European hotels the likely winner after US dropped its COVID-19 testing requirements

Jun 30, 2022

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When the U.S. ended a policy earlier this month requiring travelers on inbound international flights to provide proof of a negative COVID-19 test, hotel industry chatter focused on a key question: Who was most likely to benefit?

On one hand, removing the testing requirement could be a boon for major U.S. cities that rely more on international travelers to fill up hotel rooms. On the other, removing the testing requirement also assuaged some U.S. travelers’ concerns about traveling abroad and running the risk of getting stuck in a foreign country if they tested positive.

Dissolving that friction point would be a major benefit to hotels in Europe that rely more on American travelers to fill up guest rooms in the summer, the thinking went.

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It’s impossible to cull data and determine who exactly is staying in what hotel and for what reason (kind of like how business travel is mainly measured in terms of midweek occupancy rates). However, there are some indicators that give analysts reason to believe there is a bump in performance now that the testing requirement has ended.

Hotels in Europe last week performed 11% better — a nearly 3% increase from the prior week — than the same time in 2019, according to data from hospitality analytics firm Smith Travel Research (STR).

U.S. hotels don’t exactly have reason to complain, though. American hotels performed a little more than 12% better last week than the same time in 2019 — also a nearly 3% increase from the prior week.

“Of course, there will be an uptick in people coming to the U.S. when it’s a little bit easier,” said Jan Freitag, national director of hospitality analytics at CoStar (STR’s parent company) and who was one of the first in the industry saying the new policy was likely to bring more opportunity for international hotels than those in the U.S. “But I just think the total numbers will bear out to be that there’s more American outflow.”

Ninety-one U.S. hotel markets, the most seen in the pandemic, reported occupancy rates above 70% by the middle of this month, according to STR data. Cities like Boston, Philadelphia and Washington, D.C. — which lagged in hotel recovery over the last two years — saw their highest respective occupancy averages of the pandemic.

Thirteen U.S. markets, led by Alaska (90.3%) and New York City (86.6%) even eclipsed the 80% occupancy threshold.

However, data heading into the summer, admittedly prior to the relaxed testing policy, showed more Americans venturing abroad than international travelers were coming in. Roughly 4.9 million Americans flew internationally last month compared to nearly 3.6 million international arrivals into the U.S., according to the most recent international air travel statistics from the International Trade Administration of the U.S. Department of Commerce.

By comparison, it was more of an even split in May of 2019, when air traffic data showed 5.5 million international arrivals into the U.S. compared to just shy of 5.6 million Americans traveling abroad.

The stronger outbound number from the U.S. convinces Freitag in his belief that hotels abroad will benefit from the relaxed American testing policy.

“I would not be surprised if we look at the June data and that, of course, we will see more international arrivals,” Freitag said. “But we also will see more U.S. travelers going abroad. That will be an uptick for the key [U.S.] gateway markets in international travel and summer. But I still think my theory holds.”

When could American hotels begin to see a true boost from international travel?

That’s likely still off. Chinese travelers, as well as affluent Russians, often filled up hotels in major U.S. cities prior to the pandemic and, due to China’s strict coronavirus mitigation strategy and sanctions on Russia, neither are likely to have much of an effect on American hotels this summer.

There were nearly 20,000 Russia travelers to the U.S. in May 2019 and nearly 261,000 visitors from China. In May of this year, the Commerce Department data showed no arrivals from Russia and only 8,094 from China.

“We have had two types of visitors in the past that are not back, and those are the Chinese tour groups and Russian high-end travelers,” Freitag said.

If the return of those groups remains uncertain, U.S. hotels that previously banked on their business will have to adopt a new long-term strategy.

Featured photo by Sylvain Sonnet/Getty Images.

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