Many years ago when you’d open a checking account the bank would give you a free toaster. During the financial crisis and Great Recession if you bought a new toaster you’d get a free bank.
From the carnage in the markets over the last week it certainly feels like we’re approaching that territory even if the Federal Reserve Bank of Atlanta’s GDPNow forecast is for 2.6% growth during the first quarter (though that’s down 10 basis points from a day prior). In fairness of course that’s the upper end of forecasts.
As hard hit as the market is overall travel companies are bearing an especially heavy brunt from reduced demand and the expectation that things will get even worse. Airlines haven’t just cut China and Hong Kong flights. United is reducing capacity to Tokyo, Seoul, Osaka, Taipei and Singapore. That’s not because of fear of coronavirus, but because of passengers’ fear of coronavirus causing them not to buy travel.
What’s most striking I think, though, is the extent to which even domestic travel is already scaling back. Allow me to make three observations.
- Alaska Airlines and JetBlue are waiving change fees to get people to commit to buying tickets. These are primarily domestic operators plus travel to the Caribbean and Latin America. They do not fly to China, South Korea, Italy or any region that’s already broadly affected by coronavirus.
- U.S. hotel occupancy was down for the week ending February 22. No doubt things will be worse when they report for this week.
- The sharpest decline in hotel occupancy was airport hotels. However the decline was steepest not in the busiest airports (that are seeing a decline in Chinese arrivals and Asia departure) but at airports that are not among the 10 busiest. That would seem to be more about domestic travel being down.
Of note, U.S. airport hotels reported a 4.8% decrease in occupancy for the week, which was the steepest decline among all location types tracked by STR. The decline was steeper in airport markets outside of the country’s 10 busiest.
Oddly the Seattle, New Orleans and Oahu markets performed well while the biggest bloodbaths were San Francisco/San Mateo (revenue per available room down 22% and occupancy down 11%); Houston average daily rates down 8%; and Minneapolis occupancy down 9%.