STR: Hotels In Europe Should Still Plan For Demand This Summer

"Things are definitely reaching the bottom in Europe following the vast number of forced closures," Rossman said. "We are headed into uncharted territory."

With many countries on Europe now on government mandated lockdown, and a large number of hotels now closed, all we can do is look to Asia - where recovery is slowly taking shape.

STR data for occupancy % change versus prior year, as at week ending 21 March 2020, showed that mainland China is no longer the biggest decline at -72%. Japan has not yet seen significant declines and is at -68%. And Singapore has never really seen declines of much more than 50%. At the top end of the list was Czech Republic and Italy, both at -96%, and Greece at -94%.

Showing just how the global market is one in flux and hard to predict, at the start of the year Florida Keys was the highest occupancy markets, but last week the best performing market was Wuhan. "Not that surprising considering the medical support having to be accommodated," Rossman explained.

Comparing downturns

If we're at the bottom how does the current situation compare to previous downturns? And what could we forecast lies ahead?

"Already in China and Europe the declines are greater than 2008/9. The question then is 'How long will it remain at that level?'," said Rossman. Looking at China as an example - hotel occupancy plummeted down to 10% until new cases of Covid-19 started drying up at the beginning of March, then occupancies doubled to 20%. So, what does that mean for hotels in Europe and the rest of the world? Rossman said once new cases of the virus stop increasing and flatline, then we may start to see growth.

Occupancy for China as a whole is 20% with some domestic markets tending to do better than international markets at this stage. This is unsurprising given the international lock down.

"Along with the recovery in occupancy, we have seen an increase in hotels opening up. Hotels have been closed for two months on average. Now, 87% of hotels on average are now re-opened, but it varies depending on market," Rossman explained.

The European situation

Hotels in China closed for an average of two months. Hotels in Europe are just going into lockdown, so we have at least two months before we can follow China into recovery mode.

Aoife Roche, Director - Account Management, Europe, gave webinar attendees a snapshot view of what is happing across the continent. What started with Italy seeing 80% declines in occupancy has now moved to a number of countries in a similar domain - with 80-90% declines in occupancy week on week. RevPAR is severely down, hitting 90% declines across all major cities.

Italy was running at 30% occupancy at the beginning of March but is now effectively at 0%. France and Spain has followed suit. "This week, Germany and the UK really started to see the impact - into that 30% occupancy threshold. We've seen a really stark decline for the UK in particular," Roche explained.

Occupancies in the UK for 16-22 March dropped by -80% for London, -80% for Dublin and -75% for Edinburgh.

According to Roche, forward business on the books has also collapsed. "Last week we were still looking 20-30% business on the books, but now looking at 5-20%. There's been a high decline as cancellations come through and hotels close," she remarked.

Looking forward 90 days, there is still some OTB business but it is expected we will start to see those numbers change as hotels close. Hotels at Heathrow were the only ones to see positive pick up.

It was a similar story in the Benelux countries, where occupancies saw major drops following the announcement of the EU parliament cancelling all events. Samantha Mardkhah, Business Development Manager, Europe, explained how OTB business was also depleted. "For the next 14 days, normal would be 50-60% occupancy, but we are now seeing a confirmed occupancy of Netherlands 14% and Brussels at 6%," she said.

Recovery scenarios

Robin Rossmann closed the webinar with a ray of hope as he talked through recovery scenarios. He pointed to the fact that SARS was very much a quick recovery, within three months, with the recovery starting a month before WHO gave the all clear.

"The recovery will depend on what countries ease travel restrictions and a lot of that will be domestic to begin with," he pointed out.

Talking of the key summer business period in Europe, he likened it to "being on a movie set with no script and no end in sight".

But he remained confident that there will be an opportunity for people to travel again by the time we get to the summer.

"Lead times are likely to be much shorter, and a lot will depend on when airlift comes back. But we have to assume and plan that we will be open," he said.

In terms of long term recovery scenarios - Rossman said it all depends on the impact of this crisis on the wider economy. Most economists are forecasting some type of recession, the depth of that is unknown.

"If it is like or worse than 2008 then from an occupancy level that was a 1.5 year period of decline in occupancy, 67% to 61% in Europe - not that significant. But we are likely to see higher declines in occupancy this time around," he said.

And then there's the changes this could have on long-term consumer behaviour. A recent STR survey of international travellers has seen a decline in travel intent.

STR asked leisure travellers from 1-5 March about their intentions to travel internationally. 53% said their intentions remained the same. Conducting the same survey 16-25 March, that response had dropped to 35%.

However, Rossman urged hoteliers on the webinar to still plan for significant demand for the summer months as people will have been pent up and will looking for ways to travel beyond their house. "Demand will be there and likely first from the domestic market," he said.

Tune in to the next STR webinar update here.

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