Hotel News Update #3
November 2019 – January 2020
Our latest roundup of hotel industry news covers a number of challenges that hospitality professionals will be dealing with in early 2020. From limited growth in key metrics to labour shortages and virus scares, here is what has made headlines over the last few months:
U.S. Hotel Industry Shows Record Numbers, But Slow Growth
STR is reporting that hotel supply is at an all-time high, but industry growth is not up to par with previous years. Compared to 2018, occupancy stayed flat at 66% and RevPAR rose by 0.9%. 2019 saw new records in absolute ADR and RevPAR, but as STR president Amanda Hite mentioned in a statement, ADR did not rise above the rate of inflation — a significant concern for owners and operators.
Houston, the host city of last year’s Super Bowl, had the highest ADR growth among the nation’s top 25 markets. This year’s host, Miami, is already experiencing the benefits of hosting the country’s largest sporting event. Houston, a top-ten city in the United States in terms of room count, posted the lowest ADR growth in the same category.
STR also forecasts that 2020 will be a non-growth year in RevPAR — the first since 2009. High growth in the supply of limited-service properties is partly responsible for this. Even though demand is also climbing in this segment, the increase in supply is said to “put more pressure on performance levels.”
The Room Supply Landscape Is Changing
CBRE recently explored one of the reasons for this slowdown in RevPAR growth. For the first time ever, the monthly increase in non-traditional hotel room supply is outpacing that of hotel rooms. The investment firm highlighted this monumental shift in their Lodging Insights for November.
In 2019, there were more than ten thousand new units added to Airbnb per month. Most of these units are being added outside of the 60 major markets that see most of the hotel industry’s development. In the country’s top 25 travel markets, staying at an Airbnb is between 6% and 17% cheaper than a hotel. The sharing economy giant now has over 660 thousand listings in the United States.
While saving some money is not the only reason people are choosing Airbnb for their lodging needs, there is a larger trend towards budget accommodations. A GlobalData report states that the U.S. brings in the highest revenue in the budget hotel sector worldwide, and that cost-effective brands will thrive in the coming years.
Europe’s RevPAR Outlook for 2020
Continued political and economic uncertainty is expected to play a role in Europe’s relatively small projected RevPAR growth in 2020. As written in Hotel News Now, Brexit seems to still be a cause of this uneasiness, continuing a pattern that has existed for four years.
Only 9 cities in the United Kingdom experienced RevPAR growth over 2% in 2019, something that has also been attributed to supply growth. The report also takes a look at hotel performance in connection with the markets’ local soccer clubs, noting that despite being home to England’s top club and the defending champion of Europe, Liverpool posted a 5.7% decline in RevPAR since last year.
STR’s Alex Robinson says that Europe has experienced a decade of RevPAR growth leading up to 2020, and that this growth will vary throughout different regions in Europe this year.
Construction Worker Shortage Jeopardizes Hotel Development
Plans for hotel expansion across the United States may be in danger. As Nancy Trejos writes for Skift, a shortage in construction workers could push back planned developments, leading to more projects going over budget.
This issue is traced back to the 2008 financial crisis, when hotels were forced to shelve many planned developments, leading many people to leave the construction industry to find employment elsewhere. The shortage of young workers entering the industry has brought construction costs up between 3 and 6 percent in metropolitan areas, making it more difficult for property owners to complete development projects.
To combat the labour shortage, an AGC survey finds that some construction companies are becoming more dependent on technology. Drones, robots and 3D printers have helped fill the void, while other firms have begun offering higher salaries and incentives, as well as expanded training programs.
Hotels Begin New Anti-Trafficking Initiatives
January marked Human Trafficking Awareness Month, with the hotel industry taking up new initiatives to crack down on what has been called a nationwide epidemic. Among these initiatives is AHLA’s national dialogue with hundreds of mayors around the United States.
In December, landmark legal action was filed against twelve large hotel chains, claiming the hotels failed to prevent human trafficking at their properties and benefited financially from this illicit activity. This lawsuit and the large number of media releases stemming from Human Trafficking Awareness Month have helped bring more attention to this issue, but as Rosie Spinks writes for Skift, measuring the success of these corporate initiatives is not easy. With many resources going into efforts like 24-hour helplines to report suspected human trafficking, there will need to be proven results.
While the success of these initiatives is still to be determined, the hotel industry’s initiatives and awareness campaigns have brought some scrutiny to Airbnb. The company invested in technology to stop exploitation and trafficking in 2018, but they have also been criticized for its policy of “disclaiming all liability” of the conduct of their hosts.
Coronavirus Fears Begin to Impact Industry
While there has been conversations about what kind of impact the coronavirus outbreak in China will have on the country’s long-term economic outlook, Chinese hotels are feeling the effects of the virus scare right now.
Best Western CEO David Kong told Bisnow that the company’s Chinese properties are “hurting in a big way,” and that demand is falling across not just mainland China but also around other parts of the continent. South China Morning Post reports that seven major hotel chains in China are offering free refunds or changes on bookings made up to February 8.
With the virus spreading at the time of year when Lunar New Year celebrations usually spark lots of domestic travel throughout China, the economic hit is particularly damaging. CNBC reports that an astounding 3 billion trips were planned during this period. As more cases of the virus appear, forecasters will continue to monitor how global travel and hospitality will be affected and how this situation compares to the SARS outbreak of 2003.