Hotels, Tourism Hit Quickly by Pandemic Downturn

Posted on June 1, 2020   |   Updated July 13, 2020

When governors across the country — along with governments around the world — issued stay-at-home orders to quell the COVID-19 pandemic, hotels were among the first to feel the effect.

The occupancy rate has been near single digits at many local hotels, and every property in Orange County has had to furlough staff, said Laurie Paolicelli, executive director of the Chapel Hill/Orange County Visitors Bureau, who received a certificate in public health leadership from UNC in 2017.

The Franklin Hotel, an independent business sold last year to the national chain Graduate Hotels, has closed temporarily for renovations and might reopen in August. The recently sold Sheraton also is closed for major renovations and likely won’t reopen until fall 2021.

Along with that drop in supply, demand fell off a cliff in mid-March and by April was down nearly 32,000 room nights for the first four months of the year, the visitors bureau reported. Revenue fell 90 percent compared to April a year ago. The average daily room rate plummeted nearly $39 to $91.19, the first time in decades the price has been below $100. The visitors bureau expects Orange County hotels will have lost $33.4 million in room revenue by the end of the year.

The drop in demand, prices and bookings will reduce the revenue the county and town receive in occupancy taxes. Each entity receives 3 percent; Chapel Hill passes 25 percent of its take along to the visitors bureau and the remaining 75 percent toward the town’s budget.

Industry experts speculate that housekeepers and food service workers laid off during the pandemic might switch to industries less vulnerable to the virus. To build loyalty with staff who businesses can’t afford to keep on during the downturn, some hotels, like The Carolina Inn, tried furloughing employees rather than laying them off outright. Furloughed employees can retain their health insurance benefits through the hotel, and relaxed governmental restrictions allow them to collect unemployment benefits. But as the downturn dragged on, it became tougher. The inn laid off 217 employees on July 11.

All local hotels suspended food and beverage service, except for The Siena, which continued to offer takeout at its Il Palio restaurant.

Commencement weekend typically gives restaurants a needed cushion to offset the slow summer months. Last year, The Carolina Inn served 1,200 guests at its Commencement/Mother’s Day brunch, said general manager Mark Sherburne. The inn’s restaurant, Crossroads, lost that business this year in addition to other special event bookings. The hotel has stayed open throughout the pandemic, although most of its business early on came from parents in town to help students pack and move.

“It’s slow now, but it won’t always be that way,” Sherburne said. “The inn is 95 years old. It’s built on traditions. Currently, some of those aren’t taking place, but we’re looking forward to continuing those traditions into the future.”

Two large hotel developers are betting that the industry will rebound. Both have applied to the town for permission to build downtown — one encircling the Old Town Hall on the corner of West Rosemary and Columbia streets; and the other on the site of the former Chapel Hill News building, now TOPO Distillery, at West Franklin and South Graham streets.

Paolicelli expects that in 2020 Orange County’s tourism revenue will be slashed by half before it rebounds next year.

“Our hope for the future is that when we reopen, we will see a quick rebound, thanks to the love that alumni have for this area,” she said.

— Nancy E. Oates

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