A look at past unplanned events’ effects on hotels
 
A look at past unplanned events’ effects on hotels
09 SEPTEMBER 2019 7:19 AM

Hoteliers can never be fully prepared for unexpected events, such as natural disasters and terrorist attacks, but data can provide a story to better anticipate performance the next time tragedy strikes.

NASHVILLE, Tennessee—No two tragedies will have the same effect on hotel performance, but studying data before and after an event occurs can give hoteliers useful insight.

Unplanned events include situations that people are aware could happen, such as natural disasters and terrorist attacks, but can’t predict the specifics of, said Claudia Alvarado, analytics manager at STR, during a data session at the Hotel Data Conference titled “Learning to expect unplanned events.” STR is the parent company of Hotel News Now.

Alvarado and Emile Gourieux, business development executive at STR, examined weather events, terrorist attacks and what hotels can do to prepare.

Hurricane Michael
On 10 October 2018, Hurricane Michael made landfall along the Florida Panhandle as a Category 5 hurricane. Though 2018 saw a lot of hurricane-related weather, Alvarado said Michael in particular was interesting to analyze because the affected regions overlapped somewhat with past hurricanes.

“The dynamics when it comes to hotel performance are quite interesting,” she said.

During Hurricane Michael, Alabama hotels recorded a 33% increase in room demand over the same day in 2017, followed by Georgia hotels, which showed 10% demand growth. Florida hotel demand grew by only 3% year-over-year, in part due to tough comps with 2017, when demand spiked due to Hurricane Irma, Alvarado said.

“This also shows you a little bit of the cycle that happens when a hurricane hits a certain area,” she said.
Demand slightly increases about a day before a hurricane hits “perhaps for those that cannot fly out or are coming in to help,” but when a hurricane makes landfall, performance dips, she said. About a week after the hurricane makes landfall, demand spikes because of rescue crews and government officials coming in.

Polar Vortex 2019
A severe cold wave blew through the Midwestern U.S. and Eastern Canada region in late January, which had an impact on hotel performance in states such as Vermont and Illinois.

The Polar Vortex coincided with MLK Jr. Day, so there were already spikes in hotel occupancy and average daily rate as travelers took advantage of the long weekend, Alvarado said.

On 19 January, when the winter storm arrived, total U.S. revenue per available room rose 23% year over year. The following day, occupancy levels spiked 15.2% as travelers cancelled flights and hunkered down in hotels, she said.

“When the holiday weekend was actually over, we see all of the performance going down,” she said.

On 21 January, total U.S. RevPAR declined 15% as travelers canceled hotel reservations, she said.
Between 30 and 31 January, the Chicago area registered record cold temperatures at -23 degrees and -31 degrees, respectively, which caused occupancy to drop 15.6%, Alvarado said.

Terrorism impact
As unpredictable as weather events can be, there are seasons for hurricanes and polar vortexes. That’s not the case for terrorism, which can happen anywhere at any time, Gourieux said.

The September 11, 2001, terror attacks on the U.S. sent hotels around the world into a down cycle, he said. Prior to the attacks, hotel demand in the U.S. had been on the rise for a decade.

“It took hotels in the U.S. two years to get back to their pre-9/11 performance levels,” he said. “So 9/11 was certainly the extreme example of terrorism and how it can affect the hotel industry.”

Seven years later, a smaller-scale attack in Mumbai had devastating consequences for the hotel industry, because hotels were specifically targeted by terrorists, Gourieux said. Sixty-one of the 164 people killed were staying at one of two targeted hotels.

Hotel demand in Mumbai had grown for five consecutive years prior, but eventually went negative after the attacks in November 2008.

“By November of that year, the month of the attacks, 12-month moving average for demand change was already down 8.6%. It was on a decline, but that downward trend really dramatically accelerated after the attacks,” he said.

In December 2008, demand declined 46% and rates fell 20.6% compared to 2007, he said. Demand fell 31.4% in January 2009, 22% in February, and 16% in March. That double-digit spiral, he said, lasted until August 2009. A full year after the attacks, demand finally grew again.

In 2017, multiple terror attacks occurred in London—at the Westminster on 22 March, Manchester Arena on 22 May, London Bridge on 3 June, Finsbury Park on 19 June, and Parsons Green on 15 September.

Though it was a scary year for the United Kingdom, data shows a different story for the London market compared to markets where other attacks occurred, Gourieux said. After the Westminster attack in March, there was no noticeable change to hotel occupancy and ADR. The London Bridge attack in June seemed to have the most disruption for hotels, but it was limited to the couple days after the attack, he said. Adding performance was “back to normal at the end of June.”

“Despite some monthly occupancy declines in the latter part of 2017 (as a whole), that year actually saw positive occupancy growth—just barely at 0.3%. But even that flat growth was due to increased supply and had nothing to do with the lack of demand,” he said.

Demand growth stayed between 2.5% and 3%, accelerating during the second half of the year. Gourieux said that demonstrates the resiliency that some markets can have to such events.

How hotels can prepare
Gourieux said hoteliers can do three things to stay vigilant:

  • Have a plan: Work with local authorities to understand what their response is to a natural disaster or terrorist attack;
  • Be an active member of local associations: A hotel association and destination marketing organization will be a hotel’s voice and biggest advocate when dealing with press and lobbying for government support; and
  • Prepare for the worst: Prep for a worst-case scenario, but don’t put fear in staff or guests.

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