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S&P Global Ratings has said in a new report that a “strong recovery is not likely” until 2023 – and this is based on a widely available vaccine becoming available in the second half of 2021. Covid-19 has withdrawn the request for travel this year as lockdowns have harassed cities and reduced business and leisure travel.
In a disturbing statistic for hotel businesses, annual revenue per available room, which is a closely watched metric to measure hotel health, declined 50% in 2020. S&P predicts a slight rebound in 2021, but will remain still between 20% and 30% lower than in 2019. A full recovery to pre-Covid levels is not expected for a few years.
S&P has downgraded by roughly 75% of all rated US hosting companies since April. Downgrades have spread to other travel-related industries, including theme parks and cruise lines.
In recent months, hotels have sounded the alarm bells about the perilous financial situation in which they find themselves. An August report said 25% of hotels were at risk of foreclosure. Around 2 million jobs have also been lost, the economic impact on the industry being “nine times greater” than the September 11 attacks, according to a hotel group.
“If we don’t get the vaccine quickly and business doesn’t come back, it’s going to get a lot worse,” Best Western CEO David Kong, the industry’s longest-serving CEO, recently told CNN Business. He added that the industry needs a new round of stimulus funding, which doesn’t appear to be happening anytime soon.
Third quarter profit of Hilton (LDS) and Marriott (MAR) released last week show that activity has recovered from the start of this year, but the two saw deep declines in revenue and did not release forecasts.
“We still have a long way to go, but this crisis will end and I think travel will rebound quickly,” Marriott CEO Arne Sorenson noted in his earnings release.
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