Recovery in boutique hotel segment varies by location
 
Recovery in boutique hotel segment varies by location
18 SEPTEMBER 2020 8:39 AM

Data presented by STR and Horwath HTL during sessions at the 2020 Boutique Lifestyle Digital Summit show that July was the worst month so far for boutique hotel RevPAR declines, and markets such as Africa and North America might not hit normal, or break-even occupancy levels, until 2023.

GLOBAL REPORT—Boutique hotels are keeping up with the rest of the industry for the most part from a performance standpoint throughout the pandemic and hoteliers around the globe are starting to think about when the recovery will start in their markets, according to speakers at the 2020 Boutique Lifestyle Digital Summit.

During the “Hospitality markets operating outlook” session, Vail Ross, SVP of global business development and marketing at STR, HNN’s parent company, said boutique hotels saw the steepest declines (-27.6%) in revenue per available room in July.

STR is hoping August performance will be better and that July was the bottom for declines seen in the segment.

Like the rest of the U.S. hotel industry, April was the lowest month for occupancy for boutique hotels at 12.4% as several hotels were closed in the sector “mainly due to no group and no corporate business as well as depending on their location, those markets that are highly dependent on international travel (were) really hit the hardest there in April,” Ross said.

Resort performance
Location is a determining factor for performance in the current pandemic environment, Ross said.

Resort boutiques reported a 27.8% decrease in RevPAR year to date in July 2020 while properties in urban and suburban locations saw a 58.4% drop and a 54.1% drop, respectively.

Boutique resort weekday occupancy for July year to date hovered around 49% while weekend occupancy was about 57%, Ross said. The lowest occupancy for the month was seen in suburban markets at 38.4%.

“(It’s) not where we were at this time last year at 80% (weekend occupancy) but at least it’s a little glimmer of a good sign that people are feeling comfortable with traveling especially in locations where they feel that they have a lot of outdoor space and a lot of space in general to move around,” she said.

Year to date, boutique hotels reported 57% weekend occupancy in July, according to STR data. (Source: STR, © 2020 CoStar Realty Information, Inc.)

Holiday performance bump
There was an apparent bump for the Friday and Saturday of Labor Day weekend for boutique hotels this year, Ross said.

When comparing the boutique segment to the luxury and upper-upscale segments, Ross said all segments saw a bump in demand for holidays such as the Fourth of July and Labor Day.

ADR
While boutiques are seeing some similar performance trends when compared to the luxury and upper-upscale segments, Ross said there’s about a $100 gap in average daily rate between luxury ADR and boutique ADR. Luxury hotels are seeing average rates of approximately $254 while boutiques are seeing ADR of $158.

Ross said the demand is now coming from the transient consumer, those staying in hotels by choice, frontline workers and contract workers.

When will the global recovery begin?
During the “Global recovery outlook” session at the online event, James Chappell, global business director for Horwath HTL, shared results from a survey in which participants around the globe were asked to rank their hotels from one to 10, one being closed and 10 being near 2019 levels, on where they were in terms of performance, how confident they are in the support of their governments getting the virus under control and their thoughts on when things would return to normal.

In the Asia/Pacific region, the numbers reported are very mixed “for self-evident reasons,” he said.

“If you look at markets like Australia and New Zealand, which are very remote and are highly dependent on international travelers, if there’s no airlift, if there’s no international travel, people obviously cannot get there,” he said.

Horwath HTL surveyed hoteliers around the globe to find out how their hotels are currently performing on a scale of one to 10 with one being closed and 10 being close to 2019. (Source: Horwath HTL)

Chappell said China is the one country that’s really bucking the trend as “China has really been going from strength to strength over the last few months.”

“They’ve really got a handle on COVID; they’ve really got a handle on travel and how it works; 70%-80% of the hotels are now open; there’s a very strong domestic travel and of course you know, China is a little bit more of a managed economy so they are able to pump more liquidity into the market to support travel and tourism in a way that other markets aren’t,” he said.

Performance in Europe is a mixed bag, he said. Southern Europe has been struggling while Northern Europe has seen better performance over the summer from staycation markets and domestic demand.

Getting close to normal
For the global industry to get back to normal, or to an average global occupancy above the break-even point at 60%, Chappell said that will take governments in markets and the industry reaching a level of consistency on containing the pandemic.

Horwath asked hoteliers in the survey when they might reach that normal, which will be longer than expected for some.

Hoteliers in the Asia/Pacific and Europe said they expect to reach that threshold of at least 60% occupancy in 2022 while hoteliers in Africa and North America expect to reach it in 2023.

While the industry might take longer to reach its normal, Chappell said there are a few reasons to be cheerful.

“First and foremost, China is a really positive example,” he said. “If they can do it, we can do it. China is a huge, huge market and yes, it’s very centrally controlled; however, many billions of people are living there and they have been able to control things to a large extent and they’ve been able to get people moving again, which I think is … a real example and we can learn a lot from that from a tourism point of view.”

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