Hotel Industry Years from Returning to Pre-Pandemic Levels

Irfan Peer Mohamed, director of food and beverage at the Argonaut Hotel in San Francisco, watched his staff shrink from 80 to about 10 during the early stages of the coronavirus pandemic.

He knew he would soon be unemployed, but he kept his team informed and prepared for being out of work as best he could.

“I wanted to make sure everybody would be okay,” Mohamed told Newsweek. “I knew it was going to be bad, and it’s been rough.”

coronavirus, Palau, hotels, covid-19
Palau Hotel in Palau is the oldest hotel in the country. It is currently closed due to lack of business.
Courtesy of Palau Hotel

A total of 7.653 million leisure and hospitality workers, or about 47% of the industry’s workforce, lost their jobs in April—the largest one-month net decline during the pandemic, the U.S. Bureau of Labor Statistics reported.

Mohamed was one of them.

Pete Hillan, spokesman for the California Hotel & Lodging Association, said there are about 6,000 hotels in the state employing an estimated 235,000 workers.
“The coronavirus pandemic has decimated travel and tourism throughout the state,” he told Newsweek. “The impact is going to be felt for years, and the industry won’t return to pre-pandemic levels until 2024.”

Hillan said the hotel industry follows guidelines established by the U.S. Centers for Disease Control and Prevention to limit the spread of COVID-19 to protect guests and staff. Nevertheless, occupancy rates remain low. Demand for conventions, business meetings, bar mitzvahs and weddings has collapsed as most leisure travel vanished.

And that means hard times for hotel employees.

“We’re now in the eighth month of the pandemic,” Hillan said. “Many employees are running out of benefits that help them survive.”

Hotel occupancy rates have recovered from record lows, but still remain well below average. Bookings on Oahu in the Hawaiian Islands were down 82.4% in September compared with a year ago, while occupancy in New York was off 77.5%, New York investment bank Goldman Sachs said in a research report.

Economy and mid-priced hotels have rebounded faster than other market sectors, but still remain significantly below average. High-end hotels recently reported a slight uptick, but remain near record lows, the New York investment bank said.

Construction of new rooms has all but stopped, and low occupancy rates force hotels to cut prices to compete for fewer business and leisure travelers, further straining profit.

The COVID-19 pandemic has whacked hotel stocks. Hyatt Hotels recently fetched $64.88 a share, down 31.69% from its 52-week high of $94.98. Marriott International recently changed hands at $115.26 a share, down 24.86% from its 52-week high of $153.39. At $12.41 a share, Extended Stay America is down 18.84% from its 52-week high of $15.29.

In New York, some hotels are providing temporary housing for the homeless as a stopgap measure to generate revenue. Residents of Manhattan’s posh Upper West Side objected when homeless people were lodged in the Lucerne Hotel. Similar objections were voiced in Brooklyn and other parts of the city where other homeless people were temporarily housed.

An estimated 100 New York hotels have temporarily closed, and a number of major hotels, including the Roosevelt, announced plans to close permanently.

“Due to the current, unprecedented environment and the continued uncertain impact from COVID-19, the owners of The Roosevelt Hotel have made the difficult decision to close the hotel and the associates were notified this week,” hotel management said last month in a statement.

The hotel, opened in 1924 and named for President Theodore Roosevelt, employed about 500 people at the time of the announcement.

Many movies have been filmed at the hotel on East 45th Street near Grand Central Terminal, including “Malcolm X,” “The French Connection,” “Man on a Ledge,” “Maid in Manhattan” and “The Irishman.”

“There are currently no plans for the building beyond the scheduled closing,” the statement announcing the closure of The Roosevelt Hotel said. But there are plans to repurpose some hotels. The Bryant Park Hotel in midtown Manhattan may be returned to its original use: office space. The planned “boutique offices” will range in size from 1,900 to 7,535 square feet.

But post-pandemic demand for office space is unclear, because it’s unknown how many people will continue to work from home full- or part-time. A sharp decrease in demand for office space would undercut rents and could make some projects infeasible.

A slower than expected recovery in business and group travel could mean the hotel industry won’t fully recover until at least 2023, Standard & Poor’s believes.

U.S. revenue per available room will be down about 50% in 2020 compared with last year. Despite a recovery expected to begin in the second half of 2021, revenue is still expected to remain 20% to 30% below 2019 levels. The downturn could lower the industry’s credit rating, forcing hotels to pay higher interest rates on future loans for construction or renovation, S&P warned.

The anticipated recovery depends on wide distribution and acceptance of a Covid-19 vaccine. Preliminary reports on Pfizer’s new COVID-19 vaccine is encouraging, but it’s unclear how quickly it can be distributed and how many people will be willing to take it.

“The coronavirus pandemic upended the U.S. lodging sector this past year, and S&P Global Ratings doesn’t think a recovery will take hold in earnest until there’s a widely disseminated medical solution—likely in the second half of 2021,” analyst Emile Courtney said in a research report.

“We don’t see revenue per available room fully recovering until 2023 at the earliest,” the report said.

A survey conducted by the American Hotel & Lodging Association, a Washington-based trade group, found that only 37 percent of the nation’s hotels have rehired at least half of their workers.

“The pandemic has all but decimated the hotel industry with business and leisure travel grinding to a near halt and occupancy rates hitting record lows,” Chip Rogers, CEO of the association, said in a statement. “Thousands of hotels can’t afford to pay their mortgages and are facing the possibility of foreclosure and closing their doors permanently. That will have a ripple effect throughout our communities for years to come.”

The roiling of the market has forced hundreds of thousands of hotel workers to make other plans. Mohamed said he took a temporary job in San Diego, worked as a census enumerator last summer and now works part-time for minimum wage at a Bay Area golf course while volunteering at the Red Cross. Even with unemployment benefits, it hasn’t been enough. He and his family moved into a smaller apartment.

“This is the first time I’ve been out of work for a long time,” Mohamed said. “I was out for a week after 9/11. My kids— my daughter is 14 and my son is 12— see that I’m doing my best to help them get what they need. I’m always looking for something. It’s been hard.”

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