When you want the straight scoop on what’s happening with the meeting and hospitality industry, Michael Dominguez, president and CEO of Associated Luxury Hotels International, can be counted on to deliver. Earlier this month, he did just that during an exclusive webinar for ConferenceDirect associates and clients, who are struggling to understand how the current novel coronavirus pandemic that has ground the world economy to a virtual halt and grounded the vast majority of travel will shake out in the long and short term for this industry.

A COVID-19 Snapshot
With infection, hospitalization, death and recovery rates changing daily, this is still very much a moving target, he emphasized, adding that it’s important to not take what you hear in the media as gospel because the media also is struggling with how to report on an unprecedented health crisis like this. As of April 2, when the webinar was held, there were signs that the curve in some areas has already begun to flatten out and that other areas are entering a period of apparent recovery, with few to no new cases being reported.

There also were areas, such as New York, New Jersey, Louisiana and Michigan in the U.S., that were still on the upswing side of the curve, with peaks forecast to come over the next several weeks. It’s important to remember that, according to the Centers for Disease Control and Prevention (CDC), 78% of COVID-19 patients relegated to intensive care units (ICUs) have underlying health conditions and that, according to Anthony Fauci, M.D., director of the National Institute of Allergy and Infectious Diseases, we are now starting to “see glimmers that [social distancing] is actually having some dampening effect.”

What About the Economy?
With second quarter (Q2) gross domestic product (GDP) estimates ranging from a high of -9% (Bloomberg Economics] to a low of -40% [Capital Economics], “we’re going to have to be very careful as we come out of this,” he said, predicting that reality will probably fall somewhere in between. Not surprisingly, Google search data shows a sharp decline in consumer activity as the crisis has deepened, though it may be surprising that higher income earners have been cutting spending at a higher rate than those who earn less, both due to the coronavirus and to the roller-coastering stock market. But most believe this will be a short-term event, which is keeping consumer confidence at a surprisingly high 90%, Dominguez said.

For businesses related to meetings and events, the drop has been precipitous. According to data from OpenTable, restaurant business dropped 100% for the period year over year. Travel losses are greater than any other sector, according to data from the U.S. Travel Association (USTA) that he shared. Between air transport, lodging, retail, entertainment and restaurants, USTA estimates that travel industry–related losses will total close to half a trillion dollars. Expect more losses as Mexico and Canada, two of the largest drivers of international travel to the U.S., begin to feel the effects of COVID-19, even as China and parts of Europe begin to stir again after being locked down to contain the virus’s spread.

With this drop in business comes unemployment as hotels shut down, airlines dramatically cut routes, restaurants close or go to takeout only. “We need to take the case to Washington about the importance of this industry and why it needs to get back on its feet quickly,” Dominguez said.

And the drop isn’t in just inter-U.S. travel, of course. The drop in international travelers to the U.S. also has cratered since the coronavirus crisis began jumping borders, with predictions currently running at about a 23% decline. While most of the deficit is coming from Europe and Asia, that could change as the virus works its way to countries that are just now starting to see COVID-19 infections on the rise. In all, travel spending is predicted to drop by $355 billion, though most of those losses are resulting from domestic travel cutbacks.

A Slow Climb Back?
We can take some hope from what happened to China after the SARS outbreak, he said. After the World Health Organization (WHO) issued a global alert on SARS in March 2003, hotel occupancies dropped from 80% to 20-30%. But within six months some of the demand began to come back. “It would be positive for us if we follow a similar curve,” he said. Dominguez also pointed to data from CBRE Hotels Research and STR, which was reporting slow to no growth in the hotel industry for 2020 even before the COVID-19 outbreak traveled beyond China. Currently, CBRE is predicting a 19% drop in revenue per available room (RevPar), along with 10% drops in occupancy and average daily rate (ADR). On the plus side, they also are predicting an upswing up to 12% in RevPar by 2022. Keep in mind that it took almost seven years for RevPar to bounce back from the global recession of 2008, he said.

“This is not a normal economic dance cycle.”

The $2.24 trillion being pumped into the economy, including the travel and hospitality sectors, through the Coronavirus Aid, Relief and Economic Security Act (CARES), by far the largest economic stimulus package ever passed in the U.S., also should be a cause for cautious optimism. Maybe. Remember that most of the aid is in the form of loans, not handouts; that the government is trying to provide liquidity where liquidity is needed; and that the tax deferrals and extended credit lines extend the timeline. “We just don’t know what this will end up looking like, what the economic impact ultimately will be, until we see it in action,” Dominguez said.