Occupancy Rates Slowly Rising for U.S. Hotels, But Staff Shortages Remain

After weeks of empty rooms and temporary closures, the hotel industry is beginning to rebound. According to hospitality data intelligence provider STR, U.S. hotel profits fell more than 116 percent in April, but occupancy rates are slowing picking up again.

As of May 28, six out of 10 open hotel rooms in the U.S. were empty -- down from nearly eight in 10 rooms at the height of the pandemic in April.

Hospitality giant Marriott International also reported encouraging numbers. President and CEO Arne Sorenson noted that occupancy levels for the company's U.S. properties have now passed 20 percent, compared to 12 percent occupancy that was recorded across North America in April.

"Crossing over 20 percent occupancy is a meaningful improvement from where we were before, but it is a long way from where we need to get to," said Sorenson on June 1 at a travel conference hosted by Goldman Sachs.

Like many others, Marriott was hard hit by the pandemic and does not except to return to prior levels of business until beyond 2021. As a result, the company announced that the furloughs and reduced work schedules that were implemented in April will be extended until Oct. 2. A number of corporate positions are also expected to be eliminated later this year.

Similar findings from the American Hotel and Lodging Association show that despite hotels reopening across the country, only about one-third of the properties that have laid off or furloughed staff due to the COVID-19 pandemic have been able to rehire any employees. In fact, 52 percent of the hotels polled said they don't expect their staffing levels to be fully restored until 2021.

Reopening Begins

As states begin lifting travel restrictions, a growing number of hotels are welcoming guests back with new safety standards in place. Omni Hotels & Resorts had temporarily closed more than 40 properties due to the pandemic. As of May 21, the brand has reopened 14 hotels, including the Omni Austin Hotel Downtown and the Omni Tucson National Resort.

Gaming resorts, which were among the first to suspend operations en masse, are also slowly reopening their doors. MGM Resorts and Wynn Resorts, for example, suspended operations at their Las Vegas properties on March 16. The companies, along with other Nevada gaming powerhouses such as Caesars Entertainment and Las Vegas Sands, will reopen select casinos on June 4 in accordance with the state's reopening plan.

In Connecticut, two tribal casinos plan reopened on June 1. The Mohegan Sun and Foxwoods Resort Casino have released detailed plans with new safety protocols to keep guests and staff members safe. Casinos in Atlantic City, N.J., New York, Massachusetts, Maryland and more remain closed for the time being.

Walt Disney World in Orlando has announced plans for a phased reopening of its theme parks and resort hotels, which will begin on July 11. A reopening date for Disneyland, in Anaheim, Calif., has not yet been released.

A new COVID-19 hotel-status directory from EproDirect, a hospitality industry marketing agency, indicates whether more than 4,000 hotels are currently open, and if they are accepting individual reservations and group bookings. While most of the properties listed are in the United States, hotel reps from any destination worldwide can list their hotel's status for free.

Room Revenue Down

The economic impact of having hotels closed since March is staggering. According to AHLA, U.S. properties have already lost more than $29 billion in room revenue since mid-February. 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.

In addition, the U.S. Bureau of Labor Statistics reported that 7.7 million hospitality and leisure jobs were lost in April. With 70 percent of direct hotel employees laid off or furloughed, hotel workers are losing more than $2.4 billion in earnings each week.

Layoffs and Wage Reductions

As occupancy rates fall, hotels across the country have been forced to reduce their workforces. Marriott International, the world's largest hotel company with 1.4 million rooms, has furloughed thousands of employees at all levels.

In a video update on March 19, Marriott president and CEO Arne Sorenson shared details, including that the company has paused almost all new hires, stopped all hotel initiatives for 2020 and suspended all marketing efforts. Sorenson and executive chairman Bill Marriott Jr. will receive no pay for the year and the Marriott executive team will take a 50 percent pay cut.

"As a leader, I have experienced so many wonderful highs and a good number of challenging lows," said Sorenson. "I can tell you that I've never had a more difficult moment than this one. There is simply nothing worse than telling highly valued associates, people who are at the heart of this company, that their roles are being impacted by events completely outside of their control."

All hoteliers have felt the effects of COVID-19. Pebblebrook Hotel Trust, which represents 54 hotels and 13,000 rooms, had to lay off half of its employees (4,000 of 8,000) by early March. Jon Bortz, Pebblebrook CEO and AHLA chair, anticipated the need the let go thousands more.

Doug Dreher, president and CEO of The Hotel Group, called the effect of the coronavirus pandemic on the hospitality industry "devastating" and said he expects his company will have 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."

By early April, hotel giant Accor had already reduced the schedules of or furloughed 75 percent of its global head office teams and closed more than half of its 5,000 hotels.

Delayed Openings and Renovations

The pandemic is also affecting properties in the pipeline. The grand opening of Universal's Endless Summer Resort – Dockside Inn and Suites has been postponed. The resort was scheduled to open in mid-March; a new date has not yet been announced.

Marriott is also expecting to open and sign fewer hotel deals in 2020 than anticipated. In addition, the company has temporarily deferred most brand standards to help owners and franchisees, including delaying renovations due in 2020 by one year, according to Sorenson.

"The coronavirus is fast becoming the most significant event to ever impact our business; that includes the 12-month period after 9/11 and the financial crisis of 2009," said Sorenson during an investor update on March 19. But he noted that the development pipeline has not ground to a complete halt. "We’ve been signing deals and we have development committees that are meeting monthly. The volume is lighter and the numbers will be lower than we anticipated but they won’t be zero."

Insight from Abroad

Looking to Asia, where the outbreak began and is now subsiding, could provide further insight into the potential economic damage and timeline for recovery — although preliminary estimates indicate the toll could be much greater across the United States.

By mid-February, Hilton closed all 150 hotels in China, totaling 33,000 rooms. The company said it expected a $25 million to $50 million hit on full-year adjusted EBIDTA, assuming the outbreak lasted three to six months with an equal recovery period. It wasn't until May 8, however, that the company resumed operations of all hotels in Mainland China.

On June 1, Marriott announced that it had reopened all 350 of its China properties and occupancy rates had reached 40 percent — a significant jump from earlier in the year. According to Sorenson, some of Marriott's China hotels were running at 7 percent occupancy in January, when the pandemic peaked there.

Source:  Northstarmeetingsgroup.com