IRR Says “Survival” is the Watchword for Hotel Operators
“Survival” is the term Integra Realty Resources uses to characterize hotel operators’ current priorities. “The market has set trends aside and is fully focused on the operation of its existing properties,” IRR says in its latest update on the lodging sector.
With the near-term outlook pointing to a continued glacial pace in the recovery of demand, “operators are placing emphasis on sanitation/cleaning protocols, increased customer service, and digital check-ins,” says IRR. “Due to limited capacities, daily operations will change, and operators will look for alternative sources of guests, as they re-purpose under-utilized spaces.”
Meanwhile, the challenging environment has altered the investment landscape, at least in the near term. IRR reports, “Sellers are finding new, non-traditional buyer pools, as cities and counties are purchasing under-performing hotels for transitional and low-income housing requirements. Once the pandemic begins to abate, attention will return to enhancing the guest experience and building loyalty programs.”
IRR cites an estimate from the American Hotel & Lodging Association that 68% of hotels have less than half of their pre-crisis staff. Half the respondents to AHLA’s recent member survey believe that their properties are in danger of foreclosure, “and two-thirds believe that they can last only six more months at their projected revenue level. The Top 25 Markets, as defined by STR, are showing an overall occupancy rate of only 39.5% (-46.6%), with an ADR of $100.90 (-26.2%) and RevPAR of $40.01 (-60.6%).
For the current year, STR’s and Tourism Economics’ latest projections forecast occupancy at 52.2%, ADR at $109.21 and RevPAR at $57.03. “Unfortunately, these numbers are likely to deteriorate, as second and third waves of COVID-19 infections have surged in the fourth quarter of 2020, and new shutdowns have been enacted on a state-by-state basis,” IRR says.
The report does see “some light at the end of the tunnel,” as COVID-19 vaccines go through the approval and deployment processes. “Assuming effective deployment and efficacy of these vaccines, demand should begin to increase by the second quarter, beginning with leisure and extending to commercial and group by the fourth quarter 2021,” the report states. “We do not anticipate a return to pre-pandemic metrics until early 2024 due to decreased demand.”
For comments, questions or concerns, please contact Paul Bubny
- ◦Economy
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