. More Than 8,000 U.S. Hotels Could Close in September | Northstar Meetings Group

More Than 8,000 U.S. Hotels Could Close in September

Rising COVID-19 cases and a lack of financial aid could cause mass foreclosures, according to the American Hotel and Lodging Association. 

The Hilton Westchester in New York will shut down for good on July 20. It is one of many hotels that could close permanently due to the COVID-19 pandemic.

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Updated July 14, 2020

The hospitality industry has been among the hardest hit by the COVID-19 pandemic. Even as the industry begins to recover -- with a growing number of properties reopening their doors and 2.1 million leisure and hospitality jobs added last month -- experts warn that the industry is not yet out of the woods. 

American Hotel and Lodging Association president and CEO Chip Rogers said more than 8,000 hotels could close in September if business travel does not pick up and funding from the Paycheck Protection Program runs out. According to AHLA, only 20 percent of hotels have received any debt relief from Commercial Mortgage-Backed Security lenders on Wall Street. Without aid from Congress, the industry association expects massive foreclosures on the horizon.

"Right now, many hotels are struggling to service their debt and keep their lights on, especially those with CMBS loans, as they have been unable to obtain urgently needed debt relief," said Rogers. "Without action to shore up commercial debt, especially CMBS loans, the hotel industry will experience mass foreclosures and permanent job losses which will snowball into a larger commercial real estate crisis impacting other segments of the economy." 

Some properties are already closing their doors. Among the hotels lost to COVID-19 are the Omni Berkshire PlaceTimes Square Edition and the Hilton Westchester, all of which are in New York. A new report from The Wall Street Journal suggests 20 percent of New York's total hotel supply (about 250,000 rooms) could close permanently.

Occupancy rates for U.S. hotels also took a slight dip at the beginning of July, as the number of coronavirus cases in the U.S. continues to surge. After 11 consecutive weeks on the rise, average occupancy declined from 46.2 percent for the week ending on June 27 to 45.6 percent for the week of July 4, according to hospitality data provider STR.

"Demand came in 67,000 rooms lower than the previous week, and beyond that, July 1 was a reopening day for a lot of hotels, further impacting the occupancy equation," said Jan Freitag, STR's senior vice president of lodging insights. "A rise in COVID-19 cases has led to states pausing or even rolling back some of their reopenings. Beaches have been a big demand driver for hotels, but with many beaches closed ahead of the July 4 holiday, all but two markets in Florida showed lower occupancy than the previous week. Growing concern around this latest spike in the pandemic has further implications for leisure and business demand alike." 

Many in the industry expect it could take years before a full recovery is reached. According to STR, occupancy rates for U.S. hotels will likely not reach pre-COVID-19 levels until 2023.

Economic Impact of COVID-19

Since mid-February, U.S. properties have lost more than $40 billion in room revenue, according to the AHLA. Hotels across the country are on track to lose more than $400 million in room revenue per day due to COVID-19, which equates to losses of $2.8 billion weekly.

As a result, many hotels have been forced to furlough or lay off staff members. More than 7.7 million hospitality and leisure jobs were lost in the month of April, according to the AHLA. Even as properties reopen and the industry begins to recover, layoffs continue. 

Las Vegas-based Boyd Gaming, which owns and operates 29 casino properties across 10 states, many with hotels, announced July 13 that it had let go more than 25 percent of its workers. The cut essentially turns a large number of furloughs into permanent layoffs. According to a company spokesperson, the number of layoffs is "at the lower end" of 25 to 60 percent of the total workforce — the range that the company had warned in May could be affected.

In June, Hilton let go of 22 percent of its corporate workforce and Oyo Rooms said it plans to lay off a "large majority" of its U.S. employees on furlough. Meanwhile, Marriott International announced that the furloughs and reduced work schedules that were implemented in April will be extended until Oct. 2. A number of corporate Marriott positions are also expected to be eliminated later this year. The hotelier said it does not except to return to prior levels of business until beyond 2021.

Rosen Hotels & Resorts, which owns and operates nine properties in Orlando, is the latest to announce layoffs. The company said it would implement a "substantial reduction of workforce across multiple locations," effective July 31. 

"It is with deep personal regret that I announce a significant downsizing of staff at Rosen Hotels & Resorts. Never in the 46-year history of my company would I have envisioned such a drastic decision," said Harris Rosen, president and COO of Rosen Hotels & Resorts. "Since the onset of COVID-19 earlier this year, we have maintained as many staff as possible, with the hope of business returning to usual in June of this year. Regrettably, this did not come to pass ... This is especially painful for me, as I consider these valued associates as extended members of the Rosen family, without whose contributions our company would never have achieved the success it has through the years."

Doug Dreher, president and CEO of The Hotel Group, called the effect of the coronavirus pandemic on the hospitality industry "devastating" and expected his company to lay off at least a third of its workforce.

"It is for us the Great Depression, utterly devastating," said Dreher. "We've tried to get ahead of it. We're working with lenders, but we need help. We need help in every imaginable way. The human toll breaks your heart." 

