Challenging times for hoteliers, not just now but also in the future
We think the hotel sector faces an Act of Nature which Acts of Man cannot address through financial aid alone. The challenges will in our view result in changes to travel behaviour such as (1) Reduced travel volumes for several years in both leisure and business; (2) A slower revenue per available room (RevPAR) recovery than has been evident in the past. We expect gradual improvement from June/July and do not see RevPAR returning to 2019 levels over our forecast period (to 2024); (3) Enhanced health and safety measures attention; and (4) Potential consolidation and opportunity for independents to brand.
However, sector likely already pricing in a severe downturn
On average the hotels under our coverage have fallen by 32% YTD and we think that the lost value more than takes into account the new outlook. That said, if there is a second wave of the virus once isolation ends, there are downside scenarios that could suggest a further fall in share prices is warranted. Nevertheless, we think leisure volumes will likely recover more quickly given businesses reducing travel budgets/ exercising duty of care, greater likelihood that domestic markets open before international, and increased probability of more staycations.