The Hotel Industry Has Lost $46 Billion — and Counting

By Jemima McEvoy Tuesday, November 3, 2020

It would be an understatement to say the coronavirus pandemic has been hard for hotels. More than most, the hotel industry has suffered heavily from over seven months of a public health crisis, which has kept most of the world in their homes. With travel and tourism at a standstill and a majority of Americans working from home, here’s how hotels fared through the pandemic—and how they plan to recover.

COVID-19’s Lack of Hospitality

The hospitality industry was among the first to suffer when the coronavirus started making its rounds in the United States in early February.

In May, nearly eight of every ten hotels surveyed by the American Hotel & Lodging Association (AHLA) reported that they had laid off or furloughed staff. Around two-thirds of hotels said they were operating at less than 50% capacity. By the end of July, with thousands upon thousands of hotels shuttered completely because of state-specific shut-down orders, more than half open hotel rooms were empty across the country, according to Smith Travel Research (STR), a leading authority on the hospitality industry.

As of September, an AHLA report compiling the latest data shows hotels have lost an absolutely devastating amount of money — over $46 billion in revenue. An even more shocking depiction of this loss: hotels are on track to lose up to $400 million in room revenue per day based on current revenue and occupancy trends. Revenue losses for the entire year are expected to hit 50%, and that’s just for the hotels themselves. The Bureau of Labor Statistics reports that the human toll of the pandemic is massive too, with 4.8 million hospitality and leisure jobs lost since February and hotel workers losing more than $1.7 billion in earnings each week.

Can’t Get No Relief

“In terms of our business, [COVID-19] is like nothing we’ve ever seen before,” said President and CEO of Marriott International Arne Sorenson in a March video message to the public. “We’re a company that’s 92 years old, that’s borne witness to the Great Depression, World War II, and many other economic and global crises. So that’s saying something.”

Sorenson added that COVID-19 has had a “more severe and sudden” financial impact on Marriott than September 11 and the 2009 financial crisis combined, saying at the time, the business was running 75% below normal levels.

“It’s an extremely difficult time,” echoed David Kong, CEO of Best Western Hotels, in April. “Back in 2009, the industry declined by 16% and that was an unprecedented time. But right now, our revenue is off by almost 90%. So it’s extremely difficult, and many of the hotels…are doing very poorly, and many of them are thinking about closing as well. It’s total devastation.”

While a government federal aid package distributed early on in the pandemic offered some relief in the form of Paycheck Protection Program (PPP) loans, only 37% of hotels reported being able to rehire or return employees due to these economic measures. The hotel association begged with Congress for further funding early on in the pandemic, and again last week.

“Your engagement is desperately needed to support struggling businesses, stem the impending wave of foreclosures, and save millions of jobs to ensure the health of the entire American economy, '' wrote the AHLA. A second federal stimulus package that would provide this much-needed relief has been stuck in negotiations on Capitol Hill for months now, with no end in sight. Per the recent industry report, 33,000 hotels are at immediate risk of closure if something isn’t done soon.

Reopening And Recovery

While all these problems still exist and the US is by no means back to normal, the White House has begun pushing heavily for states to reopen in an effort to mitigate further economic fallout. As a result, starting in July, hotels in some states, like Texas, were able to welcome back guests for the first time in months. However, as states have moved to reopen, a new challenge has emerged: getting customers to come back.

Opening to major fanfare in July, the infamous Gaylord Texan, which has 1,815 rooms, filled just 8% of vacancies on its first night of reopening. There are several reasons why many hotels have had this same experience upon reopening. The first is that while hotels are reopening, many tourism destinations are still closed, and for the most part, people are avoiding unnecessary travel as states fluctuate as COVID-19 hotspots. The second, which is inherently tied to the first, is that people are still afraid and don’t want to risk going to hotels unless they absolutely have to. Many of these fears also extend to hotel staff, who major chain leaders say are taking aggressive and rigorous steps to protect.

The way the hospitality industry has been combatting this is by trying to assure customers that they will be safe. Though this varies hotel by hotel, Marriott International’s approach — detailed in a 28-page manual — is fairly standard. Measures include rigorous cleaning protocols in public spaces using hospital-grade disinfectants, deterring guest contact through signage and set-up, and adjusting food and drink distribution methods. In many cases, going to a hotel does not feel like it used to; however, much of the fundamental functionality remains the same.

For hotels and guests alike, reopening safely will be absolutely vital to getting business back to normal. Without stringent measures, the industry’s suffering will sustain even longer than expected. McKinsey research already suggests it will take until 2023—or later—for hotels to return to pre-COVID levels.

“Like so many industries, hospitality will also see both subtle and substantial shifts in the post-pandemic era,” read the report. “Some are already apparent today.”

About the Author

Headshot of Jemima McEvoy

Jemima is a journalist who enjoys reporting on business, particularly small business and entrepreneurship.

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