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MEMORIAL VIEW: The Last Column Remnants from the World Trade Center in the National 9/11 Memorial Museum at Ground Zero in Lower Manhattan, New York City. In the background is One World Trade Center, which opened in November 2014.
As hospitality industry leaders and analysts dissect COVID-19’s enduring jolt on hotel performance, they frequently refer to 9/11 as an historical point of reference on how the post-pandemic economic recovery might unfold.
This Saturday marks 20 years since the terrorist attacks killed nearly 3,000 people and injured 6,000 others in New York City, Washington, D.C., and Shanksville, Pennsylvania.
Many of those killed were employed in the travel and tourism industry, including airlines, hotels and restaurants, making the event even more horrific for millions of other hospitality workers.
Most Americans born before Sept. 11, 2001, remember where they were when they learned about the terrorist attacks on our homeland. The industry veterans Lodging Leaders interviewed were no different.
Paul Breslin is managing director at Horwath HTL Atlanta, an asset-manager. He also is an executive in residence for lodging at Georgia State University, J. Mack Robinson College of Business, Cecil B. Day School of Hospitality.
On 9/11 Breslin was managing the Sheraton Atlanta. He was in his office when his wife called and asked if he’d seen the news. He went to the hotel’s bar and restaurant where TV news was broadcasting the early stages of the attacks.
“It was just unbelievable,” Breslin said. “I knew it was going to change everything.”
The hotel was nearly full, including a large group of employees of Dow Chemical undergoing Six Sigma training.
Airliners were grounded and airports closed. Most Americans, including hotel guests, sheltered in place, unsure of the extent of the attacks.
Breslin said his staff immediately ordered extra food and liquor. The hotel got the last shipment before businesses closed. Hotel guests could not leave and travelers who had made it to Atlanta before the attacks continued to check in, putting the Sheraton over capacity. The Dow Chemical contingent shared rooms and freed up space for other guests.
After about five days, Dow Chemical leaders at its headquarters in Midland, Michigan, rented about 10 coach buses at what Breslin said was a ridiculously high price and transported their employees 800 miles home, because many airliners still were not flying.
NEVER FORGET: A view of the 9/11 Memorial and the New York City skyline from New Jersey. Saturday marks the 20th anniversary of the terrorist attacks on America. Episode 336 of Lodging Leaders podcast features industry leaders who can recall the shock of the attacks, how they cared for frightened guests and how the event changed hotel operations. They also draw parallels to the coronavirus crisis and remind listeners of the resiliency of the nation’s hospitality industry.
First Day of Business
HVMG had a small office and a few employees in Buckhead. It did not have any hotels under contract but was preparing for a visit from a representative of Cypress, a private equity firm in New York City. Cole remembers his first name as Tony.
“The meeting was set to start at 9 a.m. and we were actually in our conference room and had a small TV in there,” Cole said. As the group watched the TV coverage, Cole saw Tony grow pale and jaw go slack with shock. Cole described the event as “surreal.”
Tony eventually made it back to Manhattan and discovered his family and colleagues were safe.
Cole said HVMG was close to signing its first management agreement with a Fairfield Inn in Maine. Closing was originally set for October, but the owner pushed it into November.
“It was an immediate shutdown,” Cole said. “Obviously, all hotels that relied on air travel and so forth were running single-digit occupancy, if that, but certainly not like the pandemic where all hotels were impacted whether they relied on air travel or car travel. The 9/11 shutdown had a little bit more of a narrow impact, but it was still wide and decisive, to say the least, for several days and weeks and months to come.”
STUCK IN BETWEEN: The ruins of the 3 WTC Building, Marriott Hotel, which stood between the World Trade Center towers. On Sept. 11, 2001, the towers collapsed on the 22-story, 825-room hotel, trapping employees and guests. There were more than 900 guests registered at the hotel that morning. About 40 people died in the collapse, including firefighters who were using the lobby as a staging center. The photo by Anthony Conti is on display at the 9/11 Memorial in New York City.
The 440-room hotel was busy on the morning of 9/11. It was a Tuesday and the restaurant was full for breakfast. Diners were mostly business travelers who flew into New Jersey.
“I was sitting in my office going through my morning ritual of reading the reports from overnight,” he said. “Somebody came to me and said, ‘Hey, Sanjay, you need to see this.’ And I went to the restaurant across our lobby and looked the TV that everybody was watching.
