The hotel industry, like other travel sectors, has been hard hit by the pandemic with a 2020 survey by the American Hotel & Lodging Association finding that nearly nine in ten hotels have been forced to lay off or furlough employees. Overall, the virus has ravaged the hospitality and travel industries since its onset in March. Subsequent shutdowns and restrictions meant to contain the virus eventually cost more than 520,000 US service workers their jobs. Unlike airline employees, there has been no direct government payroll support for hotel workers and the Paycheck Protection Program’s loan forgiveness process for owners was spotty at best. Hotel headcount reductions come at a particularly tough time for veteran staffers who are in their 50s or 60s and cannot easily find another job in the battered industry. The introduction of vaccines into the population should be enough to eventually begin reopening common borders and bolster the need for overnight stays from business and leisure travelers. Hopefully, displaced workers will be called back but COVID has certainly taken its toll on both human and corporate levels. The reductions in force are a direct result of a precipitous decline in business. Let’s look at the numbers then and see just how badly the three major US-based hotel chains fared in the last quarter of 2020 and for the full year itself.
The results reported by Hilton Worldwide Holdings were not good as the coronavirus pandemic has had a detrimental effect on their business. The net loss for the fourth quarter was $225 million and total loss for the year was $720 million. For the three months and year ending December 31, 2020, system-wide comparable RevPAR decreased 59.2 per cent and 56.7 percent, respectively, compared with the same periods in 2019. Revenue per available room (RevPAR) is a metric used in the hospitality industry to measure hotel performance. The measurement is calculated by multiplying a hotel’s average daily room rate (ADR) by its occupancy rate. It’s also calculated by dividing a hotel’s total room revenue by the total number of available rooms in the period being measured. The poor performance resulted in the complete or partial suspension of hotel operations at approximately 20 per cent of Hilton’s global hotel properties for some portion of the year ended December 31, 2020.
Christopher J. Nassetta, President and CEO of Hilton, said, “Our fourth-quarter results were largely in line with our expectations as rising COVID-19 cases and tightening travel restrictions disrupted the positive momentum we saw throughout the summer and fall.” Despite this challenging environment, Hilton opened 154 new hotels in the fourth quarter, totaling 22,900 rooms, and achieved net unit growth of 20,900 rooms. Surprisingly, during the full year 2020, Hilton opened 414 new hotels totaling 55,600 rooms and achieved net unit growth of 47,400 rooms. Hilton opened the Waldorf Astoria Xiamen, the company’s 300th hotel in China in December, 2020 and continued to add to its luxury portfolio in 2021 with the opening of the Waldorf Astoria Monarch Beach Resort & Club. As of December 31, 2020, Hilton’s development pipeline totaled nearly 2,570 hotels consisting of more than 397,000 rooms throughout 116 countries and territories, including 233,000 rooms located outside the US. At year-end, Hilton had $10.6 billion of long-term debt outstanding with a weighted average interest rate of 3.77 per cent. Last March, the company suspended share repurchases and the payment of dividends to preserve capital and maintain liquidity. The stock repurchase program, however, remains authorized by the Board of Directors, and the amount remaining under the program is approximately $2.2 billion.
Hyatt Hotels Corporation reported a net loss of $203 million, or $2.00 per diluted share in the fourth quarter of 2020 compared with a net income of $321 million or $3.08 per diluted share in the last quarter of 2019. For the full year, their net loss decreased from $766 million in 2019 to $703 million in 2020. RevPAR system-wide decreased by 65.4 per cent. Consistent with third quarter trends, occupancy was driven primarily by favorable leisure transient demand, particularly on weekends and holidays . Business transient and group demand continued to be muted and Hyatt’s full service hotels in the Americas were negatively impacted by group cancellations. To their credit, nearly all properties in Hyatt’s system were open at year end with 94 per cent of total system-wide hotels and 93 per cent of rooms available.
