Hotel Industry: 9/06-9/12

Hotel Industry: 9/06-9/12

Hotel Weekly Review

Nationally, hotel occupancy was down 30.2% compared to 2019 this week. Atlanta was 7th out of the 25 biggest lodging markets in the US for the least occupancy rate declines (-28.8%), up from last week’s ranking of 12th out of 25. After people left Labor Day weekend to go back home, Atlanta’s two days of year over year hotel occupancy growth declined to previous, non-vacation levels.

Following Sunday, September 6th, occupancy rates declined to previous COVID era levels. Small metros/towns (53.6%), interstate (51.6%), and suburban 50.6%) hotels were able to achieve above 50% occupancy whilst urban (38.4%) and airport (45.3%) experienced occupancy declines above 40%.

Week of September 6th Winners & Losers

For chain scale segments, economy and midscale hotels continue to have below 10% occupancy declines as well as low ADR declines (-5.2% and -8.8% respectively). Upper-upscale hotels continue to be in the worst position during the pandemic as their pricing power declined 10% after the holiday weekend (-30.8% total ADR decline) and even further demand deficits (-59% occupancy rate decline). Luxury hotels, although having -62.7% drops in occupancy rates, had only a -16.4% drop in ADR (3rd out of the 7 chain scale segments)– up from 4th last week.

In terms of location, small metro/towns (-16.5%) and interstate (-17.7%) hotels have experienced the least occupancy declines. Upscale (-39.4%) hotels have been able to recover more quickly than upper upscale (-59.5%) and luxury (-62.7%) hotels due to an increased flexibility to pursue alternative business strategies as well as having smaller room counts.

The markets that had the best occupancy rate recoveries, Norfolk/Virginia Beach and Houston, experienced -12.9% and -21.1% occupancy declines this week, in contrast to last weeks 13% occupancy increase. The worst performing metropolitan cities and the Oahu Island (-74.9%) market saw an increase in their occupancy declines of above 10% compared to last week.

Top 6 Performing Cities by change in occupancy

City2020 Occ2019 Occ% Change
Norfolk/Virginia Beach, VA58.80%67.50%-12.90%
Houston, TX49.70%63.00%-21.10%
Tampa/St Petersburg, FL47.60%61.10%-22.10%
San Diego, CA57.50%80.00%-28.10%
New Orleans, LA48.40%67.60%-28.30%
Phoenix, AZ46.80%65.60%-28.70%

Worst 6 Performing Cities by change in occupancy

City2020 Occ2019 Occ% Change
Oahu Island, HI21.10%84.20%-74.90%
Boston, MA33.20%83.60%-60.30%
New York, NY37.40%90.00%-58.40%
Chicago, IL35.00%81.00%-56.80%
Washington, DC-MD-VA33.90%77.80%-56.40%
Minneapolis/St Paul, MN-WI34.50%76.40%-54.80%

Source: STR

Atlanta Hotel Updates

Atlanta hotels outperformed the US average in occupancy by ~1.5%, despite Atlanta hotels underperforming in terms of ADR and RevPar. This can be attributed to the new business strategies Atlanta hotels are pursuing to retain more guests.

Some hotels that fall in the upscale, upper upscale, and luxury chain scale segment’s in Atlanta have followed traditional routes to gain more occupancy by lowering their prices. This strategy strays away from these hotel’s core, high-end guests that spend a lot internally at restaurants and bars within the hotel. According to several Atlanta hotel General Manager’s, when prices start to reach around $100-$110 a night for high-end hotels, margin starts to get cut further as lower end guests spend less internally as well as having a higher “maintenance fee” in the form of messier rooms and damaged items. Prolonged cuts to room prices may start to hurt these hotels more than much lower occupancy rates.

Other avenues of revenue hotels are pursuing stem from COVID-19 itself. Some hotels negotiated contracts with Georgia Tech, Emory, and other Atlanta universities to house students that must have a 14-day travel-mandated quarantine, tested positive for COVID-19, or were contact traced to be exposed to COVID-19. These contracts hedge against low hotel room demand and provide a consistent stream of revenue during the pandemic at the expense of no realized upside during a potential demand increase like this past Labor Day weekend.

Similar to the aforementioned strategy, some convention centers are trying to achieve consistent revenue streams by housing soldiers before they fly off for training or head to one of the various forts in Georgia. GM’s also mentioned pursuing contracts with large corporations to house clients, but lack of demand for business travel have made the contracts not as viable.

As hotel general managers try to innovate and refine their pandemic business model, the city of Atlanta continues to experience revitalization in construction aimed to create a sustainable and regenerative business environment. Capital is being deployed to the Beltline, Midtown construction, and parks/attractions in order to attract many businesses to open up offices in the areas as well as increasing demand for tourism. In the long run, hotels will be able to benefit from the inflow of new business travelers and tourists pouring into the city but must persevere in the short-term to capitalize on the anticipated growth.

Week Of September 6th Hotel Report: Good And Bad News

Good News

Atlanta marketing giant, Mailchimp, moving to a new $1 billion Beltline project

Axe throwing world championship coming to Atlanta

Bad News

‘Catastrophic customer declines.’ Airport concessionaire converting furloughs to layoffs in October

Delta financing $9 billion against SkyMiles program

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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