Jennifer Huffman Sep 5, 2020
Due to the COVID-19 pandemic, Napa County and California hotel revenue has dramatically declined, said hotel industry experts.
“The tourism industry has a challenging year ahead,” said Michael Lennon, general manager of Calistoga Spa Hot Springs and the new board chair of Visit Napa Valley.
From January to July 2020, the average Napa County hotel occupancy fell 45.8%, according to hotel data source STR. For January to July in 2019, occupancy was 71.5%. This year, it was 38.8%.
From January to July 2020, the average Napa County hotel room rate was $266.03. In 2019 during those same months it was $318.05. That’s a 16.4% decline.
Revenue for a Napa County hotel dropped 60.6% during the first seven months of 2020. One year ago the total revenue was $242.2 million. This year it is $95.5 million.
According to a separate report from Atlas Hospitality Group in the first six months of 2020 the average California revenue per available room declined by 47%. From April 1 to June 30 it declined by 70%.
“The Napa County tourism industry, like almost all parts of the world, has been significantly impacted by the health and safety measures required to combat COVID-19,” said Linsey Gallagher, president & CEO of Visit Napa Valley.
“Our hotels took that responsibility seriously, with most closing completely from mid-March until non-essential travel was permitted again in June.”
“In response to Visit Napa Valley marketing efforts and pent-up regional demand, we have seen moderate and responsible hotel occupancy growth since June, reaching just below 50 percent the first two weeks of August, compared to the usual 80 percent occupancy rate in the summer months,” said Gallagher.
“During this time hotels continued to reopen and room rate also recovered. With the recent wildfires, the tourism industry in Napa Valley continued to focus first on the community, providing discounted rooms for evacuees and first responders, which also impacted average daily rate, dropping 43.2% for the week ending August 29.”
Gallagher said that “Visitors, particularly from nearby drive-in areas, are making last-minute booking decisions based on real-time conditions.”
“We hear positive news for a busy Labor Day weekend to support our small businesses and the residents employed by hotels, restaurants, wineries and retail shops,” she said.
“We are hopeful this continues throughout harvest season, but without long-haul travel and group businesses, leisure transient demand will likely not make up the shortfall in the near term. Research suggests Wine Country tourism numbers will not return to pre-pandemic levels until at least 2022,” she said.
“On a positive note, we look forward to two new Napa County hotel openings before the end of 2020, the Cambria Hotel in Napa and the Four Seasons in Calistoga, bringing additional jobs to Napa County.”
The Atlas report also covered hotel sales where the impact of COVID-19 on California hotel sales “has been unprecedented,” the company said.
Through the first six months of this year, the number of individual hotel sales declined by 21%, while the total dollar volume was down by over 53%, reported Atlas. The California median price per room declined by 13%.
“If we take a closer look at the “post-COVID” period, April 1st – June 30th, 2020 and compare that with last year, the results are staggering.”
- Dollar volume of sales was down 82%
- Total number of individual sales were down almost 45%
- Median price per room was down 22%
“With a large number of hotels closed down and occupancies and room rates at record lows, no one has ever experienced a market like this before,” said the Atlas report.
With so few sales, lenders, appraisers “and more importantly buyers are struggling like never before on where to value hotels today.”
While conventional lenders are working with their hotel borrowers and deferring loan payments, on the Commercial Mortgage-Backed Securities (CMBS) lender side we are seeing a record number of hotels in default.
“We now see that over 23% of hotel CMBS loans are now delinquent, which is 53% higher than we saw” in the Great Recession.
“We are forecasting that 2020 will be the worst year on record for hotel sales and the longer this pandemic continues it will be a very long uphill battle to recovery and a ‘stable’ market,” said the Atlas report.
There is one Napa County hotel sale currently in the works: The Marriott Napa Valley Hotel & Spa is soon to have a new owner.
Xenia Hotels & Resorts, the current owner of the property, announced it has entered into an agreement to sell the 275-room Marriott for $100 million. That price was said to be some 30% lower than in a “normal” market.
The deal should close “before the end of the third quarter,” said a Xenia news release. A buyer was not named.
You can reach reporter Jennifer Huffman at 256-2218 or firstname.lastname@example.org