(This is the first of three articles examining how the pandemic is affecting the hospitality industry.)
If there was any sign of the hospitality industry’s rapid change amid the continuing fallout from the coronavirus pandemic, look no further than the recent debut of home rental portal Airbnb in the public markets. The stock quickly traded at a healthy premium to its offering price, and since then, enthusiasm has not waned.
Even as hotel owners and operators market cleanliness and safety, the public remains wary.
The reason? Airbnb has quickly adapted to shifting consumer preferences, a strategy that has proven critical to survival in the increasingly complex pandemic environment.
From the start of the pandemic in March through August, approximately 50% of Airbnb’s bookings came from guests traveling within 300 miles of home. The company capitalized on individuals seeking a work-from-home upgrade, with long-term stays making up one of its fastest-growing market segments.
It’s no secret that the hospitality industry has faced significant headwinds during the pandemic, and the road to recovery is still fraught with detours, even with a vaccine in sight.
COVID-19 has displaced hotel owners and stripped properties of guests and reliable revenue streams. In addition, travelers are not yet returning to normal patterns, with U.S. hotel rooms 32.5% filled for the week ending Dec. 26, down 33% from a year earlier, according to the hospitality data firm STR.
The number of airline passengers, or flight throughput as measured by the Transportation Security Administration, increased during the week before Thanksgiving and the week of the holiday, including two days that registered more than one million passengers—levels not hit since March 16.
The increase in travel volume, however, did not translate to hotel stays, as weekly demand for rooms sold and occupancy fell to the lowest levels since the week ending May 30.
So what gives? Even as hotel owners and operators market cleanliness and safety, the public has opted to stay in familiar settings with relatives during the holidays or sought accommodations akin to Airbnb, eliminating interactions with other travelers in lobbies and common areas.
The financial results for hotels by location and segment have been consistent throughout the pandemic; limited-service midscale properties in interstate areas are continuing to lead the comeback, fulfilling the need for affordable accommodations and for essential workers including construction workers, traveling doctors, and nurses and truck drivers.
Through October, gross operating profit per available room, or GOPPAR, shows a disparate recovery across segments. Limited-service is faring better than full-service, midscale is outperforming luxury, and while interstate is close to full recovery, urban properties are on life support.
It’s clear that recovery is in sight, but the weak conference season and lack of business and international travel continue to weigh heavily on hotels that depend on these revenue streams. Hilton’s chief executive, Chris Nassetta, expects the second half of the year to be better than anticipated, noting that “the next 60 to 90 days are going to be very difficult.”
During this period, cash continues to be king for hoteliers, and those operators that can best manage through this period will be poised to take advantage of the greater recovery.
For more information on how the coronavirus pandemic is affecting midsize businesses, please visit the RSM Coronavirus Resource Center.