The U.S. Travel Association has revised its assessment of the worsening impact of the coronavirus (COVID-19) pandemic on the U.S. economy. The organization’s most recent study shows a loss of more than 4.7 million travel-related jobs by the end of April on account of the pandemic. Around the world, the stories resonate, of thousands of businesses pushed to the brink by this unprecedented crisis. In the midst of all this chaos, very few experts have come off with recovery predictions that approach feasibility.
Covid-19 Hotel Smasher
For U.S. hoteliers the COVID-19 data is as bad or worse. According to CBRE the COVID-19 pandemic will end up causing a 37 percent decline in U.S. revenue per available room (RevPAR). The situation for world hotels seems even worse.
A snapshot of London in the U.K. reveals how the pandemic can hammer a destination market. According to the latest from STR, hotels in London shows slightly negative performance in February 2020, a situation that worsened into double-digit declines during the first week of March. In February, RevPAR was down -2.1% to GBP 101.91. This negative trend began to spike with early March RevPAR nose-diving to -27.7% or GPB 84.14.
Now use all the multipliers you can think of. Plug in Athens, Bangkok, Sidney, Rio, Paris, or any city you can name. Once you’ve plugged in all those effects, let the larger impacts trickle out to niche destinations and into the businesses that support hotels and tourism.
And It Gets Worse: A Lot Worse
As horrible as these figures are, things could get a lot worse. A story at The Atlantic lays out how America was so ill-prepared for this pandemic. End scenarios are also discussed, some of which would lead to a complete collapse of the tourism industry as we have known it. I quote from science writer and New York Times bestselling author, Ed Yong:
“Even a perfect response won’t end the pandemic. As long as the virus persists somewhere, there’s a chance that one infected traveler will reignite fresh sparks in countries that have already extinguished their fires. This is already happening in China, Singapore, and other Asian countries that briefly seemed to have the virus under control. Under these conditions, there are three possible endgames: one that’s very unlikely, one that’s very dangerous, and one that’s very long.”
The first scenario Yong posits is one that will surely not happen. Yong says there’s almost no chance the entire world will get COVID-19 under control like the 2003 SARs. I agree. His second scenario, one where the world gets what’s known as a “herd immunity” – It turns out to be a human catastrophe with countries decimated by death and costs. The third scenario, one the author says is the “best option”, is a deadly game of “Whack a Mole” where we stamp out one hard-hit area, and then another, until a vaccine is finally developed.
In this scenario, which is the one much the world will end up with, half the airlines, cruise lines, hotels, travel agencies, restaurants, and other associated tourism businesses in the world will be shuttered. The $2 trillion dollar stimulus package the U.S. just signed into law won’t begin to touch the level of economic decline some experts predict. And travel is not the world’s top priority even in good times. I am not alone in my assessment here.
The interactive chart below shows you which countries have begun to flatten their COVID-19 spread curves. Taking into consideration the lag in between flattening this curve and travelers beginning to travel again, current recovery predictions seem overly positive. Remember, the world is interconnected. China, for instance, does not get visitors from Italy in years, perhaps.
On markets, let’s take a short look at so-called Beach Stocks have tanked for the foreseeable future. Beach stocks, for those unfamiliar with the term, are stocks of industries including booking, entertainment, airlines, cruises, and hotels. In the past month, these stocks have lost over $332 billion in value, and the vacation season is not here yet. Booking Holdings alone has lost almost $30 billion of its market cap, and Expedia is right behind having lost over 53% of its value.
The bigger list is just too extensive to attempt to list. I chose Wyndham Hotels & Resorts at random just to show you. The company has already lost 48% of its value. In February the market cap of Wyndham was about $5.6 billion. The day before yesterday it as $2.9 billion. Others have suffered a lot more. Las Vegas is shut down. Experts say the richest of the rich casino resorts can last 5 months to a year before they burn up all their cash reserves. After that, the richest hotel operations on Earth will need to borrow. MGM, for example, is burning up $14.4 million dollars a day doing nothing while the gamers are barred from town.
