Business of Design

After Its Worst Year, The Hotel Industry Is Regaining Footing

Hotel occupancy rates are the highest since November, surging 49% in the first week of March.

In this double exposure image, spring breakers relax at the Shelborne South Beach hotel in Miami.

What’s Happening: For the travel and hospitality industry, the past year stands as one of the worst on record. Thanks to the coronavirus, widespread furloughs, plunging hotel occupancy rates, and the stagnation of most business travel became the norm. As more Americans receive the Covid-19 vaccine, however, travel is becoming viable again. Hotels are experiencing a new wave of guests, with occupancy rates climbing to 49 percent in the first week of March—the highest level since last August. That’s still down from 65 percent compared to March 2020, before the pandemic had fully taken hold.

The Download: The spurt in travel is garnering a renewed interest in hotels by large institutional investors. This week, Blackstone Group and Starwood Capital Group announced that they plan to acquire Extended Stay America for $6 billion. In agreeing to make the largest hotel acquisition since the start of the pandemic, the hospitality groups are betting on demand from business travelers.

Meanwhile, stocks are pricing in an optimistic recovery. The Baird/STR Hotel Stock Index, which tracks shares of eight hotel brands and 12 hotel real-estate-investment trusts, skyrocketed 22 percent in February, compared with less than a two percent increase for the S&P 500. That increase in the hotel index followed a 31 percent surge in November, in tandem with news of the first Covid-19 vaccine approved for the market.

In Their Own Words: “The U.S. hotel industry is very slowly regaining solid footing,” said Jan Freitag, national director of hospitality analytics at the real-estate data firm CoStar Group, who notes that “we don’t expect sustained group demand until herd immunity has been reached.”

Surface Says: These promising occupancy numbers suggest that the travel industry is ready to return to pre-pandemic times. After being confined to our living rooms for upwards of one year, we’re personally stoked to start traveling again.

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