By David Eisen
The World Health Organization says that COVID-19, more commonly known as coronavirus, has the potential to become a pandemic. It’s already rocked the hospitality industry with canceled flights and forced hotel cancellations, even closures.
When hotel executives talk about black-swan events — unpredictable occurrences that are beyond what is normally expected of a situation and have potentially severe consequences — coronavirus is about as swannish and dark as it gets.
It’s certainly cast a pall over the hotel industry, leaving it reeling in its wake. Worry and uncertainty over the virus’s short-term and full-year impact on travel permeated Q4 earnings calls, especially for companies with high exposure in Asia. Hotel and flight cancellations were and are widespread across the continent, with both brands and OTAs allowing free cancellations to select destinations. Hilton took the extraordinary step of closing some 150 hotels across China.
There are currently more than 81,300 confirmed cases of coronavirus globally, but more than 78,000 of them are in Mainland China.
Laying Ruin — Coronavirus Impact on the Hotel Industry
Since January, the virus has had a deleterious impact on the hotel industry. In China, Shanghai hotels suffered to the tune of a 48.1% YOY decline in gross operating performance per available room (GOPPAR) for the month, as total revenue decreased 22.5% YOY, according to HotStats data.
Hong Kong, a global financial hub, which was already dealing with protests over an extradition bill, saw its profit per room drop 74.2% YOY in January. For full-year 2019, Hong Kong’s GOPPAR was down 34.2% YOY.
Japan made headlines after it said that 691 people on the Diamond Princess cruise ship, moored in Yokohama after being quarantined there for 14 days, tested positive for the virus. Tokyo’s January RevPAR was up 0.2% YOY, while GOPPAR was down 3.7%.
Other cities in Asia had a less harrowing January, though they still saw declines. Consider Bangkok, where YOY GOPPAR was down 2.3%, accompanied by a 1.1% YOY decline in TRevPAR.
Still, the virus has already laid waste to many cities, particularly ones that rely heavily on revenue generated from conferences and events, some of which were canceled because of the virus. The world’s biggest phone show, Mobile World Congress 2020 in Barcelona, has also been canceled due to coronavirus concerns.
The conference, which generates some $500 million and creates 14,100 part-time jobs, was scheduled to take place Feb. 24-27. The show’s organizer said that “the global concern regarding the coronavirus outbreak, travel concern and other circumstances, make it impossible … to hold the event.”
In the competitive esports world, the Overwatch League was forced to cancel games in Asia because of the coronavirus outbreak, including a series of matches that were set to take place in South Korea Feb. 29-March 22. This includes a number of makeup matches that were moved to South Korea following the cancellation of games in China.
Cases of the virus in South Korea now total 1,261, the most outside China.
Though the coronavirus has dealt China’s hotels a pernicious blow, January in Seoul was actually a strong month. Hotels there recorded a 19.9% YOY increase in RevPAR, which helped lead to a 29.2% YOY jump in GOPPAR. February data, however, will likely prove dire.
Containing the spread of the coronavirus is priority No. 1, but further contagion appears inevitable. Italy has reported more than 400 cases and 12 deaths, and the United Kingdom’s Foreign and Commonwealth Office advised against “all but essential travel” to 11 Italian towns undergoing isolation measures because of the virus.
The Washington Post reported that in the U.S., health officials have “warned that the spread of the novel coronavirus in the country appears inevitable, marking a significant change in tone as global travel disruptions continued to worsen.”
Not only are hotels taking a beating, but so are their stock prices. Hilton (HLT) is down around 12% in the past week, while Marriott (MAR) is down some 14%. The Dow Jones dropped 900 points on Feb. 25 after the Centers for Disease Control warned of further coronavirus inevitability in the U.S.
As difficult a month as January was, February data is poised to be worse, as the collective hotel industry braces for further travel disruption and cancellations, which seem to be growing rather than lessening.
As Robert Burns’ famous quote is commonly paraphrased: “The best-laid plans of mice and men often go awry.” Of hotels, too.
