Independent Hotels and COVID-19

Goals

To determine the number of independent hotels that will go into foreclosure due to the Covid-19 outbreak.

Early Findings

Impact on the hotel industry

  • According to an article published by Hotel New, there are two possible scenarios for the hotel industry.
  • As seen after other recessions, including the recent recovery of the Chinese hotel industry after COVID-19 was contained, leisure demand will rise because people will want to escape from home after spending so much time confined in it.
  • Overall, it has been historically proven that the hotel and leisure industries recover the fastest after a recession. While the COVID-19 pandemic is not a typical recession, experts still believe that the hotel industry will be able to gain back what it lost during the isolation period.
  • However, it is also possible that unemployment will rise, which would mean that a lot of the regular visitors will not be able to travel or go on vacations.
  • The high number of infected and deceased people in the US could also impact demand as people will be scared to visit the country in the foreseeable future.
  • This is further supported by the fact that the occupancy rates declined from 70.0% to below 25.0% since the beginning of the epidemic according to the American Hotels and Lodging Association (AHLA).
  • Demand will also be influenced by how soon CEOs allow their representatives to resume travel and return to their normal duties, which would also include corporate events.

Future of the independent hotels

  • While we weren't able find a specific article that shows how many independently-owned hotels will close down, it has been stated that individual hotels will be hit the hardest, projecting occupancy levels below 20% for upcoming months.
  • Of the 33,000 small hotel businesses, it is predicted that the majority of them will be forced to close down if the situation does not improve in the next few months.
  • So far, there have been close to 3.9 million employees that have either been laid off or will be eliminated in the next few weeks.
  • The total loss of the industry so far amounts to $2.4 billion per week but this figure is estimated to climb to $3.5 billion in the next few weeks.
  • It has also been estimated that non-disclosed operators, which includes independently-owned hotels, in the leisure industry will lose over $920 billion.
  • Moreover, it is much harder for small independent hotels to get access to the governments' funds, which will further accelerate the losses in the segment.
  • It is also predicted that a there is a big possibility for smaller independent hotels to turn to bigger brands for help after the epidemic, which will lead to a significant growth in the conversion of independent boutique hotels into franchises.

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