After weathering the darkest days of the COVID-19 pandemic, the hotel business is looking ahead to a recovery that could be kicked off by Spring Break.
Key markets in South Florida and Vegas are seeing a huge uptick in bookings. The upcoming summer season could be particularly strong with so many Americans desperate for a vacation. Hospitality sector financials are also improving as hotels adapt their business for the post-pandemic era.
Related Stocks: Marriott International, Inc. (MAR), Hilton Worldwide Holdings Inc. (HLT), Wyndham Hotels & Resorts, Inc. (WH), Airbnb, Inc. (ABNB)
It goes without saying that 2020 was a disastrous year for the hotel business. Globally, industry revenue plunged to just $198.6 billion in 2020, a massive 46% drop YoY.
Combined losses of the world’s top 5 hotel chains, Wyndham Worldwide, Choice Hotels International, Marriot International, Hilton Worldwide Holdings, and Intercontinental Hotels Group, topped $14 billion for the year.
Last Autumn marked a particularly hard hit for many hotels as a second precipitous dip in bookings began to form, undermining the moderate recovery seen in Summer 2020. At the time, MRP noted that, after ranging between 48% and 50% occupancy from mid-July into the later portion of October, the three weeks to mid-November produced levels of just 44.4%, 44.1% and 43.2%, respectively. The average daily rate (ADR) declined to $90.58, down 28.6% YoY, and revenue per available room was just $39.11, down 52%.
While the situation is still not ideal for hotels, it is time to start looking through the gloom and seeing what lies on the other side, as the latest data shows the hospitality sector finally resetting their trajectory toward a long-awaited recovery this month.
Occupancy Rates Rebound, Hospitality Chains Prepare for Recovery
US weekly hotel occupancy just reached a 20-week high of 49%, according to STR’s latest data through March 6. Though that is more than 20% below the same period last year – 65% if you compare it to pre-pandemic levels – the year ahead looks a lot brighter than it did in March 2020. Additionally, the ADR jumped up to $98.30, and revenue per available room was $48.13.
In another positive sign, more hotels are reopening. Of hotels tracked by STR, only 2.5% of US rooms were closed, a drop from 18% last April, a testament to easing pandemic-era restrictions on occupancy.
Per the Wall Street Journal, the Baird/STR Hotel Stock Index, which tracks shares of eight hotel brands and 12 hotel real estate investment trusts (REITs), jumped 22% in February, compared with less than a 2% increase for the S&P 500. That gain in the hotel index followed a 31% surge in November, amid news of the first COVID-19 vaccine coming to market.
Wyndham Hotels & Resorts, for instance, owner of a portfolio of brands including Days Inn and Super 8, remained profitable in Q4 and said it expects to double its quarterly dividend to $0.16 per share after cutting it during the pandemic. Additionally, Wyndham noted…