Seismic Impact On Global Travel: NYC’s Hotels Brace For Potential Coronavirus Disaster

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Written by Dana Sanchez
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Chinese visitors have been the top-growing segment in NYC’s hotel industry. The coronavirus could hurt a market that was already under stress, even before the threat of a pandemic. Photo: Pascal Bernardon on Unsplash

Chinese visitors, until recently, were the largest-growing segment in New York City’s hotel industry but the coronavirus is a potential kick in a market already under stress, even before the threat of a pandemic.

The coronavirus has claimed 2,710 lives and there are 80,419 cases worldwide. About 27,909 people have recovered from the illness, according to Worldometer. China, by far, has had the most deaths (2,664) and cases (77,666).

For the global hotel industry, the news is not good. A four-star hotel in the Spanish island of Tenerife was placed on lockdown after an Italian doctor who had been vacationing there tested positive for coronavirus.

Despite recent declining hotel-room revenue and occupancy rates, New York City is in a hotel-building boom and the number of visitors there has increased.

With a bunch of new hotels under construction, it’s nail-biting times for NYC hotel property owners, New York Post reported.

The city is expected to have 57,000 more hotel rooms within two years than it had in 2010. That’s a 65 percent increase from 87,000 to 144,000 rooms.

The average daily room rate for New York hotels dropped to $255.16 in 2019 — the lowest since at least 2013 — the Wall Street Journal reported.

Health officials don’t know if the spread of coronavirus to the U.S. will be mild or severe, but Americans should be ready for significant disruption to their daily lives. It’s not a matter of if but when, said Dr. Nancy Messonnier, director of the National Center for Immunization and Respiratory Diseases.

“It’s a human tragedy that is also a potential disaster for those of us in hotels, especially at the Manhattan high end,” a general manager told Realty Check anonymously.

New York City has had a spate of high-profile hotel loans defaulting in recent months, The Real Deal (TRD) reported earlier this month.

At least 21 NYC hotels backed by commercial mortgage-backed securities are on a watch list for difficulties, according to Trepp, a provider of commercial property data and analytics.

The city’s hotel revenue growth rate began slowing in 2018 due to visa and trade-war issues. Airbnb is also taking a piece of the pie.

However, Chinese visitors to the city continued to increase even after the slowdown, according to Tom McConnell, managing director and head of global hospitality at real estate services firm Cushman & Wakefield. Chinese visitors were the market’s largest-growing segment over the past 10 years.

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Foreign visitors to the city spend much more on average than domestic, both for business and leisure. The Chinese spend the most oper-person, per-trip, the Post reported.

Experts predict the coronavirus will wipe out more than $10 billion in spending from Chinese visitors over the next four years, with more than half the loss happening in 2020. Businesses that rely on tourist dollars including airlines, restaurants and retail are expected to face major economic fallout from the outbreak, Business Insider reported.

The U.S. could lose about 1.6 million visitors from mainland China as a result of the coronavirus — a 28-percent decrease for 2020, according to a new report from consulting firm Tourism Economics.

Major new NYC hotel projects include the Hard Rock on West 48th, the Virgin on Broadway at 28th Street, Riu Plaza on West 47th Street, Sam Chang Project at 150 W. 48th St., Marriott Renaissance Hotel at 233 W. 125th St. and Battery Maritime at 10 South St. All are supposed to be completed in 2020 and 2021.