Calendar shift slightly softened US RevPAR drop
Calendar shift slightly softened US RevPAR drop
01 MAY 2020 6:23 AM

Jan Freitag offered insights into weekly, monthly and quarterly performance data for U.S. hotels as the impact of the pandemic begins to come into focus.

HENDERSONVILLE, Tennessee—Another slight improvement in year-over-year revenue-per-available-room decline for the week ending 25 April is due to a favorable calendar shift, and not signs that a rebound has begun, said Jan Freitag, SVP of lodging insights at STR.

RevPAR was down 78.4%, compared to a 79.4% decline last week. This was the second week in a row that RevPAR has declined by less than 80%, but that only really reflects comps with Easter and Passover last year, Freitag said.

STR reports about 15% of the hotels it tracks, approximately 800,000 out of 5.4 million, are still closed. That is a temporary number that should ease as social distancing rules and regulations expire, Freitag said.

There are now more than 3 million diagnosed cases of COVID-19 around the world, and 1 million of those are in the U.S., which has clear implications for travel in the third and fourth quarters of 2020, Freitag said. All of the 645 U.S. submarkets STR tracks again showed RevPAR declines, and likely will for some time, he said.

Any reduction in the number of submarkets reporting RevPAR declines “obviously is an indicator of the first green shoots of recovery,” he said.

Hotels in each class segment reported double-digit occupancy for the week of 25 April, which was an improvement particularly for that luxury and upper-upscale segments that previously were in the single-digit range. Occupancies in the lower end of the spectrum, particularly at economy hotels, are still more than 35%, Freitag said. Much of that demand comes from first responders, people in transitions or those living in hotels.

Over the past two weeks, the industry increased the number of rooms sold by 1.4 million, but 1.5 million rooms over a period of 14 days equates to only 100,000 additional rooms sold, Freitag said. That demand growth is largely tied to five states: California, Texas, New York, Florida and Georgia.

“That said, that is better than what we reported in the early days of March,” he said. “We’re not calling it a recovery quite yet, but it’s quite fair to assume that we have reached bottom.”

Looking specifically at a few U.S. markets, Freitag said Chattanooga, Tennessee, and Augusta, Georgia, continue to see relatively high occupancies. Chattanooga has the highest occupancy among the markets at 51%, but that is tornado-driven and not because of tourists, Freitag said. New York City comes in third with 41%, which shows healthy demand around Brooklyn, the Bronx and Staten Island. The markets with the worst occupancies are in Hawaii and the Florida Keys.

STR’s monthly profit-and-loss data for the U.S. and global hotel industries presents a “dismal” picture of performance, Freitag said.

“We’re seeing that the decrease in rooms revenue of well over 60% drove revenue declines of well over 60%, which drove GOP declines of around 100%, and EBITDA declines of over 117%. Unfortunately, this is probably a sign of things to come when we get to April.”

At the market level, the markets that saw the highest number of early COVID-19 cases—Seattle, New York and San Francisco—are reporting steep declines in EBITDA as a percentage of total revenue, he said. That means for every dollar in revenue generated, the property lost more than $1, which is an unsustainable business model and why many properties have closed temporarily, he said.

For more of Freitag’s insights into the U.S. hotel performance data, watch the video below:

Editor’s note: The video included in this article was filmed by Jan Freitag, SVP of lodging insights at STR, on 29 April and edited and produced by CoStar Group. HNN is a division of STR, a CoStar Group company.

Correction, 1 May 2020: This article's headline was updated to better reflect the change in weekly U.S. RevPAR.

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