Downtown hotel occupancy fell 91% as health crisis escalated

Hotel business was so bad in March, the JW Marriott and other properties opted to suspend operations. (IBJ file photo)

The Indianapolis hospitality sector took a massive hit from the coronavirus outbreak during a five-week period beginning March 1, with thousands of room cancellations taking a toll on the city’s hotel occupancy rate.

The entire market saw a 68% drop in occupancy from the week of March 1-7 to the week of March 29-April 4, according to data from Tennessee-based hotel research firm STR, which receives data each week from almost every hotel in the country. Market-wide occupancy fell from 63.7% to 20.4% over that period.

The downtown area was hit particularly hard, dropping from 67.7% to 7% occupancy—a fall of 91.1%.

The central business district typically includes 34 hotels with 7,839 rooms, but several hotels temporarily closed beginning in mid-March, including the city’s two largest—the JW Marriott and the Marriott. STR said it did not include closed properties in the latest statistics.

The rapid decline in occupancy was largely due to the loss of several major events and conventions (some of which have been rescheduled for later in the year) that led to the cancellation of more than 88,000 room nights across central Indiana.

The data show the city’s hospitality industry is in a far different spot from where it was one year ago—long before the virus emerged.

In March 2019, downtown hotel occupancy was at 75.1% and rose to 78.9% a month later. Occupancy in the overall market was in the mid- to high-60s range as a healthy stream of sports and conventions—the likes of which had been expected again this year—brought tens of thousands of visitors to central Indiana.

So far, COVID-19 has led to the cancellation of at least 22 major conventions and events through the end of May, while another 13 have been postponed to later in the year, including the Indianapolis 500.

“It’s incredibly painful to see Indy’s tourism industry aching,” said Visit Indy’s Chris Gahl. “But it’s not surprising to see these numbers and to see the dramatic dip” caused by social distancing and stay-at-home orders.

Gahl, vice president for the tourism bureau, said while Indianapolis isn’t alone in its struggles, the rapid and sustained damage to the city’s hospitality sector is eye-opening.

“To see single-digit occupancy rates downtown,” he said, “is unprecedented.”

Since March 1, average daily room rates downtown have decreased substantially, from roughly $186 to $103 per night— about 43%. And revenue per available room, an industry standard that helps monitor profitability of hotels, fell by 95%, to $7.17, according to STR.

The market overall saw a drop in its average room rates of about 43%, from $116 to $67. Revenue per available room also dropped to under $14, from about $74—a decline of about 82%.

In addition to closing properties, hotel management firms and owners for other local hotels have laid off most of their employees.

Gahl said most of the hotel rooms that are occupied now are being used by those working in industries that have been deemed essential, along with individuals responsible for maintaining the country’s varied supply chains. 

“You still have some people traveling because of job requirements and their travel being part of the COVID-19 response,” he said.

And at least one hotel, the Crowne Plaza at the airport, has been turned into a facility for individuals who have contracted the virus.

Even as local and state leaders begin discussions about ways to start reopening the economy, it’s expected some social distancing protocols will remain in place, prolonging the absence of tourism as a major economic driver for a city that heavily depends on it.

“Indianapolis, more so than any other market in the country relies on [convention] business,” said Patrick Tamm, president of the Indiana Restaurant and Lodging Association. “That’s gone.”

Local businesses, including restaurants and bars, are expected to collectively miss out on tens of millions of dollars because of the virus.

And the Capital Improvement Board—which owns and operates the Indiana Convention Center and other major venues—also could see major hits to its income, which is largely built around hotel and sales tax revenue.

Tamm said hoteliers are concerned about how long it could take for tourism industry to return to surer footing.

“Our hotels are concerned that their recovery and any generation of business activity is going to take a considerable amount of time,” he said. “That delay will just continue to cause massive financial calamity. You can’t keep a market like Indianapolis sustainable in any way, shape or form at 7% occupancy.”

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9 thoughts on “Downtown hotel occupancy fell 91% as health crisis escalated

  1. Murray, at least back up such an outlandish comment with a rationale. Meanwhile, I bet you could get a room for $20, or whatever their marginal cost is to clean a room +$1.

    1. They’re monuments to the longest running Ponzi scheme in Indiana, unnecessary and imbalanced public subsidization of private developments in downtown Indianapolis.

      Given the tone of your comment, I’m sure you’ve got quite the case of boot breathe and are ready to list off a litany of Visit Indy economic “facts” or “studies” that conveniently do not adequately factor costs.

      All in the name of participating in the great Race to the Bottom and giving the illusion of keeping up with the Joneses.

  2. Ironic: The City today finally released the jazzy White River Vision Plan, funded in large part by Visit Indy, which sought to apply some “big ideas” to activate the river and to enhance its destination appeal and hopefully increase room-nights and other local spending. It’s principal goal is pragmatic and revenue-oriented.

    On a more spiritual side, recalling the stirring remarks of Hoosier ecologist Tom Dustin, from a 1998 conference in Indianapolis:

    ”In a 1996 book entitled The Call of the River, author Page Stegner provides this characterization: ‘The call of the river is a complexity of motion and sound which extracts from mere mortals the wildest diversity of emotional response. Awe, dread, tranquility, devotion, ecstasy. The river is an abstraction of universal force’.
    Yes, the call is all of that, but it is still more. One does not have to conquer a river to feel its tug upon our souls; in the very end one is not even required to paddle it to feel its magic. As with a distant wilderness that we may never see, it is a fulfillment to know at least that it is there, and with that knowledge as our main reward, we are justified to fight like junkyard dogs to assure present and future generations that a good representation of these creations remain to enrich all life by its very existence”. Thomas E. Dustin, Indiana Izaak Walton League

    Perhaps this health crisis will help us reflect on the increasing importance of protecting our precious natural heritage, even in urban settings. Besides, zoologists indicate that continued human development and penetration into wildlands is greatly increasing the prospects for unlocking many viruses (an estimated 1.7 million, worldwide) from native wildlife.

    1. As eloquent of an appeal to NIMBYism as this website has seen. As the White River wends its way through downtown, no amount of stymie-ing development is going to improve the likelihood of seeing a single additional frog or groundhog. Let the wilderness remain wild, but for cities to remain viable and self-sustaining, they absolutely HAVE to stay urban.

  3. I would have to believe that some of these comments are from someone who doesn’t or hasn’t worked in the hospitality industry, ever. There are over 80,000 jobs in Indy because of the conventions and events that come to Indianapolis. That includes union and non-union hospitality employees. It is not good for any of them to be without jobs.
    Those jobs are lost without “heads on beds.” Our “Hoosier Hospitality” is what makes this city unique and so welcoming to visitors around the world. If the conventions and sporting events don’t come, the hotels don’t open, the restaurants don’t open, there is no need for a valet parker or a busboy or the concierge at the hotel. No need for a chef, or servers, or a wine distributor at a restaurant. No need for a local farmer to supply “farm to table” vegetables and produce at a restaurant….the list goes on and on.
    Let the hotels make money on their “Ponzi scheme.” It is a good business for the whole economy.
    This has affected many people and many more will feel the sting of lost business. It is a shame that anyone would find this to be a “good” thing.

  4. So true, Debbie H. These “Ponzi scheme” imaginers are usually ones that have never been able to climb out of their own hole. To them, anybody that has, it’s a result of a Ponzi. We don’t know what is “profession” is but I’m confident he has never build, run, or been responsible for anything of much economic value. The truth is he know it, but resents that fact, and blames everyone but himself.

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