The most immediate and severe impact from the coronavirus outbreak stems from the hit to tourism and travel, which is already affecting the lodging sector in major travel hubs around the world. Marriott International, which operates 375 properties in China, reported a 90% year-over-year decline in revenue per available room (RevPAR) from its China hotels.
Paul Stewart and Philip Conner, European and US heads of real estate research at Barings respectively, wrote:
“Clearly, markets across Asia will be hardest hit, but the global impact will be compounded by the fact that China is a much bigger share of everything in the world economy today, including travel. According to Tourism Economics, Chinese outbound departures increased to more than 73 million in 2019 from about 7 million in 1999, giving China a nearly 7% share of all departures globally.
“The impact will be particularly pronounced in Hong Kong, which is the top destination for outbound (mainland) China travel and was already suffering from a sharp decline due to the civil unrest in 2019. The cumulative effects of the protests and virus outbreak will put further pressure on hotel occupancies and retail sales. Anecdotal reports indicate that Hong Kong office leasing activity and rents have fallen sharply since the year began, and vacancy rates are rising.”
“For the US, the markets most exposed to the sharp fall in Chinese arrivals include LA and New York City, the primary ports of entry for Chinese travelers, receiving roughly 1.2 million and 1.1 million overnight visits, respectively. Other major markets that see a substantial share of their overseas visits from China include Seattle, San Francisco, Boston and Philadelphia. While the impact on U.S. hotel performance is not readily apparent in the monthly data yet, the outbreak is expected to shave more than 4 million room nights off the total room demand forecast for 2020 and another 3.6 million room nights from 2021–2024.”