The airline industry asked for $60 billion bailout. Boeing asked for a $60 billion bailout. The hotel industry said ‘hold up… WE WANT $250 billion FROM THE GOVERNMENT.’
The CEO of the American Hotel & Lodging Association has said that the reduction in travel resulting from the COVID-19 crisis is already more severe than 9/11 and the 2008 recession combined.
In major cities that are used to high rates and occupancy (e.g. Austin, Boston, San Francisco, and Seattle) they have been seeing occupancy of under 20% for the past few weeks.
IT JUST GOT WORSE
More than 75% of hotel rooms in the U.S. were empty last week. And things were even worse in the top 25 hotel markets.
As reported by Hotel News Now, U.S. hotel revenue and occupancy data is a disaster and a same-week comparison with the prior year shows that last week:
- Occupancy fell 67.5% to 22.6%
- Average daily rate: down 39.4% to $79.92
- Revenue per available room: down 80.3% to $18.05
BUT WHO WAS HIT THE WORSE?
New Orleans, Louisiana, recorded the steepest decline in RevPAR (-92.8% to US$10.27), due primarily to the second-largest decreases in occupancy (-84.9% to 12.7%) and ADR (-52.3% to US$80.74).
Oahu Island, Hawaii, experienced the steepest drop in occupancy (-86.4% to 10.5%).
Miami/Hialeah, Florida, posted the largest decline in ADR (-57.9% to US$116.64).
Of note, occupancy in New York, New York, was down 81.8% to 15.2%. In Seattle, Washington, occupancy dropped 76.6% to 18.5%.
So Is There More Merit To Hotel Aid?
With the above out of the way, there is an important distinction when comparing the hotel industry to the airline industry. A majority of hotels aren’t owned by the actual global hotel groups (i.e. Marriott, Hyatt, Hilton, etc.), but rather are owned by individual investors. The major global hotel groups simply charge a management (or franchise) fee.
This is a bit different than the airline industry, for example, which is exclusively “big business.” With hotels:
- Most smaller hotels operate on a franchise model, so your roadside Fairfield Inn is probably owned by an individual who spent their life savings up to buy their own hotel, and relies on it to make a living
- On the other hand, there are all kinds of major hotels (ones that cost hundreds of millions of dollars) that are owned by multi-billion dollar venture capital firms
- And then there are a small percentage of hotels belonging to the global hotel groups are owned directly by hotel groups (Marriott, Hyatt, Hilton, etc.)
That means there’s a huge variety of ownership structures here, however, does that Fairfield that is owned by the life savings individual deserve aid? Does the venture capital firm deserve a bail out? Does the “big business” hotel group deserve the bailout?
This is a very complicated subject and at this point, I think some hotel owners would just like to relinquish the keys because it’s that bad.
I’m not an economist but I also feel like when we start talking about amounts in the billions (or trillions) we lose sight of just how much money that is. For example, the US has a population of about ~328 million people, so when you divide $250 billion by that, you’re looking at somewhere around $762 per person for the hotel industry only.
What do you make of all of this? If everyone receives a bailout, does anyone get a bailout?