“At that time it really just appeared as if one of those small planes hit a building, probably looks like an accident, maybe something happened with the pilot. So we were just discussing all the different possibilities when we literally saw the second plane approaching.”
Speculation ended as Bedi, hotel employees and guests quickly realized the gravity of what they were watching.
The hotel was in Central New Jersey, about 40 miles from Manhattan.
“What immediately happened was airports got shut down and we got instructions from our corporate offices that all general managers needed to stay at the hotels until further notice,” Bedi said.
“There were quite a few guests who were stuck in the hotel for a few days because there were no flights operating. So we were busy adapting to that, making sure that they are comfortable.
“There was a lot of anxiety, a lot of unknown at that time as people were trying to figure out what really happened. It took us a few days before we got our arms around it.”
After a few days, Bedi took a cab home. Along the way, he witnessed the reality of the attacks.
“My house was about 25 minutes away. The roads were of course empty, which is unusual in New York-New Jersey area. As you go down to New Jersey Turnpike, you can see the New York City skyline. And you could see the emptiness where the twin towers were.”
VIEW OF DISASTER: A view of Manhattan from the first Wachtung Mountain in New Jersey’s Washington Rock State Park. Jukka Laitamaki, a professor at NYU Jonathan M. Tisch Center of Hospitality and a resident of Westfield, New Jersey, on the morning of 9/11 stood on Wachtung Mountain to view the Manhattan skyline. He was stunned into silence as he watched the World Trade Center towers collapse.
A Clear View
Jukka Laitamaki, a native of Finland, was also in New Jersey on 9/11 where he lived while doing hotel consulting work.
As a clinical professor at New York University Jonathan M. Tisch Center of Hospitality, Laitamaki studies crisis management and the economic impact on the hospitality industry of disruptions such as acts of terrorism, disease outbreaks and natural disasters.
Some people recalling the attacks of 9/11 in New York City say they saw the first plane hit the World Trade Center’s North Tower, but that was not televised.
Laitamaki met up with a true eye witness to that first strike at 8:46 a.m.
“I was doing consulting work for the biggest hotel restaurant retail company in Finland. And I was waiting for the vice president of development to come from Manhattan so we could tour some innovative concepts in New Jersey,” Laitamaki recalled.
As he picked up a bagel and coffee at Panera Bread, someone there mentioned that a plane had hit one of the World Trade Center towers. Like Bedi and his guests, Laitamaki’s immediate thought was it was a small plane that had lost its way. “So I went in the car and put the radio on and I was waiting for my friend.”
His friend, he said, was a passenger in a limo traveling through New York City. The car was heading toward the Lincoln Tunnel when his friend looked out the window and saw the first plane hit the North Tower.
By the time she arrived in New Jersey, the second plane had struck the World Trade Center’s South Tower and reports of an airliner crashing into the Pentagon in Washington, D.C., were broadcasted.
A few minutes after 10 a.m. United Flight 93 went down in Somerset County, Pennsylvania, as passengers fought with the hijackers. The 9/11 Commission believes its target was either the U.S. Capitol or the White House.
Laitamaki and his friend quickly drove to nearby Wachtung Mountain in Washington Rock State Park to see the New York skyline. They had a perfect view of the smoking towers when the radio commentator went silent.
“We understood why he was speechless as we were all evidencing the first tower collapsing at 9:59. That really hit home,” he said.
ENCOURAGED TO FLY: President George W. Bush on Sept. 27, 2001, visits airline employees at Chicago’s O’Hare International Airport in an effort to encourage Americans to fly. Mere minutes after the 9/11 terrorist attacks, in which hijackers used commercial airliners as weapons, the federal government grounded all domestic and international flights in America. Flights resumed on Sept. 13 but it took days for passenger backlogs to clear and many Americans remained fearful of boarding an aircraft. After Bush’s public appearance and statement that U.S. air space was safe, air travel began an upward trajectory.
Downturn in Progress
Laitamaki went back to teaching at NYU when smoke was still rising from Ground Zero. Shortly after that, he and his family traveled to Walt Disney World in Orlando, Florida. He remembers being mindful of the airline company, thinking a plane with “American” or “U.S.A.” logo on it would be a target.
He wasn’t alone. Though airlines began flying less than a week after the attacks, passenger traffic was significantly down.
On Sept. 27, President George Bush visited Chicago’s O’Hare International Airport and urged Americans to start flying again. The next day, the travel industry began its comeback.
