US Hotel Occupancy Rate Plunges to New Low as Major Cities Reimpose Restrictions

It appears that the US hotel industry is still a ways away from a solid recovery, as tourism and travel is expected to remain subdued well into 2021, despite optimistic vaccine rollouts across the country.

Many major cities across the US have recently begun reinstating some form of lockdown restrictions and social distancing measures amid the holidays in order to reduce the spread of Covid-19. In the meantime, a new, mutated strain of the virus that is spreading across Europe continues to seed worry among Americans, many of which have refrained from leisure travel.

As a result of the subdued demand for the accommodation industry, the US hotel occupancy rate dropped by 26.4% to 36.8% in the week of December 13 to 19 compared to the same period only a year earlier, reports STR Inc, a hotel industry market data company. The reduced occupancy levels pushed the average daily rate (ADR) to fall by 21.9% to $85.50 during that week, while revenue per available room (RevPAR) declined by 41.5% to $31.45.

As a result of the pandemic, for the first time on record, the hotel industry had over 1 billion unsold room nights across the US, as Americans and other travellers decided to forego hotel stays altogether over infection fears. The alarming data, which serves to gauge the wellbeing of hotels across the country, suggests that some hotel operators may soon be on their last legs if a solid industry recovery is not underway in the near future.

With respect to the less-than-ideal rebound in national occupancy rates for the middle of December, S&P Global Ratings had previously cautioned in its November report that a recovery for the hotel industry may not happen until at least 2023. There have been over 2 million hotel-related jobs lost since the onset of the pandemic, with approximately 25% of hotels across the US at risk of foreclosure.

Last week, commercial real estate firm Trepp brought attention to the dwindling credit performance of commercial real estate loans related to hotels and their continued decline amid pandemic-related stress. Therefore, if the national occupancy rates do not experience some form of a substantial increase in the very near term, then a cascade of bankruptcies and consolidations across the industry could ensue come 2021.

Information for this briefing was found via STR Inc and Trepp. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.