Hotel REITS Feel the Pinch as Groups Cancel Rooms Over Coronavirus Fears
Performance Projections for the Year Take a Hit

By Richard Lawson
CoStar Group
Published: Mar 10, 2020

Hospitality real estate investment trusts are starting to say just how rough their balance sheets are looking as industry groups cancel and delay meetings and conventions over coronavirus fears.

Ryman Hospitality Properties, based in Nashville, Tennessee; Park Hotels & Resorts, based in Tysons, Virginia; and Pebblebrook Hotel Trust, based in Bethesda, Maryland, withdrew their financial performance outlooks for 2020. Sunstone Hotel Investors, based in Irvine, California, made the same move late last week.

Across the globe, there have been 113,000 confirmed cases of coronavirus, also known as COVID-19, with about 4,000 deaths as of Tuesday morning, according to the World Health Organization. Major events around the world, such as the South by Southwest tech conference and festival in Austin, Texas, have been canceled due to health concerns.

“We have seen a considerable rise in corporate group- and convention-related cancellations due to concerns surrounding COVID-19, and therefore, we are unlikely to achieve our first quarter and full-year 2020 outlook,” Jon Bortz, Pebblebrook’s chairman, president and CEO, said in a statement.

Ryman Hospitality, Sunstone Hotels and Park Hotels echoed Pebblebrook’s message in their own announcements.

Park Hotels had given guidance in its Feb. 26 earnings report that it would lose $8 million in room revenue as a result of group cancellations. But that number grew to $30 million by the end of last week, the company announced. Hotel flags for its 60 hotels containing more than 33,000 rooms include Hilton, Marriott and Hyatt.

At Ryman, Colin Reed, the company’s CEO, said in a statement that groups canceled 77,000 room nights as of last week, representing about $40 million in revenue. For context, 122,000 room nights were canceled in the first quarter of 2009, the height of the financial crisis, Reed said.

Ryman’s hotel portfolio includes Gaylord Opryland in Nashville; Gaylord Palms in Kissimmee, Florida; Gaylord Texan in Grapevine, Texas; Gaylord Rockies in Aurora, Colorado; and Gaylord National near Washington, D.C. Marriott manages the hotels.

Because the rooms were canceled doesn’t mean they might not be rebooked later in the year. “Several groups who have canceled their event have expressed a desire to rebook their event later this year at one of our hotel properties,” he said.

He noted, though, Ryman has seen “little to no change in our hospitality segment’s leisure business or in the volume of business at our entertainment segment’s venues to date.”

Ryman also owns entertainment venues such as the Opry House, home to the Grand Ole Opry in Nashville; the Ryman Auditorium in downtown Nashville, the Opry’s former longtime home; and the home of the Austin City Limits television show in Austin.

To deal with the short-term hit on hotel revenue, Reed said that Ryman is “working with Marriott to implement cost containment strategies at each of our properties to reduce operating expenses.”

Pebblebrook and Park Hotels are taking similar steps with managing costs in light of reduced revenue.

In addition to losing group business, Pebblebrook’s Bortz said the company has seen significant cancellations among business travelers in general. Leisure travelers have dropped off as well, “but to a lesser extent,” he said.

Pebblebrook owns 54 hotels comprising 13,400 rooms, many of which are on the West Coast. But it has others on the East Coast in Florida, Washington, D.C., Boston, New York City and Philadelphia. Hotel flags include Hilton, Kimpton Hotels, Sofitel Hotels and Mondrian. The Revere Hotel in Boston is one of its notable hotels.

Sunstone said in its update that it had lost $11 million in revenue so far because of cancellations and doesn't expect to hit its first-quarter projections. Sunstone has hotel properties on the West Coast, and in Florida, Washington, D.C., Boston, New York City and New Orleans under the Marriott, Hilton and Hyatt brands.

“As the situation evolves, we will continue to assess the expected impact of COVID-19 on our operations and earnings, while working to protect hotel employees and guests,” John Arabia, Sunstone’s CEO, said in a statement.