VIRUS
The United States has now recorded more than 5 million cases of COVID-19, but Republicans and Democrats point to different explanations for the increase. Most Republicans and Republican-leaning independents (6 in 10) say the primary reason for the rise is that more people are being tested. By contrast, 80% of Democrats and Democratic-leaning independents say the primary reason for the increase is new infections, not just more tests.
And why is that important [Insights Collective] … Political polarization has heightened as we head into November, that’s important to remember because resorts and destinations have been politically agnostic – however visitors are not. Earlier research found Democrats were far more likely than Republicans to say they are concerned about personally contracting or spreading COVID-19. The same survey found that Republicans have become less concerned about contracting or spreading the virus. Our data suggests that while tourism leaders and their boards may feel confidently about reopening, source markets may not be receptive to reopening messages because they are of a different political mindset.
REOPENING
New data shows the extended stay sector is holding up much better than other hotel types. Major hotel companies reported declines of more than 80 percent in revenue per room, with occupancy levels below 25 percent as of July 1. The second quarter results for Extended Stay America saw only a 28.7 percent revenue decline, with occupancy at nearly 70 percent. This still resulted in a loss, but a minor one of less than $9 million for a quarter that included the worst period of pandemic so far.
And why is that important [Insights Collective] … This sectors’ good news is important to track, as hotels are increasingly looking for new segments in need of a room. The extended stay sector is performing in a similar fashion to the vacation rental sector – both sectors are outperforming hotels. Hotel brands have tried to pivot. Previously the pivot was towards repurposing hotels for homeless solutions, and in a new example, the University of Pittsburgh has completely dedicated one on-campus hotel to freshman students in order to cut down on housing density elsewhere. Several hotel chains are working with universities to take similar steps and alleviate low occupancy rates. These unconventional moves will soon be the norm, as businesses, resorts and destinations are forced to pivot and reinvent themselves – and their markets. Those that haven’t yet done so will face an uphill battle when the time comes.
ECONOMY
New data shows that residential mortgage delinquency rates are climbing. On a national level, 7.3 percent of mortgages were 30 days past due or in foreclosure in May, more than double the 3.6 percent rate seen in May of the previous year. The sharpest rise was seen in mortgages between 60 and 90 days past due, which increased four-fold in annual terms. Also, the percentage of apartment tenants paying rent on time is declining. An industry tracker found that 79.3 percent of apartment households were current on rent as of August 6, a drop of 1.9 percent from the prior month. This represents an additional 223,000 households that are delinquent.
And why is that important [Insights Collective] … Those are two important indicators, because they contrast greatly with measures of home builder confidence which now matches an all-time high, led by a combination of strong demand for homes and low interest rates. These mixed signals make for a cloudy crystal ball and serve as a reminder not to take any one indicator as the penultimate measure of the economy. Implications for city budgets are numerous if delinquency leads to foreclosure, as property tax bills often go unpaid. In addition to residential mortgage delinquencies, hotel property mortgages are also up dramatically. The City of Beaumont, Texas is trying to be proactive – having started the process to privatize a major entertainment complex, Ford Park – home of the South Texas State Fair for 20 years. At $7 million in annual upkeep, a sale to private owners is forthcoming – and a reduction in annual expenses will be celebrated. We wouldn’t be surprised to see more cities unload facilities to the private sector – wiping the books of the annual expense that came with their development.
NEW REALITIES
A temporary public art project is encouraging social distancing in Dublin, Ohio. The exhibit is called the 6-ft gallery project, and it involves attaching 6-foot long decals to several city sidewalks. It is a collaboration between the Dublin Arts Council and local CVB. Four local artists created the project, which will be on view from mid-August through Labor Day.
That’s an important development, because as we have mentioned in other contexts here, this is a time for creativity. We recognize Dublin, Ohio for finding an additional and visually interesting way to drive home a lesson that is crucial to having our economy reopen. If it takes giant stickers on the sidewalk to keep people from spreading COVID-19, then that’s what it takes. The idea that destinations will be communicating to visitors in-market is not going away. Based on our internal research, we believe there should be a focus on this type of communications. While management strategies for short- and long- term positioning will likely depend on where we are in the virus cycle, safety standards and protocols always need to be clearly communicated.