Analysis based on the impact of the 2003 SARS virus indicates the Wuhan coronavirus could result in nearly 8 million lost hotel roomnights through the end of 2024.
Primary Category: Forecasts
REPORT FROM THE U.S.—As fears over an outbreak of the new coronavirus centered in Wuhan, China, continue to restrict travel, visits to the U.S. from China could drop by 25% in 2020, according to analysis by Tourism Economics.
Speaking on a webinar Thursday titled “U.S. economy and hotel industry 2020 outlook: Navigating the slowdown,” Adam Sacks, president of Tourism Economics, said a 25% drop in Chinese visitors to the U.S. means a loss of 4 million hotel roomnights and $5.8 billion in visitor spending in 2020, and ultimately 7.8 million roomnights and $10.3 billion in spending through 2024.
Visitors from China to the U.S. are projected to drop by about 885,000 in 2020, and by about 1.6 million cumulatively through 2024, according to the analysis.
“Given all the canceled flights, all the canceled routes, this is not an unreasonable expectation,” he said.
As for the potential impact to U.S. hotel demand, Sacks said 4 million lost roomnights represents a decline of 0.3%.
“That does represent downside risks to the lodging forecast in terms of shaving off growth in 2020,” Sacks said.
Jan Freitag, SVP of lodging insights at STR, who was on the webinar with Sacks, noted the latest U.S. hotel industry forecast by STR and Tourism Economics, released during the Americas Lodging Investment Summit this week, does not factor in impact from the coronavirus. (STR is Hotel News Now’s parent company)
That forecast calls for 1.6% demand growth in 2020 for U.S. hotels, and 1.7% growth in 2021.
“That’s prior to coronavirus. There might be an impact on this data once the smoke clears and we get a little more information,” Freitag said.
Sacks said projections were modeled after what happened in 2003 with the SARS (Severe Acute Respiratory Syndrome) coronavirus.
“Right now (as of Thursday), in terms of infections, it’s about on par, with roughly 8,000 in each case,” Sacks said.
The number of confirmed infections of the Wuhan coronavirus (designated 2019-nCoV by the World Health Organization) has risen to about 9,800 as of Friday morning (and more than 200 dead), The New York Times reports, whereas SARS infected 8,096 people in 29 countries, 774 of whom died, according to the Centers for Disease Control and Prevention.
“The difference is two-fold, what certainly made SARS scarier,” Sacks said. “One was the mortality rate. SARS had a mortality rate of about 10%, while the mortality rate on the (Wuhan) coronavirus is between 2% and 3%. At this point, the (Wuhan) coronavirus is much more contained. Though it’s growing in a number of countries, they’re generally isolated.
“So for both of those reasons, at least at this point, we wouldn’t predict anything that would be worse than SARS.”
However, even a SARS-level impact on travel likely would be significant for the travel industry and hoteliers due to the growth of outbound Chinese travel.
“We assume that the results are somewhat less significant in terms of travel impact than what we experienced with SARS, both in terms of declines in the year of the event and how quickly things recover over the coming years,” Sacks said.
“But it still leaves a mark. During SARS, you’re looking at just about 200,000 visits from China to the U.S. per year. Now, that number is 3 million. The size of the market is so much bigger, so a 25% drop in China visits now definitely leaves a bigger mark than it did in 2003.”
In 2003, visits to the U.S. from China fell 30% as a result of the SARS virus, Tourism Economics data shows.
Though the impact of the virus on travel is expected to be concentrated in 2020 and 2021, and Tourism Economics projects a “quicker comeback than with SARS,” Sacks said the cumulative loss in hotel roomnights through 2024 is estimated at 7.8 million.
“It takes a few years to catch up,” he said. “That’s nearly 8 million rooms lost as a result of (the Wuhan) coronavirus, and that’s only from China. There will be losses from other markets in Asia; we have not modeled that as of yet. But the majority of them will be from China, so this represents generally speaking what we might expect.”
A report by Baird Equity Research cites the Wuhan coronavirus as a “growing headwind” in the first quarter for the hotel industry, noting “while still early from a potential (revenue per available room) impact perspective, all signs point to more modest near-term growth” as a result of broad risks to travel.
The Baird report also draws comparisons to the SARS impact in 2003.
“The SARS virus in 2003 included a World Health Organization travel alert in March. RevPAR growth in the U.S. was negatively impacted by 400 to 600 basis points for five months, and New York City and San Francisco experienced RevPAR declines that were two times the industry average,” according to Baird.
“Occupancy and ADR declined for each of the five months, and Atlanta, Dallas and Houston were among the other markets most negatively affected. China represents about 4% of inbound international travel to the U.S.”
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Headline: Coronavirus could cost US travel industry $10 billion
Article Date: 1/31/2020
Article Time: 10:26:00 AM