• Leisure Travel Increases

    Leisure Travel Pushes Hotel Industry Toward Steady Recovery

    Key Performance Measures Rise for the Fifth Week, Primarily on the Weekend

    Leisure travelers are slowly filling hotel rooms again after anemic demand because of the coronavirus pandemic. (Getty Images)
    Leisure travelers are slowly filling hotel rooms again after anemic demand because of the coronavirus pandemic. (Getty Images)

    Rising leisure travel pushed hotel occupancy slightly higher for a fifth straight week as cities and states relax restrictions put in place to slow the spread of the coronavirus.

    Occupancy rose to 32.4% in the week ended Saturday, May 16, according to the latest report from hotel research firm STR, which is owned by CoStar Group, the publisher of CoStar News.

    Jan Freitag, STR’s vice president of lodging insights, noted in a statement that it’s a continuing trend of “less bad.”

    Revenue per available room and average daily rate, two other key industry performance measures, improved as well but are far off the numbers posted this time last year. Revenue per available room is still down 73.6% at $25.12, and the average daily rate is off by 42.4% at $77.55.

    The coronavirus pandemic clobbered the hotel industry. Groups canceled meetings and conventions and leisure travel vanished. Nearly 5,000 hotel properties simply closed rather than lose money operating with little to no occupancy.

    Hotels have started to reopen. But hotel owners, many of which are franchisees, still could face financial hardships.

    “Near term, we probably will see many bankruptcies because of no cash flow,” Tim Wang, managing director of New York City-based investment firm Clarion Partners, said during the Urban Land Institute’s quarterly economic outlook virtual presentation.

    Wang, who heads Clarion’s investment research, said the pace of recovery will improve once fear is quelled by a medical solution.

    Meanwhile, positive signs continue to emerge. Last week, Freitag said demand for room nights rose to nearly 11 million after hitting 10 million the previous week for the first time since the end of March.

    “Weekend occupancies continue to increase at a healthy clip, especially in drive-to destinations with beach access like Florida, or national park access, such as Gatlinburg, Tennessee,” Freitag said.

    Group business isn't expected to return until later. Recovering to 2019 levels could take three to four years, Chris Nassetta, president and chief executive officer of McLean, Virginia-based Hilton Hotels, said on Washington Post Live Thursday. Nassetta is a member of the CoStar Group board.

    Nassetta said it will take time for people to "feel safe and secure" before traveling more. "It's going to take businesses to sort of get back on their feet and start hiring and investing and spending more on travel," he said.

    STR's latest report tracks with improving air travel. Low-cost carrier Southwest Airlines reported in a public filing Tuesday that its bookings have started outpacing cancellations.

    The Dallas-based airline said the shift is a modest reversal from March and April when cancellations were exceeding bookings.

    As travel improves, Southwest changed its May outlook to a more positive one that originally project. It projected that revenue will be down 85% to 90% in May compared to last year instead of 90% to 95% drop. The company said June is looking even better.

    On Sunday, the Transportation Security Administration showed 253,807 travelers went through airport checkpoints, the highest number since the 279,018 on March 24. Still, the numbers are roughly 10% of last year.