Hotels React as Coronavirus Spreads
As of Thursday, there have been 15 cases of the novel coronavirus confirmed in seven states: eight in California; two in Illinois; and one in Arizona, Washington, Massachusetts, Wisconsin and Texas.
UPDATE: On a post-earnings conference call, Christopher J. Nassetta, CEO, Hilton, reported that approximately 150 hotels, totaling approximately 33,000 rooms, are closed in China as a result of the coronavirus outbreak.
Assuming that the outbreak lasts three to six months, with an additional three- to six-month recovery period, Hilton expects a $25 million to $50 million hit on full-year adjusted EBIDTA, he said. The company estimates a percentage point impact on RevPAR.
China represents 2.7% of company’s overall EBIDTA.
In a recent blog post, Laura Dietzel, partner and senior real estate analyst at RSM US LLP, discussed how the coronavirus could impact China’s growing tourism industry, both in the short and long term. Insights include the following:
• Chinese nationals comprise the largest tourist market in the world—a group that continues to grow. According to the U.S. National Travel and Tourism Office, three million Chinese tourists visited the U.S. in 2018, the third most of any country after England and Japan.
• However a sustained outbreak of the virus would pose a significant threat to this growth, constricting new developments’ cash flows, driving down occupancy and reducing average daily rates.
• In the short term, those properties most affected by the virus outbreak are likely to be at the higher end of the market. More than 60% of Chinese travelers prefer to stay in in four- and five-star properties. If the public health response thwarts further contagion, though, the long-term impact to the hospitality sector should be contained.
INTERNATIONAL REPORT—As the World Health Organization (WHO) has declared the novel coronavirus outbreak a public health emergency of international concern and the illness continues to spread, hospitality companies are reacting.
The spread of the illness, and the fear that has come with it, has caused companies doing business in China to close offices and factories, and restrict travel to and from the country. Airlines and cruise ships have cancelled flights and tours in the country.
Areas of China, including Hong Kong and the island of Langkawi, have seen dramatic declines in tourist activity in a time that is usually very busy with Lunar New Year celebrations. Zainudin Kadir, CEO, Langkawi Tourist Association, told local media that area hotels have seen a 40% drop in tourist arrivals since the outbreak.
The outbreak is having an effect on international tourism as well, as 62 countries have implemented some form of immigration control on Chinese citizens, including the U.S. About 134 million Chinese traveled abroad in 2019, up 4.5% from a year earlier, according to official figures. Before the outbreak, the China Outbound Tourism Research Institute predicted about 7 million Chinese would travel abroad for the Lunar New Year this year, up from 6.3 million in 2019.
Roger Dow, president/CEO, U.S. Travel Association, said that the outbreak should not have an effect on domestic tourism. “We are aware of the decision by WHO officials to elevate the coronavirus situation to a ‘public health emergency of international concern’ as well as the agency’s recommendation not to limit travel and trade based on the declaration,” he said. “We also understand that U.S. public health authorities, including officials at the Centers for Disease Control and Prevention, continue to believe the risk of coronavirus exposure to the American public remains low. We will await additional notice on this evolving situation that may inform whether further precautions become necessary and remind the public that U.S. health officials urge the same personal best practices that are standard for a typical flu season—frequent washing of hands, etc. All of the current expert advice indicates that business and leisure travel in the U.S. can and should continue as normal.”
Many hospitality companies are allowing guests to cancel or change reservations with no penalties.
Hyatt has implemented a set a of guidelines for all of its properties. “The safety and well-being of our guests and colleagues is a top priority for Hyatt,” a spokesperson told Hotel Business. “In light of the novel coronavirus, we are closely monitoring the situation and following guidance issued by the World Health Organization and Centers for Disease Control and Prevention. We fully understand the concerns around traveling during this time, and consistent with Hyatt’s commitment to care, the following has been implemented:
• Guests who have booked stays through Feb. 10, 2020 at any Greater China Hyatt hotel via Hyatt official channels, including Hyatt.com, World of Hyatt App, WeChat Mini Program and Global Contact Center, can postpone or cancel without any cancellation fee;
• Guests from Greater China who have booked stays through Feb. 10, 2020, at any Hyatt hotel globally via Hyatt official channels, including Hyatt.com, World of Hyatt App, WeChat Mini Program and Global Contact Center, can postpone or cancel without any cancellation fee;
• Greater China Hyatt hotels continue to work with group and event customers with questions or concerns regarding future business.”
Hyatt locations globally have been instructed to “continue to remain vigilant and utilize precautionary measures to protect the health and safety of our guests and colleagues,” according to the spokesperson. “As always, Hyatt properties will continue to follow recommended procedures and protocols to ensure that all hotel practices meet the latest coronavirus guidance—for the continued safety and well-being of our guests and colleagues.”
