% decline, and corporate travel agencies reflected an 84% drop.
Finally, what happens when you’ve booked the flight and the rental car only to arrive at your destination and realize that businesses and attractions are either closed or partially functioning?
An added challenge for travelers: What if there is nothing to do when you get to your destination?
The pandemic has dampened the allure of many destinations as the uncertainty around what will actually be open when travelers arrive remains a big question mark. The lack of available dining options, especially in major metropolitan areas, is a significant drawback.
OpenTable reservation data shows a tale of two restaurant environments: States that have locked down (California, Illinois and New York) versus states that have opened up (Florida, Georgia and Texas). Year-over-year changes in reservations for Dec. 7 correlate more negatively with states that have locked down than with states that have reopened by an average factor of 36%.
But even the most confident travelers have been adhering to an acceleration of an existing trend – food delivery services.
Data from Grubhub shows an increase in available restaurants using the platform growing from 165,000 in the first quarter of last year to 225,200 in second quarter and 245,000 in the third.
It seems that, all around the country, travelers are looking to make the best of an otherwise difficult experience. At the same time, it calls into question whether hotels should offer full-service restaurants given the cost of providing the service.
The takeaway
Even as airlines, hotel owners and rental car firms have sought new ways to lure travelers, there still are lingering concerns among the general public that businesses need to overcome. The full recovery of the hospitality industry hinges on travelers becoming comfortable with the new normal of travel, aided by the distribution of a vaccine.
For more information on how the coronavirus pandemic is affecting midsize businesses, please visit the RSM Coronavirus Resource Center.
