Recently, the U.S. State Department issued a “Level 4” travel advisory for all international travel. As of April 5, seven of the 48 contiguous states, including Maine, Vermont, Massachusetts, Rhode Island, Delaware, and Nevada, plus Alaska and Hawaii, require almost all incoming travelers to self-quarantine for 14 days. Nobody travels.
Hotels recorded the unprecedented-low performance
The travel and hospitality industry got hit the hardest, with massy layoffs and record-low KPIs (key performance indicators). According to STR’s lodging report for the week ended on March 28, the industry’s KPIs hit “unprecedented low.” STR is the leading data analytics provider for the lodging industry. For the week of March 22 to March 28, the industry recorded:
· Occupancy: 22.6%, a minus 67.5 percent change from the same period of last year (March 24 to March 30, 2019)
· Average daily rate (ADR): $79.92, a minus 39.4 percent change
· Revenue per available room (RevPAR): $18.05, a minus 80.3 percent change
· The industry is expected to see the worst occupancy in 2020 on record
· Occupancy: 19.6%, a minus 74.6 percent change
· ADR: $89.71, a minus 43.9 percent change
· RevPAR: $17.60, a minus 85.7 percent change.
Airbnb too is not doing well
Airbnb just lowered its internal valuation to $26 billion in April, down from $31 billion in the company’s previous valuation. According to AirDNA.com, a tech firm that collects and provides short-term residential rental data,
· The global Airbnb supply remained relatively little change.
· The weekly Airbnb revenue for New York City dropped from $12.5 million in the week of January 5 to $6 million in the week of March 15, a minus 52 percent change.
· The weekly revenue for San Francisco dropped from $4.4 million in the week of January 5 to $1.8 million in the week of March 15, a minus 59 percent change.
Keep in mind that on March 15, neither San Francisco nor New York City has placed the stay-at-home order yet.
Comparing to the AirDNA.com data for Beijing, a place with a sticker lockdown order earlier, bookings dropped from 40,508 in the week of January 5 to 1,655 in the week of March 1. That was a minus 96 percent change.
Looking at the yearly trend (March 2020 vs. March 2019), another AirDNA.com report reveals some new trends:
· Rural areas reported the most significant yearly gains in the month at $1320 million, a $280 increase from the previous year
· Suburban areas saw growth from $294 million to $345 million
· On the contrary, the revenue in urban markets dropped from $706 million to $631 million
It is important to note that such a yearly trend was released on March 23, 2020. It is likely that the coronavirus outbreak has stronger negative impacts on urban markets, in which more confirmed infected cases were reported in large metropolitan areas. It is also plausible that people might choose to stay outside of the urban areas before the stay-at-home order takes effect.
Will today’s Airbnb guests want to stay in chain hotels instead when the pandemic is over?
It will probably take a long time before the industry bounce back to the 2019 peak even after the pandemic is over. When people start traveling again, however, will chain hotels win some Airbnb guests back?
Referring to the pros and cons of staying in a hotel vs. an Airbnb facility, hotels appear to be a winner. For example,
· Hygiene and cleanliness will become even more important to travelers. Chain hotels can provide consistent service determined by the brand standards.
· Social distancing may have a prolonged effect on people. That will lower some travelers’ desire to interact with the local hosts, which is a unique feature offered by Airbnb.
· With lower ADR, hotels become more appealing to those Airbnb travelers who are looking for cheaper options.
· It is not as easy to change or cancel an Airbnb booking as a hotel reservation.
· It is easier to solve a service failure issue in hotels than Airbnb.
· In case of accidents (e.g., feeling ill) or damage, it is easier to claim a loss from an insurance company if the case is taken place in a hotel.
· Some Airbnb hosts, especially the multi-unit hosts, might find it difficult to make the mortgage payments for more than one rental unit during the global economic downturn.
· Airbnb did a poor job in handling the cancelation fees between hosts and travelers; It might take a long time for Airbnb to fix its relationship with the hosts.
Let’s hope the pandemic will end soon. Then, everything will go back to normal.