Looking for a travel recovery in the wrong places
Given how hard the travel industry has been hit by COVID-19, it’s to be expected that people would start looking for early signs of the travel recovery everywhere…. including in those places that will recover last … and then panicking when they don’t see the signs they’d hoped for.
That’s human nature: a strange mix of blind optimism and a propensity to catastrophize.
This explains the malaise across parts of the travel industry after The Wall Street Journal published a piece stating the obvious: “As New York Reopens, Many of Its Hotel Rooms Look Closed for Good.”
Seemingly many people read the article as if it were saying “tourists will never return to New York.” But the article pretty clearly laid out quite a different argument: that New York City had built too many hotels in the past few years. Real estate investors had come to see hotels as a sure bet. Anyone in New York in the past year could tell you that the city was filling with hotels. Seemingly every hotel brand was building something in every neighborhood. Something had to give. And the arrival of COVID-19 made that clear. Or, as the Journal put it, “hotels went into the coronavirus crisis suffering from falling occupancy and room rates, mostly because of a glut of new development. Now travel restrictions and a tattered economy … have aggravated an already-bad situation.”
The truth, as we see it, is that the New York hotel scene will be one of the last segments of the travel industry to see things turn around after coronavirus. And as the researchers at STR have noted, New York hotels recently experienced a slight downward tick. For the week ending June 20, NYC hotel “occupancy was 43.6%, down from 45.7% the week prior.“
That too is not unexpected. STR reports that the “Top 25 Markets showed lower occupancy (38.4%) than the national average, but slightly higher ADR (US$93.40).” In other words, no one is traveling to major cities yet.
Yet the travel industry is recovering. Slowly, but surely, as people do what we predicted they would: taking station-wagon vacations by hopping in the car and taking the kids to places with outdoor recreation space. ““Occupancy was up another couple percentage points from last week, marking the 10th consecutive week of such an increase,” said Jan Freitag, STR’s senior VP of lodging insights. “Demand continues to be pushed upward by drive-to spots and the destinations with outdoor offerings such as beaches. For the week, 10 submarkets showed occupancy above 70%, led by Panama City (88.7%), where occupancy was just 0.7% lower than the comparable week in 2019.”
It’s not time to celebrate just yet. The road ahead is long. But two thing are clear: the travel recovery is coming and it’s not a good time to build a new hotel in New York.