Hotels in Europe were less likely to close during the latest round to lockdowns, according to STR.
With more hotels open, there was a greater risk of discounting rate to drive occupancy.
Robin Rossmann, managing director, STR, said: “I don’t think we will see a significant level of closures, in the hope that these latest lockdowns don’t last as long as the others and in the hope that the sectors which stay open - schools, construction - drive some demand.
“The new lockdowns are somewhat similar and somehow different to what we had before and they are not because of more cases, but because of more hospitalisations and governments having to take action. The nature of the closedowns are different; it’s not all aspects of society.”
For the week to 25 October, reporting occupancy in Europe was 30%, 47% in the US and 69% in mainland China. Rolling seven-day occupancy to 1 November showed that Europe was the only region showing significantly declining progress, from a peak around 40%.
In the US Covid cases were at all time high levels but revpar was resilient at -50% on prior year levels.
Looking at progress through the pandemic, Rossmann said: “At the [lockdown] peak we saw closure rates of 50% to 100%. The unfortunate reality is that August was the best place in Europe, at 50% below prior levels and we have now trended back so that we’re not awfully far behind where we were in the worst days in April, about 20% behind the lockdown trough. Pretty much everybody is declining.
“We’re still too soon to pick numbers, but getting a sense of closures, the consistent theme is that we’re not going to see the same level of closures that we saw in the first lockdown. There were varying levels of guidance from governments in the first lockdown as to whether hotels should be open and this time around hotels must close for leisure but may stay open for business. As a result some groups are closing around 50% of the hotels they closed first time around, but 20% to 30% is the average.
“For Europe average rates at lockdown were 40% down and 15% down in the summer months, as occupancies have declined again - rates are 30% down on prior year. I don’t think it will get worse, certainly not for the next few months, but you never know with more hotels open and less people around.
“Regional cities were much more resilient than gateway cities, supported by leisure and now those have come off and pulled the whole occupancy down. Forward occupancy is incredibly weak, with occupancy on the books for the next 28 days as at 2 November at 12% for the UK and 5% for France. Cancellations have come back and even when you look at the next 14 days of forward occupancy you can see single-digit occupancy pretty much no pickup. As it looks now, we are heading back to that single-digit occupancy and that is true for countries as a whole and for cities.”
Looking at a case study on Edinburgh, Rossmann said: “Those hotels which remained open throughout stuck at around 20% occupancy and at the time of reopening after lockdown ended were 30 percentage points ahead of those hotels which had not already opened. Those that stayed open were doing better as teams were on the ball, keeping momentum going. If you close then you save costs, but you have to build revenue back up again.”
Rossmann concluded: “The lockdown worked before and it will work again, even if it takes longer because not all sectors of the economy have closed. Covid will be around for a long time, even after a vaccine is available. The moment that a vaccine is available to protect the vulnerable so that we don’t have to worry again about hospitalisations, is key to opening up. The private distribution of the vaccine will also happen rapidly, allowing people willing to pay to travel, do the shopping, visit their parents. When that comes, demand will come back.
“We will get through this and I am confident that from the second quarter next year we will start to see a recovery - reliant on a vaccine. I have no doubt that summer will be much stronger next year.”
Insight: Rossmann described the second lockdowns as a horror movie sequel and after all, Friday 13th looms. He said: “The question is whether this is going to be better or worse and, importantly, how you can survive.” But how to do this? By hiding under the bed while the virus rampages? By staying open and rolling the dice that it’ll pass you by?
For Rossmann, the question was all around how long the lockdown would last. There were costs to staying open, but costs in terms of lost loyalty if you closed. If, as in England, there was the hope that the lockdown would only run for a month, there was a case for staying open.
But it was horses for courses. Small hotels have done better, budget hotels have done better, the regions were doing better. In the winter, all bets are off. Don’t have nightmares.