US hotels report plunging occupancy rate on coronavirus fears

It’s official: the coronavirus outbreak has hit the fundamentals of U.S. hotels.

The occupancy rate nationwide plunged 7.3 percent from this time last year to 61.8 percent, according to data released Wednesday by hotel research firm STR. Figures reflect changes from March 3-9, 2019, compared to March 1-7, 2020.

Revenue per available room also sank, 11.6 percent, to $77.82 as 23 of the top 25 markets STR tracks reported a decline. The hospitality industry uses so-called RevPar to gauge hotel performance.

Average daily room rate also dropped from last year, by 4.6 percent to $126.01, according to STR.

The dismal figures reflect the booking and event cancellations because of the novel coronavirus, which globally has sickened more than 118,000 and killed almost 4,300, according to the World Health Organization. Cases in the U.S. have now surpassed 1,000.

The numbers also show the speed at which the industry has been upended: STR’s data release last week — which reflected performance metrics for the end of February — did not show any clear impacts of the virus on national averages.

“The question over the last several weeks was ‘when,’ not ‘if’ this impact would hit,” said Jan Freitag, STR’s
senior VP of lodging insights. “Well, ‘when’ has arrived.”

The Dow Jones Industrial Average fell about 1,300 points and the S&P 500 was down about 4.7 percent around 2:45 p.m. Wednesday, after the WHO declared the coronavirus a pandemic.

Fears over the virus have led stocks to nosedive in recent weeks. Real estate investment trusts also have been part of the sell-off. the FTSE Nareit All REITs index was down about 5.9 percent Wednesday afternoon.

Coast to coast decline
The steepest year-over-year RevPAR drop— 45.5 percent — was seen in San Francisco/San Mateo, Calif. That market also had the largest room rate drop: 30.4 percent. The metro area with the biggest occupancy plunge was also in California, in the Anaheim/Santa Ana market, which recorded a 27.3 percent dip.

In New York City, occupancy fell last week by 13.1 percent, and room rates came in at $188.59, reflecting a decline of 8.3 percent. In Chicago, occupancy fell 13.5 percent and in the Miami/Hialeah, Florida, market, the drop was 9 percent.

Eli Weiss of Joy Construction said usually, occupancy at his Midtown Manhattan Four Points by Sheraton property is in the 90 percent range. Last night, he saw the hotel’s occupancy was around 78 percent.

“It’s a pretty meaningful drop from a percentage point of view,” said Weiss, whose firm developed the hotel with Maddd Equities.

He noted that January and February were strong-performing months, but he has since seen group cancellations, likely because of the coronavirus.

“I do think we’re in line for a choppy few months,” he said.

Some public hotel chains have withdrawn their full-year guidances amid the uncertainty of the virus. Hilton Worldwide Holdings is the most recent firm to do so.

“With the coronavirus now spreading beyond China and the Asia Pacific region, and the related increase in travel restrictions and cancellations around the world, we believe that the potential negative impact will be greater than our previous estimate,” said Chris Nassetta, CEO of Hilton, in a statement Wednesday.

Coronavirus, which causes the viral respiratory illness known as COVID-19, originated in China in December. At first, hotels and industry watchers anticipated an impact to their properties in Asia. But as it continues to spread around the world, it has stymied travel and led to events of all sizes getting cancelled or postponed. Cities have advised avoiding mass transit, and companies have restricted business travel and have asked employees to work from home.

Write to Mary Diduch at md@therealdeal.com