The hospitality and tourism industry continues to struggle as lockdowns and curfews return, dimming hopes of a quick recovery for the millions of people who have lost their jobs since the onset of the pandemic.
According to financialpost.com, occupancy rates and revenues for hotels have collapsed, although the COVID-19-related downturn has not been evenly spread across the industry, with urban hotels being harder hit than others. Traditional tourism hotspots in North America, which were struggling in August 2020, have reported more robust recoveries recently.
Despite the uncertainty about the demand for travel and overnight stay, hotel stocks, which hit rock bottom in March 2020, are showing strong signs of recovery. Some might even think those stocks will rise even higher, given that vaccines are expected to become at least partially available for the general population by the summer, thus perhaps increasing demand for travel and overnight stays.
For instance, the Transportation Research Board meeting is held each year in January in Washington, D.C. The week-long event attracts tens of thousands of transportation experts from across the world who usually stay at hotels near Dupont Circle, where the conference is held. Many end up looking for alternative space, because hotels near the conference’s venue are usually reserved months in advance.
This year is different. The conference on mobility is a virtual event. Oddly, no travel is required. All sessions and meetings will be online.
If other organizations and companies follow suit in the future, many of the jobs already lost in the hospitality and tourism industry could be lost for good.
Canadian data for the week ending Jan. 2, 2021, revealed signs of deep stress in the hotel and lodging industry. The occupancy rate was a mere 19.9 per cent, down 53.8 per cent compared to the same period a year ago, and the average daily rate decreased 26 per cent. Also, the revenue per available room, a key industry performance metric, dropped 65.8 per cent from the same time last year.
The market in the United States was no different. On a year-by-year comparison for the same period, occupancies were down 17.2 per cent, the average daily rate fell 21.5 per cent, and the revenue per available room decreased 35 per cent.
Miami, a popular tourist spot, reported the highest occupancy level of 69.2 per cent. Vancouver reported the highest occupancy level in Canada at 27.9 per cent. On the other hand, struggling regional economies reported the lowest hotel occupancy levels, with Calgary at the bottom at 13.4 per cent. Boston reported one of the lowest occupancy levels in the U.S. at 28.2 per cent.
A comparison reveals that U.S. hotels are a lot busier than those in Canada. The highest occupancy level in the U.S. is twice that in Canada, and the lowest occupancy level in Canada is more than twice that in the U.S. The signs of recovery are more obvious in the U.S. than in Canada.
Hotel and lodging statistics from the U.S. also indicate a shifting demand from urban to suburban and beyond. American Hotel and Lodging Association data for early August revealed that the occupancy levels in urban properties averaged 38 per cent, much lower than the 52 per cent observed for suburban hotels.
But while the pandemic has aggressively disrupted the hotel and lodging industry’s traditional business models, it has apparently spared the disruptors. For example, Airbnb Inc.
initially reported large declines in demand in March and April after many cancelled their reservations, but the surprise increase in demand for overnight stays within a short driving distance of large urban centres has allowed short-term rental platforms to flourish even during a pandemic.
The stimulus packages provided by the respective governments in Canada and the U.S. have also supported millions of workers in the hospitality, lodging and travel industries, but the future for hospitality real estate depends upon further stimulus packages as well as the wide availability of a vaccine.
At the same time, some pandemic-induced changes might be long-lasting. The decline in demand for urban office space could mean a prolonged decline in business travel that might continue to pose hardships for hotels in the urban core. A gradual decline in mega-events, such as conferences and concerts, could also hurt those hotels.
Smart investors and landlords will pay attention to the shift in demand for travel and hotels to see what changes in product offerings might be needed to survive the next five years.