GLOBAL REPORT—Despite concerns regarding the outbreak of the mosquito-borne Zika virus to regions throughout the Americas, the impact the disease will have on the lodging industry is expected to be minimal in the U.S., but could pose threats to some international markets.
According to the World Health Organization (WHO), the outbreak is a potential health risk to pregnant women, as birth defects have been associated with women who were infected during pregnancy. The Centers for Disease Control and Prevention (CDC) is urging pregnant women to postpone travel to the countries where the outbreak is occurring.
International health organizations have begun to ramp up activity to fight the epidemic, a hopeful sign that the Zika virus will not have a prolonged impact on the hotel industry, noted Brett Edgerton, economist, CBRE Hotels’ Americas Research, in the recently released report, The Zika Virus: An evolving risk to the lodging industry.
Over the past 15 years, there have been several large-scale disease outbreaks that did not cause severe declines in aggregate hotel demand. According to the report, the Ebola outbreak in the U.S. from 2014 to 2015 had no meaningful impact on guestrooms sold either nationally or locally in Dallas or Atlanta, the two most affected U.S. cities.
However, markets with large exposure to international tourism may see more negative effects from lost visitors. The World Bank estimated the economic costs of Ebola in West Africa due to disruptions in travel and trade exceeded half a billion dollars. Another estimate published in Health Economics placed the cost of lost tourism revenue in Mexico during the 2009 Swine Flu outbreak at $2.8 billion.
The Zika virus is actively transmitted in a number of Caribbean, Central and South American countries, where the tropical climates contribute to the spread of the disease as mosquitoes thrive in warm and wet surroundings. Brazil has experienced the worst of the outbreak, according to reports from the region, yet the virus has not disrupted Carnival, as the hotels contacted by CBRE Brazil reported full occupancy.
STR’s Global Hotel Review for the month of January 2016 did not find a significant impact on hotel performance related to the Zika virus as news of the outbreak began circulating. STR found that occupancy in the Americas remained virtually the same compared to the same time last year. The region recorded occupancy of 54% in January 2016 and 54.3% in January 2015.
Specifically in South America, occupancy slightly declined at 53.3% in January 2016 compared to 55.5% in January 2015, according to STR. And occupancy in the Caribbean remained unaffected. The region posted a 69.8% occupancy in January 2016 and 70% in January 2015.
The potential for disruption of the 2016 Olympic Games in Rio de Janeiro is expected to be low as Rio authorities are cleaning the mosquito-infested areas, according to the CBRE report. Additionally, August temperatures should be much lower, lessening the possibility for the virus to spread. According to the Brazilian Forum of Hotel Operators, occupancy in 2016 is expected to grow by 2% and rates will rise.
The risks for hotels are not easily quantifiable, noted Edgerton. Past data indicates that epidemics are not a direct threat to hotel demand in the U.S. as a result of effective outbreak management from public health systems.
International markets, however, may be more susceptible to unfavorable results. Countries and regions with poor healthcare infrastructure are most at risk of having a prolonged outbreak that can cause long-term impacts on tourism demand.
Hotels in the affected regions are taking precautionary steps while some global chains are considering waivers for cancellations on a case-by-case basis. Hilton Worldwide is waiving cancellation fees for guest reservations in areas with active mosquito-borne transmission of the virus. Hyatt Hotels Corporation is offering refunds for guests who are pregnant along with their travel companions.
Hyatt has also developed materials to inform hotel employees about the virus and has provided mosquito repellant to guests at hotels in Latin America and the Caribbean.
To educate hoteliers on how to identify high-risk mosquito areas for travelers in the Americas, Dr. Mia Taormina, chairperson of the Department of Infectious Diseases at DuPage Medical Group, suggested they use insect repellent and have restaurants provide air conditioning and screens.
“In my role as a travel specialist and osteopathic physician, I partner with my patients to understand how their travel destination and trip activities will expose them to risk,” she said. “Similarly, lodging operators and managers can be critical resources for guests.”
—Matthew Marin