We thought our industry had seen it all – September 11, Pharma Re-regulation, Real Estate Market collapse, countless recessions, and Oil Market collapse. Nothing could have prepared us for 2020 and COVID-19.
While on the ground level, changes seem superficial with face masks becoming the norm and cleaning protocols becoming the new main buying decision factor, a view from 30,000 feet shows an unprecedented amount of hotels closing, temporarily and permanently, a forecast showing record defaults on loans and, for those that stayed open, eerily low occupancy and ADR levels. According to CBRE, US hotel RevPAR dropped -75% in Q2 2020. As a comparison in the last 20 years the largest nationwide RevPAR decline was -16.6% in 2009. That’s a huge contrast and a great illustration at what impact the pandemic has truly had on our industry. Like many of you, this makes me nervous. How much more can we take? How much longer is “keeping the lights on” a metric of success? Where is the glimmer of light at the end of the tunnel? Well…hope is not a business strategy but, as all my fellow ‘Star Wars’ fans know, rebellions are built on hope.
First, let’s be honest. 2020 is not going to end well. CBRE forecasts 2020 to end -52.5% in RevPAR nationwide. For those of you managing a luxury, upper upscale and upscale property, expect to see the brunt of the dip as I am sure this is impacting both occupancy and rate with the drop off in group much more drastically than other tracts. Upper midscale and midscale should expect to see a little less severe of an impact while economy should expect to see the smallest impact. Don’t get to comfy you economy properties – you’re still expected to end -29.5% YoY with probably the biggest hit to your occupancy.
Fair not as CBRE tells us to keep hope and stay in the fight!
While over the last 4 years, the US hotel market has seen a compounded average +1.8% RevPAR change driven by a +1.6% ADR growth, the forecast for the next 4 years shows an expected compounded average +21.1% RevPAR change with the impact expected to be from occupancy/demand since ADR is only expected to grow a compounded average of +6.5%.
It seems the brunt of the RevPAR dip is behind us with Q2 -75.0% nationally. The forecast for Q3 and Q4 shows -58.5% and -52.6% respectively.
2021 is forecasted to have a large release in pent up demand with an estimated RevPAR growth of +41.1% thanks to +31.3% occupancy growth and +7.5% rate growth.
2019 RevPAR levels are expected to make a come back by 2023-2024. While this seems so far away, I remember setting my standard rates back in 2010 to expire on 12/31/2020 and that came pretty quickly!
While these nuggets of information may seem trivial, it is important to keep yourself plugged into these macro statistics. With forecasting and budgeting as we know it a thing of the past, for now, these macro statistics and trend outlooks can help to paint some sort of picture to base future decisions against.
If you haven’t gotten it already, we recommend purchasing the CBRE Outlook report for your market. It will help you understand these same macro statistics for your specific region with more local detail.
Follow Smith Travel Research (STR) on LinkedIn; they publish webinars and data constantly to help you navigate these COVID-19 waters to understand what is really going on in the market.
While Monthly STR is a great look at what has happened historically in the macro-market and tract, perhaps explore the new ForwardSTR with Smith Travel Research to get better insight to what is coming up ahead – helps to know the general direction before you go somewhere, right?
Keep in touch with your OTA Market Managers, local CVB, visitor information centers and tourism departments; they tend to have access to deeper market-specific data and can see trends with occupancy and events returning. Plus, it couldn’t hurt in staying front-of-mind for occupancy opportunities.
As a Revenue Management nerd, I also encourage you to empower your Revenue Management team including your Revenue Manager/Director, Reservations, Front Desk & Sales.
Empower them to pull all levers and use all tactics to garner occupancy.
Try that new promotion, package or opaque strategy.
Reach back out to that FIT partner you tightened the agreement on in 2019 to reevaluate the partnership.
If you have a “break even” rate, make sure they know that price point.
Get the business in the door.
However, I also encourage you to empower your Customer Service Teams (basically your whole staff…) to do whatever it takes to keep the guest coming back. The guest has so many options to choose from – show them you are grateful they chose you. Show them respect and that you care about them as a person, not just as a guest. Make them want to keep coming back during this turbulent time and long after. Even if they are a one-stay guest, they will put the experience on TripAdvisor and it will contribute tenfold down the road.
Most importantly – don’t lose hope! By holding on to hope and staying with the fight, everyone will come out on the other side. We may be bruised and tired, but I know it will be worth it!
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