Skift Take

It's still only one data point, but Europe's softened hotel performance is a warning signal to major hotel company executives who previously tried to downplay the impact the Ukraine War would have on their European portfolios.

War in Ukraine appears to have finally made an impact on European hotel revenue.

European hotel performance was 27 percent off 2019 levels last week compared to a 13 percent decline the week prior, according to STR data. The 13 percent decline was an improvement from three weeks ago, and analysts at the time were unsure why hotel performance was improving during Russia’s invasion of Ukraine.

The drag on performance arrived after major hotel companies like Accor, Hilton, Marriott, and IHG announced they would continue operating hotels in Russia but pause plans for future openings, development, and investments there.

“While one week does not make a trend, we have to think that Russia/Ukraine concerns are a major factor in this deceleration,” Truist Securities analysts noted in this week’s report on the 27 percent drop. 

The executives at many major hotel companies prior to the recent STR data release noted the Ukraine war had little to no impact on their overall performance in Europe. Marriott CEO Anthony Capuano, while speaking at a JPMorgan conference earlier this month, said the company had yet to see “material cancellation volume” into Western Europe. 

“The forward bookings through the spring and summer looks strong, and we expect to see more and more cross border travel,” Capuano added.

Europe wasn’t the only market to feel a hotel performance sting last week.

Hotel revenue per available room — the industry’s key performance metric — was 51 percent below 2019 levels in China last week. That’s down from being 42 percent off 2019 levels the week prior. 

Chinese hotel performance slipped below the U.S. and Europe in recent months as a result of its tough crackdown on newly reported cases with new waves of targeted lockdowns and travel restrictions. But a recent surge of new cases tied to the Omicron variant ushered in a new wave of lockdowns in areas like Shanghai and the northeastern province of Jilin. 

The decline in performance is a significant fall for the country that initially led the global hotel industry’s recovery from the pandemic. China’s zero-tolerance approach to new surges is attributed to the fact that outbreaks, even if they pale in comparison to the case counts reported in the U.S., could quickly overwhelm the country’s healthcare system. Leaders were also reportedly concerned by the lower vaccination rate of China’s more vulnerable, elderly population.

Chinese President Xi Jinping Thursday noted the country should stick to its “Covid-zero” strategy but also called for more targeted measures that could reduce the economic impact of such a tough mitigation policy. While details were sparse, that should theoretically be good news for hotels in the region. 

The one bright spot for the largest three hotel markets in the world last week came from the U.S., where hotels were only 3 percent down from 2019 levels. But the real boost was in group bookings, according to Truist Securities. 

“Past the headline stats we view decent improvement in midweek travel, especially on Group,” analysts noted. “Group occupancy had one of the best weekly occupancy results vs. 2019 since COVID that we can recall.”

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Tags: china, coronavirus, coronavirus recovery, omicron variant, ukraine

Photo credit: War in Ukraine hindered overall hotel performance across Europe while an Omicron surge impacted hotels in China. PxHere

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