On Wednesday, March 11, we had three full hotels, and our arena was bustling with activity from the Men’s and Women’s Big Sky Basketball Tournament. By 11 the next morning, Big Sky University presidents had canceled the tournament and hotel guests began their mass exodus from Boise. The arena and nearby hotel rooms became dark and empty. The impact of the coronavirus on the Boise hospitality industry was sudden and severe.
To begin to illustrate the impact, Boise’s hotel occupancy in April 2019 was a very healthy 79.2%. Yet in April 2020, the occupancy percentage had plummeted to 10.5%. This chart below from CBRE shows the impact on other western U.S. markets.
As we all know, non-essential travel was banned as part of national and state stay-at-home orders, and the hospitality industry has come to a virtual halt. The chart below demonstrates the impact the pandemic has had on payroll in several industries, with the leisure and hospitality industry experiencing the most severe impact.
In our sports and entertainment division, the Idaho Steelheads hockey team was having another winning season. The team had routinely been playing in front of sold-out crowds at CenturyLink Arena when the season was abruptly canceled by the ECHL.
Almost every one of us has been impacted by this virus in some way. In our businesses, we are social gathering spots. We rely on guests to visit and eat, sleep and socialize with us. Many of us are itching to return to the way things were. However, for some, there is concern about the safety of traveling and socializing at hotels and arenas. We have to earn back the confidence of guests so they once again feel that our facilities are a safe and fun place for them to frequent.
As bad as things may seem, there IS reason for optimism. We have watched the hotel occupancies of our local competitor hotels increase for seven consecutive weeks (according to Smith Travel Research). Business activity appears to be increasing as we move through Gov. Brad Little’s four-stage plan of reopening.
A recent report from CBRE also forecasts positive news for the hotel industry. Despite suffering the greatest performance declines in the history of the U.S. lodging industry during 2020, the nation’s hotels will benefit from what is expected to be a relatively rapid economic turnaround in 2021 and 2022, according to the June 2020 edition of CBRE’s Hotel Horizons forecast report. CBRE foresees demand for U.S. lodging accommodations returning to pre-crisis levels in the third quarter of 2022.
“The U.S. lodging sector has been hit by two headwinds in 2020: a contraction in overall economic activity and the need for social distancing,” said Jamie Lane, senior director of CBRE Hotels Research. “Accordingly, our current forecast calls for a 37% reduction in the number of room nights occupied in 2020 compared to 2019. There is some comfort knowing that travelers will be back on the road in full force within two years.”
“Although the trough in 2020 lodging performance will be much deeper than anything we’ve seen in the past 80 years, much of this decline is not caused by underlying fundamental economic problems,” said Bram Gallagher, senior economist with CBRE Hotels Research. “Once social gathering restrictions are lifted, an expected return to the strong underlying economic conditions that existed before 2020 will restore economic production.”
CBRE’s report takes a national view and is encouraging. We can also take comfort in the fact that the Treasure Valley continues to become more widely known as a beautiful and fun place to visit. As more and more people discover the area’s appeal, the hospitality industry will certainly continue to improve.
The sports and entertainment industry, however, may have a much longer road to recovery if social distancing requirements for large gatherings remain in place. Local arts, musical and sporting events, like those held at CenturyLink Arena, rely primarily on revenues generated from event attendees, such as ticket, concession and merchandise revenues. Reducing a venue’s capacity for social distancing will make it very difficult for an event organizer to take a risk on scheduling an event and show a profit.
John Cunningham is CEO & president of Block 22 Hotels.