TOPHOTELNEWS Live Blog roundup: COVID-19’s financial impact on hotel industry

(Photo from Unsplash by Victor He)

Details on how the COVID-19 crisis has had a strong financial impact on hotels and significantly slowed project development.

The TOPHOTELNEWS Live Blog collects the latest updates regarding the hotel industry in this difficult time.

We summarise recent reports to highlight the financial impacts the COVID-19 crisis has had on hotels as well as how it has influenced hotel investment.

New hotel projects go on hold

As hotel companies around the world strive to cut costs and preserve their liquidity, they have slowed the development of new projects.

For example, STR reported that hotel construction in the United States hit an all-time high pre-corona in March but has now slowed significantly due to restrictions around work, social distancing and the hotel groups’ cost-cutting measures.

According to STR, hotels already under construction are likely to be completed despite crisis mitigation measures, albeit slower than planned. The properties which are currently only in the planning phase are the ones most likely to be put on hold or even cancelled.

Revenue loss due to demand collapse

The collapse of demand for hotel rooms around the world has, quite unsurprisingly, led to a sharp decline in hotel revenue. Hilton, for example, reported a 22% – 24% decrease in RevPAR across its portfolio in Q1 2020.

According to AHLA (American Hotels and Lodging Association), this drop in revenue has already resulted in hotels around the US losing $13 billion in room revenue since the crisis onset in mid-February. Many hoteliers are forecasting revenue losses of over 50% for the first half of 2020.

COVID-19 impact on hotel value

HVS, a global hospitality consulting firm, recently looked at how the crisis is impacting hotel value. They compared findings from the 2008/09 financial crisis and drew conclusions about how property worth is likely to develop in the short and medium-term.

Their models predict a value decline between 20% and 35% this year. According to them, even in the worst case, values should be back to current levels by 2023. They also forecast strong value growth in the coming years, estimating that by 2025 hotel property values will reach 109% of their current worth. This is good news for investors seeking opportunities in the hospitality industry right now.