Wyndham Hotels and Resorts released the following statement:
“The safety of our guests, owners, team members and partners around the world is a top priority. We are currently recommending that our hotels in China follow the guidelines established by the World Health Organization (WHO), the U.S. Centers for Disease Control and Prevention (CDC), and their local health departments—and to report any suspected cases to the proper authorities as soon as possible. We are sending supplies to our hotels in China for distribution to workers, guests and members of the community. Additionally, guests traveling to or from China with direct bookings for stays in any of our hotels from January 22nd through February 29th will have their cancellation or change penalties waived. We continue to monitor the situation closely.”
“We are always very focused on the well-being of our guests and team members, and are closely monitoring updates from local and international health authorities,” a spokesperson from Hilton told Hotel Business. “We encourage our guests to do the same. We have announced a modification and cancellation waiver for all guests who plan to travel to any Hilton-branded property in China between January 21st and February 29th. Additionally, guests planning to travel from China to a Hilton-branded property globally, modification and cancellation penalties may be waived during the same time period. Guests with additional questions about their reservations are invited to contact our guest assistance team.”
Marriott International is also waiving cancellation fees. “We are closely monitoring the Centers for Disease Control and Prevention and World Health Organization’s statements regarding the novel coronavirus (2019-nCoV) cases and following the guidelines from these agencies and the local health departments,” the company said in a statement. “The well-being of our guests and associates is of paramount importance. We are waiving cancellation fees for hotel stays through February 29, 2020 for guests with reservations at our hotels in Mainland China, Hong Kong SAR, Macau SAR, and Taiwan and guests from Mainland China, Hong Kong SAR, Macau SAR, and Taiwan traveling outbound to other Marriott destinations globally.”
IHG told Hotel Business: “The health and well-being of our guests and employees is our top priority. We are monitoring the situation and working very closely with local authorities. Guests traveling to or from Mainland China, Hong Kong SAR, Macau SAR, or the Taiwan region between January 23 and February 29, 2020 will be able to change or cancel a valid booking reservation made via the hotel directly, IHG.com, the IHG App, or the IHG Central Reservations Center, without financial penalty. For bookings made by a travel agent or online booking platform, we are advising guests to contact their agent.”
Ctrip, China’s largest online booking platform, said more than 300,000 hotels on its platform had agreed to refunds on bookings between Jan. 22 and Feb. 8, according to a report from Reuters.
Four in 10 hotel employees in Hong Kong’s may lose their jobs in the next few months, as travel restrictions against the coronavirus outbreak grow, according to a report in the South China Morning Post. The industry has already been affected by nearly eight months of anti-government protests.
NYU April 2020 Hospitality and Real Estate Investment Conference at NYU Shanghai Postponed
The organizers of the NYU April 2020 Hospitality and Real Estate Investment Conference at NYU Shanghai have made the decision to postpone the conference. “In light of the recent concerns regarding the novel coronavirus in China, and the World Health Organization’s decision to declare the epidemic an international public health emergency, the NYU School of Professional Studies (NYUSPS) has decided to postpone the NYU April 2020 Hospitality and Real Estate Investment Conference at NYU Shanghai,” the organizers said in a statement. “While disappointing, this measure must be taken to safeguard the health and well-being of those who would have attended the conference, as well as those who would have participated as speakers and panelists.
“Once the crisis abates, it is our intention to reschedule the event for April 2021, and to host industry professionals from around the world, who will benefit from the deep knowledge and immersive content for which the NYUSPS Jonathan M. Tisch Center of Hospitality and the NYUSPS Schack Institute of Real Estate are known globally. We will be in touch once the new date is set.”
Airbnb Activates Extenuating Circumstances Clause
Airbnb has reported that it is closely monitoring official news and guidance about the novel coronavirus outbreak in order to support its community of hosts, guests and employees in China and around the world. “In accordance with guidance and recommendations from the World Health Organization, the Chinese government, and other local and health authorities, we have activated our extenuating circumstances policy to offer impacted hosts and guests the option of a cancellation of their reservations without charges,” the company said in a release. “As the situation evolves, we will be continuously evaluating and updating this policy, in line with official guidance. Airbnb is also working to support authorities who are responding to this global health emergency.”
Industry Expert: Coronavirus Impact “A Blip”
“Our group travel industry has been hit particularly hard,” he said. “About 2 weeks ago we saw a slow down of about 30% in bookings in Asia and now that has increased to a 50% drop in bookings. Back when SARs hit, there were only an estimated 10 million outbound Chinese tourists. That number has exponentially increased over time and last year alone, there were an estimated 159 million outbound Chinese tourists. We know that the Chinese like to travel in groups, and a loss of 159 million tourists will make a significant impact on the tourism economy.”
It is estimated that there will be a $10 billion impact to the industry. “In order to mitigate our losses, we see this as an opportunity to buy. Last year, we braced for a recession that never came, so we have cash to spend and we are looking to take advantage of this blip and come out stronger. Travel rebounds really quickly once the headlines change and we are anticipating those headlines to change in the next 30 days.”