Don’t expect hotel revenue improvement to continue, industry says

Lodging industry reps say summer tourism bump won't last

Published September 10, 2020 by Sydney Lake

UPDATED SEPT. 11, 2 P.M.

Virginia hotel revenues saw some improvement last week, according to data released Thursday, but hotel industry representatives say it’s nowhere near enough to offset the “economically devastating” losses that the lodging sector has suffered this year due to the pandemic.

For the week of Aug. 30 through Sept. 5, hotel revenues decreased by 23% and rooms sold declined by 16% compared to the same week last year — an improvement over the previous week, which saw a 38% decline in revenue and 27% decrease in rooms sold, according to data from STR Inc., a CoStar Group division that provides weekly market data on the U.S. hospitality industry. Compared to last year, the average daily rate (ADR) paid for hotel rooms dropped 9% to $93.53, while revenue per available room (RevPAR) fell to $44.92, a 23% decline.

However, hotel revenues and rooms sold still declined in most markets in Virginia, compared with the same time frame last year. Compared to the same week in 2019, revenues fell 45% in Northern Virginia and 23% in Charlottesville. Hampton Roads, however, actually saw an increase in revenue by 3% — the first increase since the week of March 1.

But Mark Carrier, president of Bethesda, Maryland-based B. F. Saul Company Hospitality Group (which owns 14 hotels in Northern Virginia), says this data does not reflect the state of the lodging industry as a whole.

“There is absolutely no rebound in any of the urban areas or areas that deal with corporate business travel, which is the fundamental underpinnings to the U.S. hotel industry,” Carrier says. “We know we have a long road ahead. … When the summer is over and it’s the typical business travel season, the story will be incredibly different. The pain that hoteliers face … is just economically devastating.”

During the week of Aug. 23 through Aug. 29, revenues fell 52% in Northern Virginia, 46% in Charlottesville and 25% in Hampton Roads. The number of rooms sold in Northern Virginia is down by 34%, while the Charlottesville market held on at 14%. Hampton Roads saw a 0.2% increase in the number of rooms sold.

Hampton Roads also continues to fare well when compared nationally. It continues to hold on to the highest occupancy rates among the nation’s top 25 markets during the pandemic, with 60.6% occupancy last week and 61.8% occupancy since the week of Aug. 9. Its RevPAR level held on at third place in the nation last week at $65.52, behind San Diego and Los Angeles.

However, “the occupancy is not the cash flow of the industry or what pays the bills,” Carrier says. “It’s the combination of occupancy and revenue. … It’s all about cash flow, the rate you’re able to get, the food and beverage business that you’re doing.”

Professor Vinod Agarwal of Old Dominion University’s Dragas Center for Economic Analysis and Policy said, “Performance of the hotels in Hampton Roads during the current week was in general better than last week. It appears that except for Williamsburg, all other submarkets have nearly recovered from COVID-19. Hopefully, this trend will continue.”

Eric Terry, president of the Virginia Restaurant, Lodging and Travel Association, says, however, that the trend isn’t expected to last.

“While Hampton Roads has seen a temporary rise in hotel occupancy, it will be very short-lived as we are now out of the tourism season,” Terry says, adding that one major operator has only been able to rehire about 20% of their laid-off hotel staff.

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