Hotels were slower to rebound.
“If you really consider what happened here, in 2001, the hotel industry in the United States already started a downturn,” Laitamaki said. “In March 2001, the RevPAR had started to decline for the first time.
“There is that cycle in hotel industry. RevPAR goes up and everybody’s happy. And then there’s overcapacity or external incidents like this. So we were already entering into the low-growth or decline space of the hotel industry.”
On 9/11 and the days after, about 400,00 hotel jobs were lost in the U.S. Average occupancy dropped from 70 percent to 60 percent.
The impact of the Great Recession in 2009 was worse – 470,000 jobs lost and occupancy averaged 54 percent.
The shock of the coronavirus crisis is far greater.
The U.S. Travel Association reported in April 2020 the economic impact of the pandemic was nine times greater than the 9/11 attacks. Just one month into America’s pandemic shutdown, the travel industry had lost 8 million jobs and travel spending dropped 80 percent to 3 billion.
The American Hotel & Lodging Association reported this past July that of the 3 million hotel jobs lost during the pandemic crisis, 500,000 will not return by the end of 2021.
Comparatively, that is the same number of employees who did not return to the industry after 9/11.
Post-pandemic average occupancy will remain 10 percent below 2019 levels and hotel room revenue will be $44 billion less than in 2019, said AHLA.
Though leisure domestic travel has lifted the U.S. lodging business performance from early-pandemic doldrums, the industry’s road to a full recovery is long and uneven, said AHLA’s president and CEO Chip Rogers in the report, which was directed at Congress in support of legislative and policy decisions that would help hotels recover what COVID-19 stole.
Laitamaki believes the U.S. hotel industry suffered such a great loss because the country has not dealt with a global health crisis in 100 years. Some countries that encountered outbreaks such as severe acute respiratory syndrome or SARS in 2003, the H5N1 bird flu in 2004 and the swine flu pandemic in 2009 were somewhat prepared on how to brace for the impact of the COVID-19 pandemic.
“The scale was totally different. And why? I think the real big reason for this is these are so unknown,” he said. “We never were hit by the SARS; we never had really experienced bird flu. We had been through epidemics and other challenges but never on this scale. And there was very little experience and very, very little about how to respond to that.”
MASS REMEMBERANCE: A five-sided granite marker in Arlington Cemetery stands over the remains of 184 people killed in the 9/11 terrorist attack at the Pentagon and on American Airlines Flight 73 in Washington, D.C.
Different Focus on Safety
After 9/11, airports drastically revised operations, including the advent of the federal Transportation Security Administration and heightened security protocols throughout the travel journey.
Even hotels took part in that, remembers Bedi at Real Hospitality Group.
“Sometimes I guess it takes a crisis for us to re-evaluate the way we do business,” he said. “I remember the big focus after 9/11 was our internal safety plans, which used to be very basic at the hotel operations level where your regular odd guest might be aggressive. Now we were covering things on what to see, what are the signs, what should we be on the lookout for. So we had to redo all our safety trainings around that threat that you could have.
“Suddenly our security budgets were increased and we had more security personnel than before so that we were being more vigilant.”
Drawing a parallel with the pandemic, Bedi said hotels heightened cleaning and sanitation protocols and adopted a greater focus on health and sanitation.
“Hotels, especially upscale hotels, are always very big on cleanliness, but now we actually created plans and read them,” he said. “Cleanliness kept getting adapted with the sanitization guidelines that were coming out of CDC. And they were changing every two months. They learn something more about the virus and something else would come out. So we were adapting.”
Another parallel with the pandemic and the 9/11 aftershock is the plunge in corporate travel.
Post 9/11, he said, “We thought that once the airports will be back open it will go back to normal. As the fears subsided, they knew what happened and more facts came out, business would come back. But it was slow to come back. It was very slow.”
As Laitamaki also pointed out, the U.S. economy was entering a recession in the months before 9/11. Bedi said, “We could start seeing its impacts where companies were now cutting down on expenses. Travels were cut down. So it took some time after the airports were opened for the business to come back.”
Deloitte in August reported although domestic leisure travel has returned, corporate travel is slower to resume. Groups and meetings are especially absent as technology enables virtual events. In addition, many companies reduced their travel budgets by as much as 90 percent.
