Europe had seen “quite a big reversal” in the first week of September, with occupancy down 13.9% on the week, according to STR.
The fall was attributed to the end of summer and the increase in the number of Covid-19 cases.
Robin Rossmann, managing director, STR, said: “In many ways the last month has been far better than most expected and in many ways people are more worried than that have been, with the recent increase in cases in Europe as well as some concerning trends in hotel operations. Will the recovery continue or worsen? What kind of demand segments should you be going after?
“We have seen some improvement, but we are seeing some road bumps on the way. Summer is over and people are feeling that August has not been bad - global occupancy was around 50%.”
China was around 60%, US “stagnated” at 50%, Middle East stuck at 40% and Europe getting up to 40%, “although in the last week dipping back a bit”. Rates have been recovering, despite a negative impact from mix.
Across mainland China, two weeks ago occupancy was fractionally below prior-year levels. Other than first-tier cities, occupancy was the same as the previous year. Rossmann said: “They still have the virus, there is still no international demand, but they are still able to get back up to prior-year levels”. Revpar was around 10% lower on the year.
Looking to Europe, he said: “We’re still seeing the same trends, with gateway cities are occupancy at much lower occupancy, 20% to 30%, while regional markets are up 40% to 60% with rates much lower for cities.”
In the UK “it got going a month later than the rest of Europe and had a much steeper rise in occupancy and they continued to power ahead in the UK, with many many people going on holiday, particularly up to the August bank holiday. Leisure destinations along the south coast were driving performance”.
Looking ahead, Rossmann said that, for the UK, Netherlands, Spain, Italy and Switzerland, for the next three months there was “much less business on the books more than 14 days out”.
He said: “It’s like looking at a long-term weather forecast. You believe the next week, but further out, so much can change. There’s nothing to suggest that the numbers are going to bounce back to 50%, 60% but there’s noting to suggest that it will drop down to 10%, there is enough business on the books.
“The major cities are going to see some recovery, particularly in those countries where they have the virus under control.
“London does have some business on the books, but it is way behind this time last year and way behind regional UK. Pickup in the regional UK is also much higher. We expect London to come up and the regions to come down, but it will be a while before they meet. We are seeing a lot of summer leisure shoulder demand from people still taking holidays.”
Business demand is only going to come back after people return to the office. In many countries in continental Europe, more than 2/3 of people are in their normal work location. In the UK this is 1/3, but this is changing rapidly. When they travel for business, it’s not going to be all business travel coming back at the same time. How they travel and the reason for travel will change; is it to drive sales, for an internal meeting or an industry conference? In that order.
“Flight capacity also needs to recover - we are currently looking at around 50%. There isn’t that rapid recovery in business demand, it’s domestic which is going to be important.”
Commenting on the impact of short-term rentals, Rossmann said: “The importance of managing risk has gone up significantly and for business travel, that’s likely to be in branded accommodation. But you can’t take it for granted and hotels will have to make sure that the guest experience lives up to the safety standards.”
For this year, the company forecast that revpar would be 60% lower for the regional UK and 76% lower for London, recovering to 2019 levels in 2024, unless there was “a real cure” which would release pent-up demand.
“We are forecasting that most markets will take up to 2023 or 2024 to recover. There will be pent-up demand by the impact of a recession and that take some time for our industry to come back”.
Insight: Times they are a-changing. Although, with cases and restrictions rising, it may seem very reminiscent of March, but demand for hotels has now shifted and, with fewer business folk on the road, it’s time to think about who else can fill beds in what could be an unchanged state until a cure is found.
That’s not to say that you should hang up your road warrior suit. Rossmann said: “If you’re not meeting your customers face to face, I assure you somebody else will.” He also looked to likely changes to office useage, which would mean workers living further out, then travelling into hubs to see their colleagues, describing “huge demand for hotels”. Something CitizenM is already thinking about.