Immediate pullback on personal and business travel

Global Market Perspective, May 2020

The COVID-19 virus is having a profound adverse impact on the hospitality industry as more jurisdictions continue ‘shelter-in-place’ orders and travel restrictions. In key markets across Europe and the U.S., owners have shifted their daily focus from offense to defense. They are spending most of their time on asset management, capital preservation and liability management. As China slowly moves out of lockdown, an increasing number of hotels are gradually reopening, with approximately 87% of hotels in China open since March according to STR.

Heightened uncertainty has impacted investor appetite for hotels, with asset valuations becoming more challenging. Acquisitions are mainly on hold, with the exception of several transactions well underway at the onset of the pandemic. Global hotel investment activity slowed in Q1 2020, with transaction volumes totaling US$10 billion, marking a decrease of 29% from Q1 2019.

A longer-term perspective: Shifting traveler patterns and preferences

Travel patterns are expected to shift toward drive-to-resort destinations and less dense markets where travelers can be in open spaces and avoid large groups of people. Additionally, a greater focus on hygiene and personal well-being may move demand toward professionally-run and maintained lodgings.