The hotel industry needs a break. The global pandemic has turned dozens of industries upside down, but few have been impacted as dramatically as hotels. Facing unprecedented low levels of demand and occupancy, hotels and entertainment venues are struggling to stay afloat. As talk continues that a potential vaccine will hit the market as early as spring 2021, hopes are high that post-vaccine vacations will give the hotel industry the boost it desperately needs.
The polls are in: People want to travel, but not without a vaccine
It's clear the majority of Americans want a vaccine before resuming travel again. A recent Harris poll published by the U.S. Travel Association said roughly three-quarters of Americans are postponing travel until a vaccine is available. Another study, of 3,500 consumers conducted by Allianz, found that 58% of respondents stated they would feel comfortable traveling again with a proven vaccine.
Several announcements of successful preliminary trials of the COVID-19 vaccine, including ones from Pfizer (NYSE: PFE) and Moderna (NASDAQ: MRNA), have boosted confidence among consumers. Hopes are high that travel and life should be returning to "normal" soon, but it's still unclear when vaccines will be widely available -- meaning those very same consumers who are anxious to take their next big trip aren't booking their stay quite yet.
A travel surge is coming
The CBRE Group estimates hotel occupancy won't return to pre-COVID levels until roughly 2023, but revenues per available room (RevPAR) will surge far beyond historical averages. This would be a welcome change for hotels, considering RevPAR has fallen 54.4% year over year as of third quarter 2020. Certain markets, including top tourist destinations, will likely see a large uptick in mid to late 2021 but return to more normalized levels after people have gotten a taste for the "travel bug," at least temporarily.
Long-term recovery will likely be more stable among rural and interstate hotels, which have fared better than other hotels in their asset class.
The Millionacres bottom line
Vaccine news is a positive sign that relief is on the way to this struggling industry, but there's no guarantee as to when that relief will happen. The timing for distribution of the vaccine, particularly on a large scale, is still unknown, and with many hotels already shutting their doors, unfortunately many may not make it that long. That's bad news for both hotels and their investors.