Meanwhile, New York City’s death toll spiked 110% in one day, and American President Donald Trump is promising an “all clear” to go back to work by Easter! The flamboyant American president is not alone in his puzzling attitude toward a virus outbreak that has affected the lives of billions of people. In pristine Switzerland, for instance, a fabulous luxury hotel is offering their elite guests COVID-19 protection, at a price.
No, you are not reading science fiction.
A COVID-19 PR Tragedy
I had to include this section for all those readers who do not realize how CRAZY opportunistic, and how oblivious many business people are to the current situation. And I thought snake oil marketing pros were bad. A story from Switzerland caught my eye today for the sheer callousness of the hoteliers who would try and capitalize on death. According to USA Today:
“Le Bijou Hotel & Resort in Switzerland, made up of repurposed luxury apartments, advertises them as “quarantine apartments” on its COVID-19 service page.”
For between $12,000 to $14,000 per day, guests of this exclusive retreat can get the ultimate coronavirus package. This is from their website:
“You don’t need to expose yourself to infected patients and hospital infections: Together with our healthcare partner Double Check, we provide medical check-ups and coronavirus tests inside your Le Bijou apartment.”
Of course, if you can afford these prices you probably fly over the peons of Earth in your private jet, and you’re spirited to your exclusive digs by a private driver in a sterilized Bentley. If you cannot? Madeleine Hübner, the co-founder of this luxury offering, produces me a sense of breathless disconcertedness.
If ever a hotel operator exhibited a moment of insensitivity, Zurich’s Le Bijou just took the cake. Let’s hope Madeleine does not suggest letting dying Italians eat the cake too. Everything in my wants to ask; “How dare you?” And you know what, I am asking for everyone affected by this horrid epidemic; “How dare you?”
Fast Experts are Probably Wrong
Well, you probably won’t even be able to hang out for a couple of weeks at Uncle Bob and Aunt Cathy’s beach bungalow in forgotten Panama City. If the situation continues for too long, very few people are going to be going anywhere. From what I am seeing, the level of obtuseness by many decisionmakers in government and industry warns of a far more devastating business effect than most recovery predictions indicate. I have Wall Street analysts’ recovery predictions for airlines flying high again by year’s end. Then there are the crazy sales and marketing people not simply lying to people, but trying to capitalize on the misery of people and the industry.
Even McKinsey & Company’s early on worst-case scenarios lead to only a moderate recession. As of the day before yesterday, even their predictions ranked with the worst situations since World War 2. Somehow, all these analysts seem off the mark when it comes to assessing the full breadth of the economic effects from COVID-19. It’s as if none of them have had time to think about the olive farmer here in Crete who cannot sell his oil because no hotel needs it, and because no one can pay the right price. What about the retailers who will lose everything they have?
The latest research from the WTTC outlines the woes of the Asia market, which I did not previously mention. According to them:
“Asia-Pacific is expected to be most heavily impacted with up to 49 million jobs at risk throughout the region, representing a loss of nearly US$800 billion to Travel & Tourism GDP.”
The Hotel Trades Council in New York says that 95 percent of the hotel workers there will probably lose their jobs before the COVID-19 crisis is over. Hotels there say they cannot even pay their property taxes unless they get some relief. Health experts say the virus is spreading in Detroit, Michigan faster than any major city in America. Cases in the United States will soon surpass Italy, they may have already. My point here is, if the United States grinds to a halt, this will add another dimension to the tourism market. Jobless claims in the United States have already shattered the previous records.
Now factor in no traveling American spenders over the top of destinations placed under the stigma of lockdowns and death. Just the PR nightmare is enough to erase many hotels’ profitability. Best case – we are in an unprecedented mess and recovery predictions do not reflect the true situation. Our experts need to synchronize. We need to demand that they do. I won’t even discuss “next time” here.
I will keep you updated.