Even if a coronavirus vaccine is released next year, the battered lodging industry will take several years to recover.
S&P Global Ratings said in a new report that a “solid recovery isn’t likely” until 2023 — and that’s based on a widely available vaccine becoming available in the second half of 2021. Covid-19 has suppressed demand for travel this year as lockdowns snarled cities and reduced both business and leisure travel.
In a worrisome stat for hotel companies, year-over-year revenue per available room, which is a closely watched metric for gauging hotel health, has decreased 50% in 2020. S&P forecasts that will rebound slightly in 2021, but will still remain between 20% and 30% lower compared to 2019. A full recovery to pre-Covid levels isn’t expected for another few years.
S&P has slashed ratings on about 75% of all rated US lodging companies since April. The downgrades spread to other travel-related industries including theme parks and cruise lines.
In recent months, hotels have been sounding the alarm regarding the perilous financial positions they’re in. An August report said that 25% of hotels are at risk of foreclosure. Roughly 2 million jobs have also been lost with the economic impact on the industry being “nine times greater” than the September 11 attacks, according to a hotel trade group.
“If we don’t get a vaccine soon and business doesn’t return, it’s going to get much worse,” Best Western CEO David Kong, the industry’s longest-serving CEO, recently told CNN Business. He added that the industry needs a new round of stimulus funding, which doesn’t appear to be happening anytime soon.
Third-quarter earnings from Hilton and Marriott released last week show that business recovered compared to earlier this year, but both registered deep declines in revenue and didn’t release guidance.
“We still have a long road ahead, but this crisis will come to an end, and I believe travel will rebound quickly,” noted Marriott CEO Arne Sorenson in its earnings release.