COVID 19 and the Hotel Industry
COVID-19, also known as Coronavirus, is here and we all have to learn to cope with its effects. The stock markets are erratic; events, conferences, and schools are being canceled; and business is being heavily affected. In the hospitality industry, COVID-19 is having and will still have enormous consequences. According to a STR webinar from March 16, RevPAR dropped across the US by 11.6% for the week of March 7 (1). Figure 1 shows the expected decline in absolute occupancy of the US in tandem with the trend of China and Italy.
Figure 1: This figure shows the absolute level of occupancy change of China, Italy and US hotels over time. It can be assumed that the US is at the level of COVID-19 response that China was at six weeks before so we can expect to follow the trend of China and Italy barring any outside relief such as government aid. Obtained from STR (1).
However, due to the cyclical nature of economic downturns, as shown in Figure 2, we can expect to make an upturn at some point. This problem is that things are expected to get worse still until that upturn. Some good news for our portfolio is that our location types are such that we are not as hard hit.
Figure 2: A historical view of RevPar % change in the US from 1990 to 2020 which includes 9/11and the 2008 recession. This figure illustrates the cyclical nature of RevPar after economic events. Obtained from STR (1).
Figure 3 shows that urban location types were most affected while small metro/town locations were least affected. Interstate types were also not affected as much. This could indicate that while groups are canceling travel plans, there is still some transient travel that our small metro and interstate hotels can accommodate. The government has already come out with relief bills; one is the Coronavirus Aid, Relief, and Economic Security Act (CARES) and the other is the Families First Coronavirus Response Act (FFCRA). The CARES Act is a 2 Trillion dollar stimulus package (2). The FFCRA is a Leave bill pertaining to small businesses (3). Utilize resources like AAHOA webinars for details about how this affects your hotels (4). Another great avenue you should all pursue is the SBA emergency loan for businesses. Apply at sba.gov/disaster.
Figure 3: This figure shows the differences in RevPar% change by location type in the US of the week of March 7. Obtained from STR (1).
For now, the most important thing hotels and businesses can do is prevent the transmission of COVID-19. Posting signage explaining preventions that are taking place is a way to put guest worries at ease. Most brands are allowing limited or “grab and go” breakfast options due to government restrictions in certain areas. Keep track of your local health department notices and city/county restrictions. It is imperative that you follow these restrictions not only because it is unlawful but because it is a civic duty to reduce COVID-19 transmission. Reinforce the following information to employees by either reminding them often or posting in a visible area.
Reminders for Employees (5):
Wash hands often with soap and water for 20 seconds
Use hand sanitizer with at least 60% alcohol
Avoid touching face
Do not allow employees to work if they feel sick
Practice “Social Distancing” by keeping six feet away from others
Know the symptoms of COVID-19 (6):
Fever
Cough
Shortness of Breath
Increase Cleaning Efforts (5):
Clean highly touched areas in public spaces
Clean highly touched areas in guest rooms such as remotes, door handles, light switches, telephones, desk surfaces
Make sure cleaning products are “sanitizing” or “disinfecting”
Provide hand sanitizer stations in public areas for guests and in back of house for employees
References and Resources:
https://www.dol.gov/agencies/whd/pandemic/ffcra-employer-paid-leave
https://www.aahoa.com/advocacy/disaster-preparedness