Hotel owners still reeling from the coronavirus pandemic

Hotel owners brace for a tough 2021, as the industry continues to experience a historic drop in bookings caused by the Covid-19 pandemic.

While the industry’s worst year in living memory has ended with a glimmer of hope, many in the industry expect the celebrations to be short-lived.

The start of Covid vaccinations in the United States and Europe raised the prospect that people would start traveling again and blew up the shares of hotel owners and operators. But investors and analysts say reservations will take years to return to pre-pandemic levels. Meanwhile, the industry faces increasing financial stress as homeowners struggle to pay mortgage bills, salaries and other expenses.

Despite the record decline in bookings, many hotels were able to stay open thanks to bank debt relief and temporary government assistance like the Paycheck Protection Program. Today, some lenders are starting to lose patience, brokers and investors say, which could lead to an increase in foreclosures and sales of distressed properties in the first half of 2021.

Hotel owners brace for a tough 2021, as the industry continues to experience a historic drop in bookings caused by the Covid-19 pandemic. (iStock)

DELTA CEO SEES LITTLE RECOVERY FROM TRAVEL SLUMP LATER IN 2021

For hotel owners, “it’s all about survival,” said Greig Taylor, managing director of consulting firm AlixPartners LLP.

In the short term, the slowness of vaccinations and the still high number of Covid-19 infections will likely continue to hold back bookings. In a November report, S&P Global Ratings estimated that revenue per available hotel room fell 50% in the United States in 2020. The rating agency expects revenue to pick up in 2021, but estimates it will still be 20% to 30% lower than in 2019. He does not expect revenues to fully recover until 2023.

Public markets are also pessimistic. Although the FTSE Nareit Equity Lodging / Resorts Index surged in November following news of successful vaccine trials, it was still down 25% in 2020. The S&P 500 Index was up 16% on the same period.

Business travel is of particular concern. While some analysts expect tourism to pick up at a near-normal pace by the second half of 2021 in many places, cutting costs and the growing popularity of virtual meetings could mean fewer credit cards. company will be used in hotels for the foreseeable future. In a recent report, accounting and consulting firm PricewaterhouseCoopers said some business trips may never return.

“I think the biggest change will be the last minute business travelers on the road for 100 or 150 days a year,” said Michael Bellisario, senior research analyst at Robert W. Baird & Co. “Because I think they’re going to say, “Do I need my employer to spend money on this? Can we do it over the phone? Can we do this via Zoom? “”

In a recent report, accounting and consulting firm PricewaterhouseCoopers said some business trips may never return. (AP Photo / John Minchillo, file)

UNIVERSAL ORLANDO HAS OPENED A NEW VALUE HOTEL WITH ROOMS FOR $ 77 PER NIGHT

This is a problem because business travelers are generally the most profitable customers of hotels. They often book last minute and tend to be less concerned about costs than leisure travelers. Hotels in big cities like New York or Chicago that depend on business travelers will take a particularly long time to recover from the crisis, said Mr. Bellisario.

Nayan Patel, who owns seven hotels in the Washington, DC area, including the Georgetown Inn, said his revenues were down about 80% from a year ago. Business travelers, once a major source of income, have all but disappeared. He said he recently closed one of his properties, the 76-room West End Hotel, because two or three bookings per night couldn’t even pay for his front desk staff, although he plans to reopen once business resumes. “If you look at our numbers, they are appalling,” he said. “I don’t try to watch them every day because it’s too depressing.”

Mr. Patel expects the business travel drought to weigh on his income in 2021 as well. “If you look at next year’s schedule for the DC Convention Center, it’s pretty much empty,” he said. he declared. “It’s a major problem.”

Thanks to his lenders’ forbearance from indebtedness, Patel was able to keep his properties, he said, but others were not so lucky. Although the number of seizures is still low, it is gradually increasing. Debt relief deals negotiated in the spring are expiring, leaving many hoteliers to choose between asking for help again or handing over the keys. Mark Schoenholtz, vice president of real estate services firm Newmark, said he expects sales of struggling hotels to increase in early 2021, as new spikes in infections lead to property closures . “It’s going to force homeowners and lenders to put things on the market,” he said.

Despite the record decline in bookings, many hotels were able to stay open thanks to bank debt relief and temporary government assistance like the Paycheck Protection Program. (iStock)

GET FOX BUSINESS ON THE ROAD BY CLICKING HERE

Outside of business travel hotspots and large conference hotels, the outlook is less bleak. Millions of Americans, most of whom have been homebound for nearly a year, are eager to travel again. Analysts say they expect bookings at popular leisure travel destinations like Miami or San Diego to increase once vaccines become widely available and people feel safe.

Alan Lieberman, whose South Beach Group owns 17 hotels in Miami Beach, including the Chesterfield Hotel & Suites, and one in Hollywood Beach, said his properties were almost booked for New Years Eve. His biggest problem at the Now is to find workers, he said. His company laid off about 1,200 people in the spring when it temporarily closed its hotels. Now he’s struggling to persuade some of those former employees to revert to their old salaries, which he says are often not much more than what they collected through extended unemployment assistance. In some cases, he said, staff shortages have forced managers to clean rooms.

Although he expects occupancy to be near normal levels until May, when peak tourist season ends, most rooms have been at great rates. Its income will not have returned to pre-pandemic levels until the cruise ships and conferences return, he said. Still, he feels lucky to have hotels in a sunny location with a beach. “I would be bankrupt in Chicago or New York,” he says.