It sounds so nice they had to name it twice: New York, New York.
These days, however, America’s biggest and arguably most vibrant city — a tourist magnet and concomitant revenue engine unmatched on the continent — is facing a long road to recovery.
The venerable Hilton Times Square is the latest hotel casualty of COVID-19, announcing on Thursday (Sept. 3) that the 44-story, 478 room property, favored by Manhattan’s midtown and Broadway visitors ever since the 42nd Street district was reclaimed in the 1990s, will close for good.
Local media reports say the hotel, which began furloughs in mid-March, will shutter permanently in October. Owner Sunstone Properties, which leases the site to Hilton, has vacillated on whether the closure is permanent. This latest news appears to seal its fate.
Hilton’s Times Square loss is more a reflection of how COVID-19 has bruised the Big Apple’s remarkable tourism industry than it is a commentary on individual hospitality operators.
In its Q2 earnings statement, Sunstone Properties said that “after reaching a trough in April, the Company began to see hotel demand slightly improve in May and June, most significantly in leisure travel, which benefited its hotels in drive-to leisure markets.” And while properties in “certain urban markets” including Boston, Chicago and New Orleans saw upticks in July, a COVID resurgence cooled the trend. As the epicenter of America’s pandemic battle, New York attractions, events and even indoor dining remain on lockdown.
Additionally, Sunstone said it “currently believes that the majority of its group business for 2020 has canceled or will eventually cancel. Of the group business that has canceled to date, approximately 23 [percent] has rebooked into future periods.”
(Bad) Timing Is Everything
There’s no getting around the grim tourism situation in New York City at the moment, where many analysts saw a problematic oversupply of rooms before the COVID spring even began.
Major events relied on to put heads in bed every year at this time are either canceled or likely to be, including Fall Fashion Week, the U.N. General Assembly meeting, and U.S. Open tennis match.
“As many as 25,000 rooms, or 20 [percent] of New York’s total, might not reopen, analysts and hotel owners say. That is equivalent to the entire size of hotel markets in Louisville, Ky., or Jacksonville, Fla.,” The Wall Street Journal recently reported.
Hilton is among the savviest worldwide hotel operators, and there’s a sense around this latest closure that if Hilton is preparing itself as an organization for a long recovery.
The New York Times recently reported that “Only about one-third of [NYC hotel] rooms have been occupied in recent weeks, according to STR, an industry analyst. That’s a drop of nearly 60 percent from the same period last year. Among U.S. cities, only Honolulu’s hotels have lost more business,” and adding that, “The Hilton’s closing means about 200 workers who have been furloughed since March will lose their jobs permanently.”
The Winter Of Travel’s Discontent
PYMNTS research documenting the arc of COVID-19 and its chilling effects on all forms of physical activities from travel to transactions shows that the recovery will take longer than first thought and will be far more costly to certain industries — travel and hospitality among them.
Our report, The Great Reopening: The Road To A Digital Normal, uncovered in May the fact that consumers feel the pandemic will continue to disrupt life for some time to come.
“The average consumer now expects it to take another 225 days before their lives will return to normal, up from 178 days on April 11 and 138 days on March 17,” per the report.
“This means they now expect the pandemic to last 63 percent longer than they did 40 days ago. Most now believe it will take six months or longer before their lives can return to normal, cited by 53.2 percent. This is up from 44.7 percent on April 11 and 30.6 percent on March 17.”
And with new post-pandemic sanitization protocols expected to cost the lodgings industry an additional $9 billion a year, saturated markets like New York City are looking at longer recovery timelines, according to industry experts.
“Tourists will return, but those big boxes (large urban hotels) rely on corporate group and corporate transient business,” Jan Freitag, senior vice president of lodging insights at analyst STR, told travel industry publication Skift. “Corporate group is the big question here: How comfortable are people going to feel being around other people to attend meetings?”