"Last straw" for NYC hotel industry?

David Goldsmith

All Powerful Moderator
Staff member
Business at city hotels down a stunning 90%
Sales tax figures tell darker story than occupancy rates

Of all the industries devastated by Covid, hotels have perhaps been hit the hardest — and far worse than occupancy rates would suggest.
Sales tax from hotels from June through August were down 90 percent from the same time last year, according to an analysis by the Citizens Budget Commission. That represents a shortfall of $2.2 billion and was even worse than the previous quarter’s 88 percent drop.

The occupancy rate at hotels in the five boroughs in mid-August was 41 percent, but that figure is deceiving because it only counts establishments that are open. Scores of hotels have closed, many of them permanently, and those that remained open were forbidden from hosting large events such as conferences and weddings.

The precipitous drop in sales tax collection shows just how much business at hotels has withered in the past year. It was the steepest decline among all the sales tax streams collected by the city and the state, although the third-quarter drop in the recreation and entertainment sector was more than 90 percent after a 71 percent year-over-year decrease from March through May, the report found. Between that sector and personal services, where collection was down by more than half, sales tax revenue was down by about $1 billion in each quarter.

Overall, sales tax revenue across all sectors fell 23 percent over the summer to $34.2 billion. The decline was less severe than the drop seen from March through May, but sales tax collection in the city has lagged that of the rest of the state, where tax sales have rebounded to their 2019 levels.
In the city, restaurants saw the biggest dollar volume decline, with sales down $9 billion from March through August.
One bright spot was retail, where year-over-year sales tax collection was down only 5 percent in the third quarter after being off by 32 percent from March through May, the budget watchdog found.

The Real Estate Board of New York earlier this month found that the city and state have missed out on $755 million in tax revenue this year from real estate sales.
 

David Goldsmith

All Powerful Moderator
Staff member
Stemming losses, Hilton sets sights on office workers instead of tourists
Hotel giant reported a net loss of $81M andRevPAR was down 60%

Hilton Worldwide Holdings is still bleeding cash, but its CEO is confident the troubles are just temporary.
“We’ll see what happens with all of these crazy elections here in the U.S.,” Chris Nasetta said on the hotel giant’s third-quarter earnings call Wednesday. “Obviously, a lot going on in the world, a lot going on with the business.”
But when it comes to Hilton’s future, Nassetta said he is feeling “really good about the progress” despite posting a net loss of $81 million for the quarter, a steep fall from $290 million a year earlier. The company’s total revenues are down more than 60 percent year-over-year to $933 million from about $2.4 billion in the third quarter of 2019.

It’s an improvement from last quarter, when the company posted a net loss of $432 million and its revenues down 77 percent year over year.
The optimism comes from Nassetta’s belief that a significant change in attitudes toward travel is around the corner.

The CEO said he believes movement on a vaccine will be coming by the end of the year or early 2021, and once that and winter flu season is in the rearview mirror, “there’s a real opportunity for a step change.”
Hilton is noticing a pick up in business travel, albeit not from the company’s traditional business traveller. Instead, the hotel company has begun experimenting with a new offering, namely office space.
The pilot program, dubbed WorkSpaces by Hilton, where the company rents out hotel rooms as office space rolled out last month.

“A lot of people aren’t back in offices, so they need to have places to congregate, to have meetings,” Nassetta said. “Particularly for people that need to get out of their house and need Wi-Fi and need some space and privacy.”
Though Nassetta noted that the hotel-cum-office space is just temporary, he said it was a good stop-gap measure until typical demand for hotel rooms returns.
“The trick is this isn’t going to last forever,” he admitted. “[But] when we get to the other side of this … we won’t have let those muscles atrophy.”

Hilton is also continuing to construct and convert hotels into Hilton-branded properties. The company opened 133 hotels in the last quarter with a net growth of nearly 15,000 new rooms, or 4.7 percent.
The company’s development pipeline totalled more than 408,000 rooms at the end of September, an 8 percent increase year-over-year. Nassetta said net unit growth for the entirety of 2020 could be as high as 5 percent.
“The construction trades around the world, particularly here in the U.S., were ready to go,” said Nassetta. “Ninety-plus percent of what was under construction when we went into the crisis is back under construction.”

System-wide revenue per available room was down 60 percent for the quarter at about $45 per night with occupancy hovering around 42.5 percent and an average daily rate of $105.87. The uptick compared to last quarter was thanks to a combination of loosening travel and operating restrictions, and an uptick in demand from leisure travellers in the U.S. and China, per Hilton.
During the quarter, Hilton also brought back its furloughed corporate staff and plans on making other cost-cutting measures permanent until demand for events, business and leisure travel bounces back years from now. The company said 97 percent of its hotels were open as of Nov. 2.

“I do believe in my heart of hearts that when we get to the other side of this, we’re a bigger, better, stronger, more efficient higher margin business,” Nassetta said.
 
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