Mark S. Hoplamazion, President and CEO said, “I am extremely proud of, and grateful for, the achievements of our teams around the world throughout 2020. The Hyatt family demonstrated resilience in the face of difficult decisions and undertook meaningful action to place Hyatt in a strong position as the recovery unfolds.” Against a backdrop of challenging operating fundamentals, the company’s net rooms growth was strong. Hyatt opened 72 hotels and entered 27 new markets. They also executed new contracts to maintain a robust pipeline increase to their existing hotel rooms going forward. Hyatt reported total debt at year end of $3.24 billion and undrawn borrowing ability of $1.49 billion. The company believes it has adequate existing liquidity to fund operations and investments supporting the continued growth of the business for approximately 36 months based on fourth quarter 2020 demand levels. Hyatt planned to sell approximately $1.5 billion of real estate by March 2022 as part of its capital strategy announced in March 2019. As of December 31 2020, they’ve realized proceeds of nearly $1 billion towards that goal. With 20 premiere brands, the company’s portfolio includes over 975 properties in 69 countries across six continents.
Marriott International’s fourth quarter 2020 results, like others, were materially impacted by the COVID-19 pandemic and efforts to contain it. Full year worldwide RevPAR declined 60 per cent, with average occupancy of just over 35 per cent compared with 73 per cent for full-year 2019. The company experienced the sharpest worldwide RevPAR decline on record in April, down 90 per cent year-over- year with just 12 per cent occupancy. Year-over-year RevPAR and occupancy rates showed steady improvement over the summer and into early fall but the later spike in coronavirus cases in many markets around the world saw the global pace of recovery flatten in the fourth quarter and into the first few weeks of 2021. Marriott’s reported operating loss in the fourth quarter of 2020 totaled $128 million, compared with 2019 fourth quarter reported operating income of $274 million. Fourth quarter 2020 adjusted net income totaled $39 million, compared with 2019 fourth quarter adjusted net income of $498 million.
Marriott’s pipeline grew in Q4 though to more than 498,000 rooms at the end of 2020, with 46 per cent of those rooms under construction. Newly-named CEO Tony Capuano (who replaced Arne Sorenson who passed away in mid-February at the age of 62) said the company is seeing strong interest in conversions, as demonstrated by the recent announcement of the planned conversion of 19 all-inclusive hotels with nearly 7,000 rooms to the Marriott system in the Caribbean and Latin American region during this year. Commenting on the quarter, he said, “We are gratified that we continue to see strong demand for our industry-leading brands from owners and franchises despite the unprecedented challenges resulting from the pandemic. “At year-end, the company’s global lodging system totaled more than 7,600 properties and timeshare resorts with more than 1,423,000 rooms! Marriott’s net liquidity on December 31, 2020 totaled approximately $4.4 billion, representing roughly $0.8 billion in available cash balances and $3.6 billion of unused borrowing capacity under its revolving credit facility.
The numbers we’ve reviewed here are sobering. Consider that the industry’s indicators, namely occupancy, average daily room rate and RevPar for 2019 were all at record highs. According to JLL, a global leader in real estate services, more than $85 billion in worldwide hotel transactions took place during that year alone. Hilton Worldwide reported revenue of $9.45 billion in 2019. Revenue for Hyatt Hotels that year was $2.07 billion and Marriott International’s was $10.57 billion. What a difference a year makes! Warren Marr, US hospitality & leisure managing director for Price Waterhouse Coopers, one of the “Big Four” accounting firms, said earlier in the year, “The significant increase in daily COVID-19 cases across the country is troubling and expected to prolong recovery for hotels.” Certainly, it has been an uneven recovery, with destinations reliant on business, group and international demand suffering the most. Thankfully, COVID numbers nationwide are now in decline with the increased availability of vaccines. But the business traveler’s return will be telling.
Until next time…stay safe.
Very interesting to see that the major groups were able to continue opening hotels across the world - let's hope their enthusiasm for doing so is proven justified as the world recovers and we can get out from our homes!