Hotel News August 2020

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San Francisco Hotel News by Donna Jean Coquilla
San Francisco Hotel News by Donna Jean Coquilla

West Coast Hotel Vacancy August 2020 by Donna Coquilla

The California hotel industry is expected to see a sharp decline in travel demand over the next three years, losing more than 125,000 jobs, an industry group estimated Monday, and San Francisco Travel expects that number to rise to 1.6 million by 2021, but it will still fall by nearly half compared with 2019. The nearly announced layoffs in the Bay Area in July represent a pace no worse than that which occurred in June, official notices from the state Labor Department show. Still, the number of planned hotel and resort job cuts in California is sharply higher than the normal pace of layoffs in early 2020 and is expected to be well above the coronavirus – the equivalent peak of 2.5 million jobs in 2015. The layoffs were officially announced in April and the plan will remain in place for the rest of the year, according to the California Hotel and Lodging Association of California.

According to San Francisco Travel, a trade association for the travel and tourism industry, it will be a difficult path for the city’s hospitality industry and for the city as a whole.    

All three key hotel performance indicators for the week ending March 14, 2020, were down by double – digit percentages compared with the week of March 10 – 16, 2019, according to STR.         

Hotel data for Solano County last week showed an occupancy rate of 31.5 %, down 57.1 % from a year earlier. 

San Francisco / San Mateo posted the week’s second – largest drop in RevPAR ( 63.3 percent ) due to the second – steepest decreases in occupancy ( 51.6 percent ) and ADR ( 24.2 percent ).     

Among the top 25 markets for overall hotel performance, Seattle saw the steepest year – over – year declines in occupancy ( 55 percent ), ADR ( 24.7 percent ) and RevPAR ( 66.1 percent ).    

San Francisco / San Mateo, California, posted the week’s steepest drop in RevPAR ( -45.5 % to US$ 134.26 ), due largely to the largest decline in ADR ( -30.4 % to US$ 212.61 ).     

Anaheim / Santa Ana, California, experienced the largest drop in occupancy ( -27.3 % to 59.6 % ) and the second – largest decreases in ADR ( -19.9 % to US$ 155.14 ) and RevPAR ( -41.8 % to US$ 92.42 ).  

Hotels have seen substantial losses in revenue in the wake of the coronavirus, and face the uncertainty of an economy which may take months or years to recover.      

The study found that occupancy will recover in roughly two years, ADR in roughly four years, and RevPAR and GOPPAR will take five years before they reach pre – coronavirus levels.    

PROVIDENCE, RI — Hotel Asset Value Enhancement ( hotelAVE ) released a study that estimated that it will take the hotel industry in the United States approximately five years to achieve pre – COVID-19 occupancies, revenues and profitability.     

In 2020, due to the rapid escalation of the COVID-19 pandemic, hotel revenues in the United States could decrease by 25 – 30 %.  

On July 7, 2020, the San Francisco Board of Supervisors passed additional emergency measures to establish cleaning and disease prevention standards at tourist hotels and large commercial office buildings.  

Deemed the “Healthy Buildings Ordinance,” it will place significant new obligations on most of the City’s hotels and office buildings, including heightened cleaning standards, employee training on paid time, and a prohibition against retaliation against employees for refusing to perform work under conditions they believe may be unsafe.  

The measure seeks to contain the spread of COVID-19 as the City looks to reopen hotels to tourists and offices to employees. 

The San Francisco Hotel Council is working on establishing new cleaning guidelines for hotels re – opening after the shelter – in – place orders are lifted.

In addition, history and case law are replete with apparently so – called airtight policy exclusions only to find a court holding an insurer liable for coverage.      

Recently, the Seventh Circuit held that a manufacturer’s insurer must cover its insured, a designer and builder of anaerobic digesters, under its errors and omissions policy for claims alleging breach of contract, despite an express exclusion in the policy for claims arising out of a breach of contract. 

Many hotel owners ( or their lenders, surprisingly ) are not bothering to make insurance claims at the advice of their insurance agents or counsel.          

The insurer’s first ( and not only ) defense will likely be “virus, bacteriaum or other micororganism” exclusion from coverage under its policy, and that further the 2006 circular specifically addresses loss of business income.  

An analysis by McKinsey indicates that to cover variable and semi – fixed costs, luxury hotels conservatively need occupancy rates 1.5 times greater than economy hotels.       

Looking ahead, economy hotels are expected to have the fastest return to pre – pandemic levels, and luxury and upper upscale hotels to have the slowest.        

San Francisco’s hotel industry is hurting from millions in lost revenue amid impacts of COVID-19.  Seventy of the 215 hotels in the city were temporarily closed following mandatory shelter – in – place orders.    

But, weeks before mandatory shelter – in – place orders, rates plunged to around 6%.”This is unprecedented,” said Kevin Carroll, CEO of the San Francisco Hotel Council.

According to the EDD, total non – farm employment in San Diego County decreased by 2,200 jobs — from 1,357,000 to 1,355,000 — while farm employment remained unchanged.          

The decrease in jobs coinciding with a simultaneous decrease in the unemployment rate could indicate that fewer people are actively searching for work, or are looking outside the county for employment — not a good sign for the local economy. 

The San Diego region’s unemployment rate dipped to 12.3 % in July, a 1.5 % drop from the previous month, according to figures released Friday by the state Employment Development Department. 

Though Las Vegas ‘unemployment rate was down a point and a half in July over June ( from 17.8 % to 16.4 % ), more than 180,000 people are still out of work in the metropolitan area and hospitality jobs are down 25 % compared to July 2019.   

Donna Jean Coquilla
By
Donna Jean Coquilla
August 28, 2020

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