Hotels Amid COVID-19

The District of Columbia is home to over 700,000 residents but welcomes millions of tourists each year. In fact, tourism is one of the backbones of the region’s economy. According to Destination DC, the city is home to approximately 132 hotels with Greater Washington containing close to 700 hotels. The average hotel occupancy rate nationwide is around 66% while Washington’s hotels boast an average occupancy rate of over 77%. However, this rate has been falling since 2018. This is despite the average daily rate for hotels in Washington’s CBD increasing by 2.0% in 2019 according to data gathered from STR, a travel analytics firm. There are many factors to consider when examining these numbers, most notably demand versus supply. The total number of rooms sold in 2019 increased year-over-year by 1.9% while supply increased by 3.3%. One of the larger projects recently built in the city is the side-by-side Courtyard and Residence Inn by Marriott, which opened across the street from the Walter E. Washington Convention Center.

The COVID-19 pandemic placed hotel owners in the District in an unprecedented and perplexing situation. The hospitality industry has never experienced such a crisis as severe as this one, with more uncertainty than ever. The District’s hotel occupancy typically reaches its peak during the National Cherry Blossom Festival in March, lasting through July and in October when the seasons shift. However, COVID-19 cut right through peak season with several states enacting a shelter-in-place or stay-at-home order in March after the disease was classified as a pandemic by the World Health Organization. These restrictions were slowly eased as time went on, with the Washington metro area being one of the last regions in the country (aside from New York City) to start reopening its economy. Other factors to consider is the essential travel restrictions announced by airlines, Amtrak, and public transportation operators. Tourists in the District heavily rely on Metro and tour buses so as transit options have been restricted, most people decided it was better to stay home rather than take that family trip this summer.

In an interview with Bisnow, Foxhall Partners Managing Partner Max Wexler, whose company owns multiple hotels in the District, called what is happening in the industry today “a complete bloodbath.” He went on to say that “It’s beyond ugly. There is zero demand. The entire economy has come to a standstill.” According to STR, District hotels experienced approximately 50% occupancy in mid-March, a 33% drop from the year prior. The occupancy rate for hotels in the District stood at 19.2% for the week ending June 20. The figure, which only counts hotels that are open, is a whopping 78.6% decrease from the same period last year. The Trump International Hotel has about 5% occupancy with roughly 95% of its staff not working, according to an article in Bisnow. With occupancy rates below 20% and uncertainty looming in the air, several hotels are expected to shut down completely by the end of the year. Most notably, the massive Washington Marriott Wardman Park Hotel in Woodley Park announced that it may close permanently.

2020 Forecast 2021 Forecast
Supply -14.9% +15.6%
Demand -51.2% +81.8%
Occupancy -42.6% +57.3%
ADR* -13.9% +3.7%
RevPAR** -50.6% +63.1%
*Average Daily Rate
**Revenue Per Available Room
Source: STR/Tourism Economics

The hospitality industry in the region is going through an especially rough time, with over 80,000 workers out of a job. The world’s largest hotel company, Marriott International, has furloughed thousands of employees to navigate its way through the crisis. Some researchers estimate that it will take at least three years for the market to bounce back. Others do not expect occupancy rates to return to the pre-crisis peak until 2024. The figures reported today are worse than downturns following 9/11 and the Great Recession combined. It took 17 months to reach the lowest levels of room rates and 39 months afterward to return to the previous peak after the Great Recession in 2009. The hospitality industry will eventually recover but the severity of the situation should not be underestimated.