Increases in corporate group- and convention-related cancellations due to concerns about COVID-19 have led both Pebblebrook Hotel Trust and Sunstone Hotel Investors to pull their Q1 and full-year 2020 guidance.
Pebblebrook noted its Feb. 20 guidance did not account for any impact from the COVID-19 outbreak, other than what was known at the time. Increasing travel restrictions, governmental travel advisories and state of emergency declarations across multiple markets, it said, “are now expected to significantly adversely impact” its financial results in the first quarter and full year.
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“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 E. Bortz, chairman/president/CEO of Pebblebrook Hotel Trust, said in a statement. “These cancellations, which have dramatically escalated in just the last 10 days, are largely for business previously on the books for March, April and May of 2020. We’ve also experienced significant cancellations and material declines in business transient demand, while leisure bookings have also been impacted, but to a lesser extent.”
As a result of the shift in demand, Bortz said the real estate investment trust is modifying its operations and implementing cost-reduction plans to mitigate the impact on revenue. Pebblebrook, he added, does not expect to issue new guidance until there is more clarity on how the virus will impact the industry.
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In Sunstone’s FY 2019 earnings report, released on Feb. 18, the real estate investment trust’s 2020 guidance included approximately $1 million of lost revenue resulting primarily from known group customer cancellations related to COVID-19. Since then, the company said it has seen “a material increase in expected lost revenue from group customer cancellations.” As of March 5, this totaled approximately $11 million. The majority of this lost revenue, it said, related to business scheduled to occur in March 2020.
“Since the time of our earnings call, we have witnessed a sizable increase in both group cancellations and corporate travel policy restrictions related to COVID-19, both of which are expected to reduce our near-term occupancy and hotel revenues,” John Arabia, president/CEO of Sunstone, said in a statement. “As the situation evolves, we will continue to assess the expected impact of COVID-19 on our operations and earnings, while working to protect the hotel employees and guests.”
Pebblebrook Hotel Trust owns 54 hotels with approximately 13,400 rooms. As of February, Sunstone Hotel Investors had interests in 20 hotels comprised of 10,610 rooms.