Hard times for Boston’s luxury hotels? 70% Decline. (I thought my real estate business was off)
If you really want proof that the economy is in bad shape, take a look at the downtown city’s hotels.
The coronavirus pandemic made 2020 the worst year for the U.S. hotel market since the Great Depression, when occupancy rates dipped below 40 percent. In 2020, the overall occupancy rate was 41.6 percent.
However, the impact varied significantly by geographic location and the type of hotel, according to a new report from CBRE Research.
New York City was the hardest-hit market of all, with revenue per available room (RevPAR) dropping 77 percent year-over-year. Other gateway cities like Boston, Chicago, San Francisco and Seattle, as well as air travel-dependent Hawaii, saw RevPAR declines of more than 70 percent.
A drastic drop in group demand, including business and convention-related travel, contributed to the decline, as did an 80 percent drop in inbound international travel to the U.S. amid ongoing travel restrictions.
“Demand cannot return to pre-Covid-19 levels without group demand returning,” the CBRE report notes.
In terms of hotel chain scale, the overall tendency was for higher-priced chains to see larger declines in room rates. But “luxury” properties, at the very top end of the market, were somewhat less impacted than “upper upscale” ones, according to CBRE data.
The type of hotel also played a role, with convention hotels unsurprisingly the hardest hit of all.
This may shock you. most hotels saw year-over-year declines of more than 100 percent — in other words, they lost money. But there were two exceptions.
While hotel occupancy is now at a historic low, occupancy rates just before the pandemic had risen to a historic high of more than 65 percent — a level not seen since the 1940s, as the graph below shows.
As fewer people have traveled — and thus, booked hotel rooms — because of the pandemic, the hotel industry is facing a staggering statistic: almost 1 billion empty hotel rooms for the year.
As of last week, more than 962 million room nights have gone unsold, Bloomberg News reported, citing data from lodging information firm STR. That’s about 46 percent more than all of last year. The industry is projected to surpass 1 billion unsold rooms by Christmas.
But this year is anything but normal. It’s estimated that hotel owners have seen about $46 billion in lost revenue, and many owners expect to close without federal aid.
“If there’s no relief before the holidays, I don’t know how many hotels will continue into 2021,” Bijal Patel, chairman of the California Hotel & Lodging Association, told Bloomberg. “Many of us are going to be on the brink of shutting down.”
[Bloomberg] — Sasha Jones