Airbnbs And Premium Hotels Are Struggling Even As Reopening Begins Amid Coronavirus

Jun 9, 2020

Many of us are about 12 weeks into being cooped up at home. Well, if we’ve followed public health guidelines to limit contact with other people. And even though the Wisconsin Supreme Court struck down the state's safer-at-home order, the local hotel and Airbnb industry is still feeling the effects of people taking social distancing seriously.

Antony Pennington-Cross, a professor of finance and the Bell Chair of Real Estate at Marquette University, says a good indirect indicator for how travel lodging is fairing is through air travel. And data out of Chicago shows just how much air travel is down.

"The people who were in the hotels in 2019 came from, on average, about 642 miles away. Right now it’s down to about 46 miles. So the people in hotels and Airbnbs are driving there. They’re not flying," says Pennington-Cross. 

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For Airbnb owners in Milwaukee, the biggest loss from this year will be the lack of a large Democratic National Convention. It's currently unclear what the DNC will look like in August due to the coronavirus pandemic.

"If you had someone coming in and they were going to stay in your house for a full week and charging a real premium price, that's likely gone," he says. 

For the rest of the summer, he projects Airbnb rentals to be down around 20%. This is especially difficult for those who rely on Airbnb rentals to pay for a mortgage as there is little else they can do to cover that overhead. 

The coronavirus has hit luxury chains like Hilton, Marriott, or Hyatt the hardest.

"For luxury chain hotels, the occupancy rate for last week was 14%, the same week a year before it was 78%," he says. 

But cheaper chain hotels tend to be doing a bit better.

"Last week, economy hotels were occupied at about 50%, but their traditional occupancy rate in the prior year was 63%," says Pennington-Cross. 

In the short-term, he expects that some luxury hotels may shut their doors. But, like after the 2008 financial crisis, he expects them to do just fine once business travel picks back up.

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