Friday with Jan Freitag
As the U.S. market begins to open after stay at home orders lift, hotels are beginning to see signs of life. Operators who had previously laid off team members are bringing them back as they see sustainable occupancies grow with consumers looking for opportunities to leave their homes. Many analysts have been watching the Chinese market as they preceded the U.S. Market in opening. Still, many hotel construction projects have been delayed and hotel property sales have somewhat slowed with a value disparity between sellers and buyers. Today we have a quick Q&A with STR’s Jan Freitag, SVP at STR about some of these points and he shares a takeaway for owners and operators.
On this week's Market Update, you showed that the US market is beginning to open up which has contributed to an increase in hotel occupancy. Can you share a little about how some other markets have fared that have opened and what we can expect in the US market?
JF: As we said when this all started, there are three stages to the US hotel industry recovery. Leisure travelers will return first, then corporate transient, then finally corporate group. We saw in our data from the weekend of May 1-2 that leisure travelers indeed returned. We saw occupancies in the 40% and 50% range in Florida and Texas beach markets.
Along this same line, one STR Update noted the increase in 2nd tier markets as they first came out of quarantine in China. More mountain and lake district bookings were up, with weekends leading. What patterns in the US market are you seeing in this short amount of time?
JF: Basically the same patterns. Drive-to destinations saw a noticeable uptick in demand and we attribute that to stay at home orders expiring and consumers itching to leave their homes.
Do you see the sales of hotel properties increasing in other markets and what should the US market anticipate in terms of property sale spikes?
JF: It is too early to tell. My sense from listening to market participants is that there is disconnected between what buyers and sellers are perceiving at fair market value: Is it -50% or -15% from 2019 values? That needs to be figured out. HVS came out with a study that suggested that the realistic discount maybe in the -20% range but that is not what opportunistic funds who are ready to jump in are looking for. So it will be a while until we see the first trades.
What would the one take away you would give to hotel owners and operators at this time based on the data you are seeing in other markets?
JF: In 2002 I listened to Steve Bollenbach, then CEO for Hilton, and his quote stuck with me: “A recession is a terrible thing to waste.” So, those renovation plans that you were pondering? See if this can be done now. Your super star sales and ops people? Give them access to online training. The data from China is clear, this is a temporary disruption. Severe? Yes. Unprecedented? Yes. But temporary. So position yourself to be stronger once the travelers hit the road again.
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