Some of the largest U.S.-based hotel companies have reported their first quarter earnings just as April ended as what may be the worst month in the history of the lodging industry.
Marriott, Hyatt, and Hilton CEOs all said on their respective first quarter earnings calls they expect revenue per available room (RevPAR), a measure of occupancy and pricing, to decline about 90% for the month of April. The hospitality giants, however, are seeing signs that business in Greater China is starting to bounce back – a hopeful sign of what’s to come worldwide.
Marriott President and CEO Arne Sorenson said occupancy has improved to about 20% over the past two weeks in North America and believes lodging demand has stabilized in the face of the COVID-19 pandemic.
Roughly a quarter of Marriott’s 7,300 hotels are closed, with 16% of our North American portfolio temporarily closed.
“The resiliency of demand is evident in the improving trends in Greater China, new bookings continue to pick up with demand, driven primarily by domestic travelers,” Sorenson said, adding occupancy levels in Greater China are currently just over 30%, up from the lows of under 10% in mid-February.
For the recent five-day holiday weekend in China, leisure demand being strong, with occupancy for that weekend was over 45% with resort markets close to 70%.
Hyatt is also looking to Asian markets where negative trends appear to have bottomed. In China and South Korea, bookings and occupancy have steadily increased as new coronavirus infection rates dropped below 100 cases per day. Short-term transient business bookings recently doubled in South Korea, and China has gone from 26 to 1 hotel that’s now currently closed.
Several Hyatt properties were also sold out for the Chinese Labor Day holiday. “While occupancy has been building over the course of the month, the last week was quite significantly positive,” Hyatt CEO Mark Hoplamazian said Thursday during the company’s earnings call. “The fact that you can even have a hotel sell out at this point is a pretty notable thing to begin with.
He also said the hotels that were in the highest demand are hotels that have a very significant drive to marketplace. “It validates what we expect to see elsewhere, which is leisure will lead, drive-to markets will lead.”
A third of Hyatt’s hotels around the world have suspended operations due to declines in occupancy and travel demand during the coronavirus pandemic. Operations are suspended at 62% of full-service hotels but only 19% of select-service hotels in the Americas, according to the company.
Hyatt saw RevPAR decline 28% across its portfolio.
As the coronavirus was the worst in North America in mid-March, “we expect the second quarter to be our worst quarter of the year,” Hyatt Chief Financial Officer Joan Bottarini said. “May will look a lot like April.”
Hoplamazian expects to see “a resurgence of travel at a very, very high level” due to significant pent-up demand.
Hyatt started the year looking at new openings of over 80 hotels, but now about 10 hotels may be pushed into next year, mainly in Asia Pacific and Europe.
Hilton, too, has seen signs of recovery in China, where nearly all closed properties have reopened and booking traffic has been steadily growing. During China’s May Holiday, occupancy reached more than 50%, up from 9% at its low point in February, Hilton Worldwide Holdings President and CEO Christopher Nassetta said on the company’s respective earnings call.
Hilton has currently suspended operations at approximately 950 or 16% of its hotels globally, including about 10% of hotels in the Americas.
Global occupancy levels have gone from a low point of 13% to 23% currently.
RevPAR in March dropped 57% as the virus spread across Europe and the U.S. “given the timing of the pandemic, and we expect a much more dramatic impact on our second quarter results.” Nassetta also expects RevPAR to decline roughly 90% in April.
“Assuming we start to see mobility and we don't have a significant recurrence, demand should slowly rebuild in the third quarter.”