Hotel Lobbies Go Quiet As Demand Drops During Coronavirus Pandemic

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Hotels always have their doors open — but now an unwelcome visitor has forced many to shut.

Since coronavirus has spread, it has caused events to be cancelled en masse, governments to enforce nationwide lockdowns, and travel to virtually stop. 

Tui, the world’s largest tour operator, has frozen payments, suspended contracts with hoteliers and taken an emergency €1.8bn state loan as it copes with the global lockdown. Hilton, one of the three largest hotel operators, increased its borrowing from $255m to $1.75bn to see it through the crisis. Accor, the biggest hotel group outside the US, has, like its peers, furloughed staff, scrapped its dividend and cut executive pay.

The drop in demand and government-enforced closures come just as the crucial Easter holiday season begins.

Milan, the Italian city at the centre of the European outbreak, had just one in 10 hotels open for business in the week of March 23, two weeks after the start of a national lockdown. This week that dropped to near zero, according to data from hospitality research provider OTA Insight. 

In London the number of open hotels plummeted from 75 per cent to zero in a week, after Boris Johnson, the prime minister, imposed strict travel restrictions and ordered all pubs, cafés, restaurants and bars to shut.

And, in New York, the supply of open hotels has dropped roughly 25 percentage points in the past week as the number of cases has jumped. Yet New Yorkers appear optimistic, with openings set to return to normal levels over the next 60 days. 

“Lockdowns are observed somewhat differently between London and New York, judging by the availability of hotels returning for May,” said Angelika Sharma, senior analyst at OTA Insight. “Whether this is down to regulations or New York optimism, it is hard to judge.”

Typically, markets would operate at roughly 90 per cent of capacity according to consultants at OTA Insight. Analysts at rating agency S&P said there was a chance of “a modest pick-up in the third and fourth quarter” but cautioned that such is the uncertainty, they could not rule out further downgrades to hotel stocks.

It is perhaps not surprising that in Stockholm, where the government has not restricted public movement, most hotels remain open and the market is relatively stable. In Russia, there was a surge in bookings after Vladimir Putin, the president, declared a nine-day paid national holiday. But after Moscow last week started limiting international flights and closed its land borders to passenger transport indefinitely, there was a 10 per cent drop in the number of hotels open. 

In Asia, the number of hotels opening is beginning to return to pre-crisis levels, with many hoping for bookings to pick up in May.

Few dare to bet when normality will return, however. Analysts at Bernstein found across a sample of hotels in five countries an average reopening date of May 3. “Likely nothing more than a hopeful estimate but it will be instructive to see how this moves over the coming weeks,” they said.

The Financial Times

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