Reopening Hotel Properties

After weeks of empty rooms and temporary closures, a growing number of hotels are reopening their doors and welcoming guests back with new cleaning protocols in place. Omni Hotels & Resorts, for example, has already reopened most of its properties which had shut down during the pandemic. More, such as the Omni Riverfront Hotel, will reopen later this month.

Gaylord Hotels was forced to temporarily close its five properties in the U.S. But four have already reopened: the Gaylord Texan Resort & Convention CenterGaylord Opryland Resort & Convention Center, Gaylord Palms Resort & Convention Center and Gaylord Rockies Resort & Convention Center. Meanwhile, the Gaylord National Resort & Convention Center management hopes to reopen in late July.

Gaming resorts, which were among the first to suspend operations en masse, are also reopening their doors. MGM Resorts and Wynn Resorts, for example, suspended operations at their Las Vegas properties on March 16. The companies, along with other Nevada gaming powerhouses such as Caesars Entertainment and Las Vegas Sands, reopened select casinos on June 4 in accordance with the state's reopening plan. The companies are gradually reopening more Nevada properties as demand rises and will continue to do so through the summer. Mandalay Bay Resort & Casino, Delano Las Vegas, ARIA Resort & Casino and the Nobu Hotel at Caesars Palace are among the latest openings.

In Connecticut, two tribal casinos reopened on June 1. The Mohegan Sun and Foxwoods Resort Casino released detailed reopening plans with new safety protocols to keep guests and staff members safe. Atlantic City casinos reopened on July 2, and Massachusetts casinos began welcoming guests back last week. Plainridge Park was the first to reopen on July 8, followed by the Encore Boston Harbor on July 12 and MGM Springfield on July 13.

Despite a surge in new coronavirus cases in the state of Florida, Orlando's Walt Disney World began a phased reopening of its theme parks and resort hotels on July 11. Disneyland, in Anaheim, Calif., had announced a July 17 opening but has postponed that as the state has yet to release reopening guidelines for theme parks. A new date has not been set. 

A COVID-19 hotel-status directory from EproDirect, a hospitality industry marketing agency, indicates whether more than 4,000 hotels are currently open, and if they are accepting individual reservations and group bookings. While most of the properties listed are in the United States, hotel reps from any destination worldwide can list their hotel's status for free.

New Openings and Renovations Delayed

The pandemic is also affecting properties in the pipeline. The Langham, Boston was due to unveil a multimillion-dollar renovation this fall. However, the completion date has been pushed back to early 2021 due to a local halt on construction.

The grand opening of Universal's Endless Summer Resort – Dockside Inn and Suites has also been postponed. The resort was scheduled to open in mid-March; a new date has not yet been announced. 

Marriott is expecting to open and sign fewer hotel deals in 2020 than anticipated. In addition, the company has temporarily deferred most brand standards to help owners and franchisees, including delaying renovations due in 2020 by one year, according to Marriott president and CEO Arne Sorenson

"The coronavirus is fast becoming the most significant event to ever impact our business; that includes the 12-month period after 9/11 and the financial crisis of 2009," said Sorenson during an investor update on March 19. But he noted that the development pipeline has not ground to a complete halt. "We’ve been signing deals and we have development committees that are meeting monthly. The volume is lighter and the numbers will be lower than we anticipated but they won’t be zero."

Insight from Abroad

Looking to Asia, where the outbreak began, could provide further insight into the potential economic damage and timeline for recovery — although comparisons are challenging, as the United States has tallied far more COVID-19 cases and continues to do so even as stateside hotels open their doors. 

By mid-February, Hilton had closed all 150 hotels in China, totaling 33,000 rooms. At the time, the company said it expected a $25 million to $50 million hit on full-year adjusted EBIDTA, assuming the outbreak lasted three to six months with an equal recovery period. It wasn't until May 8, however, that the company resumed operations of all hotels in mainland China. The company is now looking to expand its presence in the country, and announced plans on June 23 to add 1,000 Home2 Suites properties to the market.

Hyatt president and CEO Mark Hoplamazian said almost half of the hotelier's China properties are running at 50 percent occupancy or higher. Meanwhile, Marriott announced on June 1 that it had reopened all 350 of its China properties. Occupancy rates are now between 40 and 50 percent — a significant jump from earlier in the year. According to Sorenson, some of Marriott's China hotels were running at 7 percent occupancy in January, when the pandemic peaked there.

"We have come up a long way from the bottom, that shows you about the potential path forward," said Sorenson on a webinar hosted by AHLA on June 25. 

New cases, however, could again affect travel and hotel performance. A third wave of coronavirus cases in Hong Kong will force Hong Kong Disneyland to close on July 15, less than a month after it reopened. The Disneyland resorts will remain open with adjusted services. Cases in Tokyo have also spiked in the past week, but the number number of new cases in those outbreaks remains far below the levels being reported in parts of the U.S.