TROUBLE IN THE Asia-Pacific region could foreshadow an “ugly March and April” in the U.S. market as profits potentially drop 40 to 60 percent compared to last year, according to HotStats.
HotStats’ “Suntrust Robinson Humphrey February 2020 Hotel P&L Analyzer” found China’s total RevPAR dropped 51 percent in February compared to last year while GOPPAR dropped 108.3 percent. The novel coronavirus currently causing a pandemic around the world originated in China.
“Assuming continued containment in major Asian countries, results in March and April could be somewhat of an indicator for the North American and European recovery (hopefully) later this year, although we note that domestic Chinese travel will likely rebound faster than international inbounds (and Asian inbounds likely faster than Europe and North America given flight restrictions),” the Suntrust report said.
Two other Asia-Pacific countries, Australia and Japan, which have labor costs more comparable to the U.S., provide a more accurate forecast. Japan’s year-to-date total RevPAR is down 11 percent and GOPPAR is down 29 percent underr last year. Sydney’s total RevPAR went down 8.1 with a 13.5 percent drop in GOPPAR, and Melbourne’s total RevPAR was down 6.9 percent while GOPPAR dropped 10.9 percent.
“We find this range a good starting place for evaluating the potential profit loss for upper upscale and luxury hotels in the U.S. given the unprecedented situation of hotels running very low occupancy,” the report said. “We advise clients that the material EBITDA margin reductions after 9/11 and the global financial crisis of 2008 provide modest precedence. U.S. rooms RevPAR fell at peak 30 to 35 percent in the worst month and by and large most hotels stayed open. Having hotels close en masse has not occurred since the Great Depression, where hoteliers sometimes kept room lights on simply to give the impression that hotels were busy.”
In March, HotStats provided tips on how to survive the COVID-19 economic crisis.