Hilton has closed about 150 of its hotels in China amid the growing coronavirus crisis plaguing the country and the rest of the world — and its impact on the hotel industry may be just beginning. In the U.S. specifically, it could cost the country billions of dollars and millions of hotel room stays.
And it’s not just predictions: Hotels in different parts of the world beyond China, the epicenter of the outbreak, are already starting to see dips in occupancy due to the coronavirus, though it will take months before the industry can assess the macro effects.
“This is not a regional phenomenon; this is a global phenomenon,” Jan Freitag, a senior vice president with data research firm STR, told USA TODAY.
What’s going on at Hilton
Hilton’s 150 hotels translate to about 33,000 rooms, Christopher Nassetta, president and CEO of Hilton, said on an investor call Tuesday. While the company is still operating business as usual in some parts of the country, the situation is evolving. At this point it looks like the chain could lose $25 to $50 million in EBIDTA (a financial term meaning earnings before interest, depreciation, taxes and amortization), over six to 12 months, including outbreak and recovery period. For context: China is 2.7% of the company’s overall EBIDTA.
The coronavirus has killed more than 1,110 people with more than 45,000 people infected, has left thousands of cruisers stranded and led U.S. airlines to cancel flights as far out as April.
“It goes without saying that the safety and well-being of our team members and our guests remain a paramount priority as we continue to carefully monitor the situation,” Nassetta told investors. “We’re working with local governments and health authorities globally to best support our operations and our communities in impacted areas.” Elsewhere in Asia: The company has yet to see cancellations for the Tokyo Olympics.
Beyond Hilton: What’s going on with the hotel industry and coronavirus
Hilton’s issues reflect a larger problem for hotels in China. Hotel occupancy declined 75% in mainland China between Jan. 14 to Jan. 26 amid the coronavirus outbreak, according to preliminary data from STR. Mainland China’s hotel occupancy was at 70% on Jan. 14, then fell to 17% by Jan. 26 — eight out of 10 rooms were unoccupied on average. Around that time, China had quarantined 20 million people across three cities.
It’s not just China that needs to be concerned though. Tourism Economics predicts a possible 28% drop in visits from China to the U.S. this year, or a drop of $5.8 billion in visitor spending and 4.6 million hotel room nights sold. China is the third-largest source of overseas travel to the U.S., according to the U.S. Travel Association. California and New York took in the most overnight visitors from China last year (1.7 million and 1.2 million, respectively).
This 28% visitors drop figure is roughly the same as what happened during the SARS outbreak in 2003, where the U.S. saw a 30% dip in visits from China, though tourism from China to the U.S. bounced back in 2004.
Jesper Palmqvist, STR’s Asia Pacific area director, said in a news release that comparing this outbreak to SARS might be premature given the differences in the market today.
“Dependence on smartphone technology, the widespread use of social media, significant differences in hotel inventory, greater volume in international arrivals to Mainland China and overall economic conditions make it difficult to use that previous outbreak as an indicator this time around,” Palmqvist explained.
As of now in the U.S., anecdotally hotel operators may be seeing an impact, but it’s not something STR has seen yet — not that it won’t happen. Three months from now will be a better time to look at market-by-market impacts.
How are hotels responding to the coronavirus outbreak? What can travelers do?
It’s best to check with the individual hotel or travel agent you booked with to find out about your trip options.
That said: Marriott is monitoring statements from the Centers for Disease Control and Prevention and World Health Organization as well as adhering to local health departments, according to a statement on its website. It is waiving cancellation fees for hotel stays through Feb. 29 for guests staying at Mainland China, Hong Kong SAR, Macau SAR, and Taiwan, as well as for those traveling elsewhere from Mainland China, Hong Kong SAR, Macau SAR, and Taiwan.
Hyatt is waiving cancellation fees through Feb. 29 for travelers from Greater China staying at Hyatt hotels across the world, as well as for guests with reservations in greater China. Travelers who booked through travel agents or third-parties should contact them directly.
The Four Seasons Hotel Shenzhen isn’t taking any new bookings until Feb. 15.
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