Banco Sabadell | It is well known that the hotel sector is one of the worst off after the irruption of Covid-19. Travel, both leisure and especially business, has almost completely disappeared. This has led to hotel closures and occupancy levels below 20% in some months.
With the summer, everything seemed to improve, and even at some moments in July we saw occupancy levels above 40%. But the joy was short-lived. And the new measures taken by the various governments, throughout the summer and especially in recent weeks, have put an end to the sector’s recovery.
However, the Pfizer and Moderna vaccines are a light at the end of the tunnel, although the road will be hard and tortuous.
So, is it the worst over?
While we would like to think so, the truth is that visibility is still very reduced and the prospects for Q4’20 are not favourable. In general, everything points to the fact that possible vaccines will not have a relevant impact on activity until the end of Q2’21 or H2’21.
In order to try to find out what could happen with hotel demand, we believe that the airlines’ perspectives could be a good proxy. The proof is that for 2020, IATA forecasts that the number of global passengers will be 61% lower compared to 2019. Our forecast of a drop in occupancy is -66% in NH Hotels and -67% in Meliá Hotels.
For their part, companies such as Lufthansa and IAG have already confirmed they expect activity levels (measured in capacity) to be less than 30% in Q4’20 compared to Q4’19. In 2021, the forecast is that we will be 38% below 2019 levels. We are somewhat more cautious here because of the urban business component (~30% EBITDA for MEL and ~90% for NH), which we believe will take longer to recover.
Thus we estimate Melia and NH will be 40% and 43% below 2019 levels respectively.
In the long term, the whole industry is talking about not recovering 2019 levels until 2024 (see table below), something we reflect in our numbers.
It is worth emphasizing that in the face of a predictable vaccine recovery, as has been shown in countries such as China and/or Russia, it is the short scope trips which are the first to recover (more dependent on individual decisions). But there is some delay in business travel (more dependent on corporate decisions which may be associated with a certain delay and affected by the desire to cut costs and new work habits).