Seven months after the Covid-19 pandemic struck the United States, the hospitality industry is still reeling and the need for federal relief is growing dire. New research from the American Hotel and Lodging Association shows 68 percent of hotels have less than half of their normal staff working full time. In addition, more than two-thirds of hotels said they would not be able to last six more months at the current projected revenue and occupancy levels, and half of the hospitality owners polled said they are in danger of foreclosure. Without government assistance, 74 percent of hotels said they would be forced to lay off more employees.
Another study released by the AHLA last month found that unemployment within the hospitality and leisure sector is at 38 percent, nearly four times that of the national average (10.2 percent). In an effort to the save industry, the organization is calling on lawmakers to swiftly pass additional Covid-19 relief.
“It’s time for Congress to put politics aside and prioritize the many businesses and employees in the hardest-hit industries. Hotels are cornerstones of the communities they serve, building strong local economies and supporting millions of jobs,” said Chip Rogers, president and CEO of the AHLA. “Every member of Congress needs to hear from us about the urgent need for additional support, so that we can keep our doors open and bring back our employees.”
According to the AHLA, urban hotels have been hit especially hard and are seeing occupancy rates around 38 percent. Research from hospitality-data provider STR shows the average occupancy rate for all U.S. hotels in August was 48.6 percent, up slightly from 47 percent in July. This marked the lowest occupancy rate for any August on record (STR was founded in 1985), and the company expects U.S. hotel demand will not fully recover until 2023.
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“Our industry is in crisis. Thousands of hotels are in jeopardy of closing forever, and that will have a ripple effect throughout our communities for years to come,” said Rogers. “We need help urgently to keep hotels open so that our industry and our employees can survive and recover from this public-health crisis.”
Rogers recently indicated that more than 8,000 hotels could close in September if business travel does not pick up and funding from the Paycheck Protection Program runs out. According to AHLA, only 20 percent of hotels have received any debt relief from commercial mortgage-backed security lenders on Wall Street. Without aid from Congress, the industry association expects massive foreclosures.
More than half (58 percent) of Manhattan hotels remain closed, according to the latest Manhattan Lodging Index from PricewaterhouseCoopers. Findings from the report show approximately 61,450 hotel rooms in Manhattan had not reopened as of early September. Of these, nearly 2,700 are expected to be shuttered permanently.
“You won’t see meaningful increases in operating metrics for Manhattan hotels until we see a return of the business traveler, and that likely comes after a widely distributable vaccine and therapeutics become available,” said Warren Marr, managing director of U.S. hospitality and leisure for PwC.
Some properties are already closing their doors. Among the hotels lost to Covid-19 are the Omni Berkshire Place, Times Square Edition, Hilton Westchester, W New York Downtown and the Hilton Hotel Times Square, all of which are in New York state. A report from The Wall Street Journal suggests 20 percent of the state’s total hotel supply (about 250,000 rooms) could close permanently.
As an additional indicator of industry health, U.S. hotel transactions were down 74 percent year-over-year from March through May, according to the latest Hotel Transaction Almanac, produced by STR’s Consulting and Analytics office and CoStar Group. May represented the largest decline in the total volume of hotel deals, falling 94 percent compared with last year. According to STR, only 68 assets representing a combined total of $112 million were sold in the month of May, compared with 329 hotels worth $1.8 billion in May 2019. The number of transactions will likely begin to rebound as investors look for distressed inventory, according to the report.
Since mid-February, U.S. properties have lost more than $46 billion in room revenue, according to the AHLA. Hotels across the country are on track to lose more than $400 million in room revenue per day due to COVID-19, which equates to losses of $2.8 billion weekly.
As a result, many hotels — 87 percent, according to the AHLA — were forced to furlough or lay off staff members. More than 7.7 million hospitality and leisure jobs were lost at the peak of the pandemic and 4.3 million remain out of work. Even as properties have reopened and occupancy picks up, layoffs continue. In many cases, furloughed employees are now losing their jobs permanently.
In the latest news, Marriott International plans to let go of 17 percent of its corporate workforce. According to The New York Times, the company confirmed that it will lay off 673 people in late October. Marriott had initially furloughed two-thirds of its corporate staff in March. In June, the furloughs were extended until early October. The hotel giant said it does not expect to return to prior levels of business until beyond 2021. Effective Sept. 20, Marriott will no longer be listed on the Chicago Stock Exchange, a move the company said would reduce administrative costs and requirements.
Hotel and casino giant MGM Resorts was expected expected to lay off 18,000 of its furloughed staff, starting Aug. 31. The company had furloughed 62,000 employees in March, according to Reuters.
InterContinental Hotels Group eliminated 10 percent of its corporate staff in July, as part of a $150 million cost-cutting plan that is expected to continue in 2021. Oyo Rooms, which operates more than 43,000 hotels with more than 1 million rooms around the world, announced in mid-July that more than 90 percent of its U.S. workforce would be let go.
Las Vegas-based Boyd Gaming, which owns and operates 29 casino properties across 10 states, many with hotels, announced July 13 that it had let go more than 25 percent of its workers. The cut essentially turns a large number of furloughs into permanent layoffs. According to a company spokesperson, the number of layoffs is “at the lower end” of 25 to 60 percent of the total workforce — the range that the company had warned in May could be affected.
In June, Hilton let go of 22 percent of its corporate workforce. Rosen Hotels & Resorts, which owns and operates nine properties in Orlando, has also announced layoffs. The company implemented a “substantial reduction of workforce across multiple locations” on July 31.
“It is with deep personal regret that I announce a significant downsizing of staff at Rosen Hotels & Resorts. Never in the 46-year history of my company would I have envisioned such a drastic decision,” said Harris Rosen, president and COO of Rosen Hotels & Resorts. “Since the onset of COVID-19 earlier this year, we have maintained as many staff as possible, with the hope of business returning to usual in June of this year. Regrettably, this did not come to pass… This is especially painful for me, as I consider these valued associates as extended members of the Rosen family, without whose contributions our company would never have achieved the success it has through the years.”
Doug Dreher, president and CEO of The Hotel Group, called the effect of the coronavirus pandemic on the hospitality industry “devastating” and expected his company to lay off at least a third of its workforce.
“It is for us the Great Depression, utterly devastating,” said Dreher. “We’ve tried to get ahead of it. We’re working with lenders, but we need help. We need help in every imaginable way. The human toll breaks your heart.”
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