The number of unsold hotel rooms in the United States in 2020 far exceeded those left empty in the worst year of the Great Recession, placing the industry in a deep financial hole that could take years to fill.
Hotel industry research firm STR, which is part of the CoStar Group, reported that demand had fallen so much after the coronavirus pandemic that the number of unsold rooms topped one billion last year. In 2009 during the last recession, the number of unsold rooms reached 786 million.
Group meetings disappeared when the pandemic hit in mid-March, hitting high-end, full-service hotels the hardest. These hotels remained about a third full for most months of the pandemic before ending the year about a quarter full.
Many hotels have temporarily closed and some have never reopened. As a result, lenders became owners of hotels while low-cost buyers managed to grab properties at very favorable prices.
Leisure travelers took to the road rather than the plane, which helped the limited-service hotels to survive. Budget hotels performed best, especially those located along highways, in suburban areas, and in small town hotels. Travelers seemed to favor beach and mountain destinations.
Lower demand across all areas, however, pushed the average occupancy rate to 44%, 22 percentage points lower than in 2019, which was a record high, said Jan Freitag, country director of the hotel analysis at CoStar.
Revenue per available room in high-end hotels fell by more than 50% over the year. Freitag said revenue per available room at limited-service hotels has fallen by 30% to 50%. Last April, revenue per available room was 80% lower than in 2019, the worst drop in STR’s 36-year history of tracking hotel data.
“It is clear that the recovery of high-end hotels can only happen after the implementation of mass vaccinations and mass immunization,” he said. “2020 results will take time to recover, especially as these low occupancy rates give hoteliers little to no pricing power.”
According to STR’s forecast, the group’s U.S. operations will begin to return in the third quarter if vaccines meet the federal government’s distribution target of most vaccine recipients by summer.