Hotel Industry 8/30-9/05

Hotel Industry: 8/30-9/05

Hotel Weekly Review

Nationally, hotel occupancy was down 17.1% compared to 2019 this week. Atlanta was 12th out of the 25 biggest lodging markets in the US for the least occupancy rate declines (-21.1%), down from last week’s ranking of 10th out of 25. With the arrival of Labor Day weekend, Atlanta hotel occupancy was able to break last years rate of 66.9% on Saturday, September 5th– the first occupancy rate increase since the pandemic caused shutdowns in April.

Resorts, small towns, interstates, and suburban hotels all had increased occupancy rates at some point this week. Across the board, occupancy rates have recovered the most this week since April. With hotels experiencing their first year over year gains, the future short-term holiday travel outlook is optimistic.

Week of August 30th Winners & Losers

On the profitability and performance end, ADR only declined 0.3% for resorts– indicating resort hotels will be able to maintain last years vacation pricing regardless of the current economic environment. The worst performing location in terms of occupancy, urban hotels, has an exponentially larger ADR (-34.6%) decline compared to other locations– highlighting travel preferences are still slanted towards less concentrated areas.

For chain scale segments, economy and midscale hotels have below 10% occupancy declines as well as low ADR declines (-2.9% and -5.9% respectively). Upper-midscale hotels are in the worst position during the holiday season they have the worst pricing power (-20.2% ADR decline) and large demand deficits (-49% occupancy rate decline). Luxury hotels, although having -56% drops in occupancy rates, had only a -10.2% drop in ADR (4th out of the 7 chain scale segments)– indicating strong pricing ability for luxury hotels despite room demand deficits.

Houston was the first city to experience a weeklong occupancy rate increase since the lockdowns in early April. Virginia Beach, which has consistently been #1 in terms of least occupancy rate decreases, almost experienced a growth occupancy as well. Despite the weekend, large metropolitan areas such as New York, Chicago, and Boston as well as out of reach vacation spots (Oahu) suffered almost 3.5x worse occupancy declines compared to the national average.

Top 6 Performing Cities by change in occupancy

Cities2020 Occ2019 Occ% Change
Houston, TX57.80%50.90%13.50%
Norfolk/Virginia Beach, VA60.60%60.90%-0.50%
Phoenix, AZ48.10%54.00%-10.90%
Tampa/St Petersburg, FL48.10%54.90%-12.20%
New Orleans, LA51.70%59.00%-12.30%
Dallas, TX46.40%56.90%-18.40%

Worst 6 Performing Cities by change in occupancy

Cities2020 Occ2019 Occ% Change
Oahu Island, HI24.40%83.30%-70.80%
New York, NY38.20%87.40%-56.30%
Boston, MA39.20%77.30%-49.30%
Seattle, WA39.40%71.80%-45.20%
Chicago, IL36.10%65.50%-44.90%
Minneapolis/St Paul, MN-WI35.10%63.40%-44.70%

Source: STR

Atlanta Hotel Updates

The commercial mortgage-backed securities research group, Trepp, recently released a US Hotel report indicating $20 billion CMBS loans are delinquent as of July. During the financial crisis 12 years ago, delinquent hotel loans totaled $13.5 billion, representing a 48% increase. According to Trepp, 23% of hotel properties are 30+ days late on their mortgage payment as of July– the highest amount ever recorded. In 2019, only 1.3% of CMBS loans were 30+ days late during the whole year.

Hotels and construction in the Atlanta has continued to rise. Norfolk Southern, Anthem, a Marriott hotel, and various other projects are being constructed in part of the SoNo revitalization project (a serious shortage in sites “South of North Avenue”). Institutional capital has started to flow into the district as Santander Bank N.A. is providing a $54.7 million construction loan for the nearly $90 million, 284-unit residential tower Woodfield Development is building– the first tower to be developed in SoNo in the past 10 years. Other projects include:

  • Emory’s construction on a 17-story cancer treatment tower.
  • Portman Holdings proposal to MARTA to develop a 480,000-square-foot office tower and 275-room hotel over the North Avenue transit station. 
  • Almost 1,650 residential units are already under construction in Midtown, according to Central Atlanta Progress, and another 6,000 downtown units are in planning.

In Atlanta, Labor Day festivities brought in the cities first occupancy growth this whole year. Although the biggest event, Dragon Con, was held virtually, various other events continued to attract economic activity into the city.

Major Labor Day Weekend Events:

  • Sky High Hot Air Balloon Festival (Sept. 4-6)
  • Stone Mountain Park Labor Day Weekend Fireworks
  • TiNYCon at Children’s Museum of Atlanta (Sept 5-6)
  • Peachtree City’s Rescheduled Independence Day Fireworks (Sept 5)
  • High Museum of Art

Major Labor Day Weekend events that were cancelled/moved virtual:

  • Dragon Con (Sept. 3-7)
  • Decatur Book Festival (Sept 4)

Week Of August 30th Hotel Report: Good And Bad News

Good News

Hyatt Regency Atlanta hotel names new GM

Revitalization of the SoNo district is expected to bring more visitors into Atlanta in the long term

Bad News

COVID-19 (As of August 31st, 2020)

  • 268,973 cases confirmed in Georgia. Over the last 14 days, the average daily increase in newly confirmed cases was 2,281.64 new cases a day. 
  • 5,604 COVID-19 deaths in Georgia
  • 24,572 total patients hospitalized in Georgia

Pandemic exposes ‘severe stress’ in commercial property financing

Lawsuit claims Atlanta developer Stan Thomas was defrauded out of hundreds of millions in Texas project

Photo of an undetermined Georgia Tech home game during the 1918 college football season. That's when the sport was hit by the Spanish flu and the end of World War I.

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