COVID-19’s impact on the hospitality industry has been devastating. With the abrupt halt to business and leisure travel, occupancy rates plummeted. Six out of 10 open hotel rooms were empty nationwide as of June 6, according to Smith Travel Research (STR), which collects, analyzes and reports hotel industry data. This dismal figure doesn't include the thousands of hotels which have already closed their doors. Since the public health emergency began escalating in the US in mid-February, hotels have already lost more than $31 billion in room revenue. This figure is alarming with hotels currently on pace to lose up to $400 million in room revenue per day, based on current occupancy rates and revenue trends. At this rate, it’ll amount to a loss of $2.8 billion every week with more hotels taken off the grid as each week passes. STR Tourism Economics are projecting revenue losses of 57.5 percent for the year. Last week, revenues were 34 percent of what they were during the same time period in 2019. The human toll is equally grim with major hotel managers already reporting significant layoffs and furloughs. The Bureau of Labor Statistics revealed that 7.7 million hospitality and leisure jobs vanished in April alone and hotel workers are now losing more than $2.4 billion in earnings each week.
Let’s take a detailed look at how the major chains have been affected by this global pandemic and the steps they’ve taken to respond to the crisis. #HiltonHotels Worldwide Holdings has suspended operations across many managed and franchised hotels. Those that remain open have reduced services for guests because of the decreased occupancy levels. At the corporate level, Hilton has taken any number of actions to significantly reduce their expenses and preserve liquidity. President and CEO Christopher Nassetta gave up his salary for the remainder of the year and the executive committee has taken a pay cut of 50 percent for the duration of the crisis. Beginning April 4, many corporate Hilton team members have either reduced their schedules or been furloughed for up to 90 days. Those corporate team members not furloughed saw their pay reduced by 20 percent. All capital expenditures have been eliminated along with the share buyback program and dividend payments. Guest reservations, even for non-cancellable stays occurring on or before June 30, are eligible for full refunds.
The company has developed a new worldwide program of enhanced hotel cleanliness and disinfection to ensure their guests enjoy a safer and cleaner stay. They call it “Hilton Clean Stay with #Lysol Protection.” It’s been developed with experts from RB, makers of Lysol brands trusted for safely disinfecting surfaces. In addition, they consulted with the Infection Prevention and Control team at the world-famous #MayoClinic for advice and assistance with cleaning disinfection protocols. The program includes contactless check-in and check-out, extra disinfection of the top 10 high-touch hotel room areas, the “Hilton Clean Stay Hotel Seal” indicating that guest rooms haven’t been accessed since their cleaning, increased deployment of hand sanitizers, and greater frequency of public area cleanings.
The #Hyatt Hotels Corporation has been disproportionally affected by the ongoing COVID-19 crisis as they have no exposure to economy, midscale or extended-stay hotel brands. The company has built its core offering around the higher-end properties that have seen demand fall precipitously. “We have clearly a more significant representation full service than some of our large public peers and also a higher representation in urban and resort markets,” said Hyatt President and CEO Mark Hoplamazian. Their first-quarter results include some very sharp performance drops including a 262.8 percent decrease in net income resulting in a net loss of $103 million for the quarter along with a 54.3 percent drop in adjusted earnings. About 35 percent of their hotels had operations suspended as of April 30, including 62 percent of full-service properties in the Americas and 82 percent of their owned and leased portfolio. Hyatt officials have stressed they have enough cash to maintain operations through a prolonged crisis with just over $3.1 billion in available liquidity,
including $1.6 billion in cash.
With some very limited exceptions, existing reservations booked at Hyatt before July 1 for arrivals through the end of that month can be cancelled at no charge up to 24 hours before scheduled arrival. In May, the company introduced their Global Biorisk Advisory Council (GBAC) STAR accreditation program which is essentially a performance-based cleaning, disinfection and infectious disease prevention initiative. It focuses on establishing hotel environments that are sanitary, safe and healthy. The accreditation will include detailed training at more than 900 hotels worldwide and Hyatt intends to complement that with regular internal and third-party auditing. GBAC is a division of the International Sanitary Supply Association, the worldwide cleaning industry association, and is comprised of leaders in the area of microbial-pathogenic threat analysis and mitigation designed specifically to deal with biological threats and real-time crises like this pandemic.
With its $13 billion acquisition of #StarwoodGlobal Hotels in 2016, the #Marriott Corporation became the largest hotel company in the world, joining together its Marriott, #CourtyardHotels and #RItzCarlton brands with Starwood’s #SheratonHotels, #Westin, #WHotels and #stregishotels properties. It’s no surprise then that the COVID-19 pandemic and resultant travel downturn has wrecked havoc on its global business. Net income plunged during the first quarter to $31 million compared with $375 million during the same time period last year. Revenue per available room (RevPAR), a key hospitality-industry metric, declined 19.5 percent in North America and 30.4 percent elsewhere. Arne M. Sorenson, Marriott’s President and CEO, said, “In the last few months we have seen the impact of COVID-19 spread throughout our business in an unprecedented way. In April, worldwide RevPAR declined approximately 90 percent. Currently, roughly a quarter of our worldwide hotels are closed.” The company has taken steps to preserve liquidity and mitigate the impact of low demand. In addition to reducing operating expenses dramatically, they issued $1.6 billion of senior notes and in early May announced amendments to their existing co-branded credit card agreements with JP Morgan Chase and #AmericanExpress, raising $920 million in additional liquidity.
The hotel’s cancellation policies have been relaxed and loyalty program status has been extended through February 2022. The Marriott Global Cleanliness Council was recently formed. It consists of experts in food and water safety, hygiene and infection prevention as well as hotel operations. They’re all working towards developing a new generation of global hospitality cleanliness standards. In its everyday cleaning, the company is now using the highest classification of disinfections recommended by the Centers for Disease Control and Prevention and the World Health Organization to treat known pathogens. In public spaces, surfaces are treated with hospital-grade disinfectants. Contactless check-in is now available in over 3,200 properties. All guest-room surfaces are treated with hospital-grade disinfectants and cleaning is done with increased frequency. More hand sanitizing stations are now available near entrances, front desks and elevators.
With all that bad news, there’s reason to be hopeful. STR data for the week ending June 6 showed another small rise from previous weeks in US hotel performance. Leaders of all 3 mega-chains have publicly commented on sector improvement. In early June, Marriott CEO Sorenson reported the company had reopened all its hotels in China and was seeing a steady recovery in the US, its largest market. Hyatt CEO Hoplamazian said recently, “All of the early evidence that we’ve seen in some of the earliest markets to reopen, like China, suggest to us that there’s a tremendous level of pent-up demand.” Indeed, Many hotels are seeing strong bookings for the months of July and August. Hilton CEO Nassetta believes there are signs of hope that the hospitality industry will recover faster than its chief peers, notably airlines and cruise ship companies. “I feel spectacularly good about the long-term for the industry,” he noted on a conference call with analysts after the release of their first-quarter results. He sees a return, first to leisure travel, then to business bookings and finally to meeting travel as the patterns that will take shape as the crisis fades. We can only hope.
Until next time…stay safe.
Good news that the hotels are seeing signs of recovery
Very informative and encouraging to know our hotel rooms will be so much more clean in the future. Guess we’ll have to consider higher tips for the room service staff!!