Hotels 'On A Path' To Pre-Pandemic Occupancy Levels

After a 14-month lull, the Transportation Security Administration is clocking daily traveler numbers in excess of 2 million—the first time since March 7, when the COVID-19 pandemic began gripping the nation. And that increase in air travelers is evident in the hospitality sector’s continued recovery, which has been apparent across multiple data points. 

A recent Trepp analysis shows that the share of non-farm employees in the leisure and hospitality sector as reported by the Fed’s economic data was around 10% in May, up from an April 2020 low of 6.6% and nearly up to the pre-pandemic level of 11%. And the Trepp CMBS delinquency rate for hotel properties also dropped to 14.2% last month, down from an all-time high of 24.3% in June of last year. 

But diving deeper into the data paints an even more nuanced picture of just how deeply the lodging sector fell into a COVID trough: the room revenues per key for hotels backing CMBS all reduced markedly from 2019 to 2020 in four key states. California and New York saw the biggest decreases (from $80,288 in 2019 to $30,834 in 2020 in California and from $49,217 to $23,059 in New York), followed by Florida (a decrease from $40,387 to $28,637) and Texas (down from $30,546 to $25,301). 

Operating expenses per key and NOI per key also went down in all four states from 2019 to 2020, with the exception of Texas.

The biggest pandemic lodging losers were airport hotels, which saw around a 70% reduction in NOI per key in 2020 from 2019 levels. Total revenue declined nearly 50% over that period, total operating expenses per key went down 41%, NOI per key decreased 68.5% and total capital expenses per key decreased 50.38%.

Despite these bleak numbers, however, Trepp analysts say there’s plenty to look forward to for the hospitality sector.

“As tourism and business travel continue to pick up this year, it will be interesting to see its impact on hotels serving as collateral for CMBS loans as they report their quarterly financials,” writes Trepp’s Jyoti Yadav in a recent analysis of the data, noting that recent STR numbers show that occupancy hit 61.9% across the US during the week ending June 5. “While the occupancy is 14% lower than the respective week in June 2019, it is still the highest recorded occupancy of the pandemic era. With higher occupancies being reported every week or so, it appears that hotels are on the path to a return to a pre-pandemic era.”