AIRLINE SECURITY: A U.S. Transportation Safety Administration checkpoint at the Denver International Airport in July 2019. Two months after 9/11, President George W. Bush signed the Aviation and Transportation Security Act into law, which created the TSA.
Real Hospitality Group manages nearly 50 hotels in New York City, where the COVID-19 outbreak was rampant.
Though the company offered up some of the properties to house first responders and people at risk of homelessness, Bedi said, many owners decided to temporarily close other hotels.
He contrasted the pandemic closures to the loss of business in the days after 9/11.
“What happened in pandemic, which I did not see after 9/11 was actually shutting down of hotels,” he said. “Because this was a health concern, cities and states were putting in restrictions and a lot of hotel owners decided to just shut down completely. And that’s what we were busy doing in March (2020).”
Bedi said Real Hospitality Group began meeting with hotel owners in early February as the news about a novel coronavirus in China emerged and Washington state reported its first case of COVID-19.
“Every week, a new fact would come up. A new news update would come up and slowly within two or three weeks from just planning on what to do and how to react. We were strategizing on shutting down buildings itself. And then that happened so quickly within couple of weeks, that by, towards the third week of March, we managed about over 50 hotels in New York region. And imagine planning, shutting those down one after another, after another.”
Another significant challenge Bedi witnessed that’s unique to the pandemic crisis is the type of guests hotels were serving during the pandemic. Some of them Bedi describes as aggressive.
A few months after 9/11, frequent business travelers resumed activity and returned to hotels. “In terms of the pandemic, we didn’t see our regular hotel guests come back in New York City for the entire year,” he said.
Aside from the first responders and health care workers in need of accommodations, the other guests were of a different ilk. They were aggressive and caused problems.
“Some of them had some free money now with the government handouts,” Bedi said. “Our staff was not even trained how to handle certain situations. There were a lot of security and safety concerns with the guests in the hotel, not with an outside threat like September 11. These were all internal guests. We had high rate of aggressive guests in the lobby and assaults on some of our staff members.”
Bedi said the situation created a Catch 22 as low revenue forced Real Hospitality to cut back on expenses, including reducing frontline staff from three or four employees per shift to one or two.
“And then suddenly these incidents started happening and now we are concerned about can we leave one person at the front desk when you have all these aggressive guests?” So Bedi and his team decided to increase staffing at night to be able to handle problem guests.
“I cannot say enough words of appreciation to our teams at the hotel who saw us through this time,” Bedi said. “We have said great things about first responders who saw us through this time. I would put GMs, our operations managers, even our frontline staff very close to those first responders on what they saw us through this time.”
TIME IS MONEY: STR in May 2020 published an analysis external crises have on hotel industry performance. Using 9/11 and the September 2008 collapse of Lehman Brothers, which triggered the Great Recession, STR charted the path of average daily rate in the events’ aftermaths. 12MMA means 12-month moving average. (Source: STR)
Rebound takes time
From one disaster to another, Breslin of Horwath HTL said the U.S. hotel industry learns valuable lessons.
In May 2020, STR published an analysis of the impact on hotel business performance after 9/11 and the Great Recession, which was triggered by the September 2008 collapse of Lehman Brothers, which was heavily invested in subprime residential mortgages.
STR’s overarching message was the rebound of average daily rate after an external shock takes time.
After 9/11, ADR went backward by 19 months and took 37 months to recover. It caused an immediate and sharp decline in rate, STR said, but ADR began its climb back up month over month.
After Lehmann Brothers bankruptcy, ADR declined slowly but the impact of the depressed revenue was more severe.
Breslin recalled the worry hotel owners had in the weeks after 9/11 about the drop in business and inability to pay their mortgage debt. But the American economy bounced back rather quickly, though rates remained relatively low.
Breslin remembered during the Great Recession, the mercilessness of the Federal Deposit Insurance Commission as well as banks that held hotel mortgages. He did not witness that kind of response in the Pandemic Year 2020.
“What helped us the most in this crisis was the real-estate crisis. That was such a failure. We did not know how to work with our banks. Their vision was sell the note or get rid of the hotel and push for foreclosure. They realized after they came out of that storm that was a huge mistake,” he said.
The pandemic was far worse than the real-estate crisis or Great Recession, but because of lessons learned in 2008-2010, this time lenders and banking regulators kept their cool.
“All the banks said, ‘Look, you’re going to have 90 days, no interest, no principle.’ And then everybody could breathe,” Breslin said. “And then before that 90 days was up, we had the PPP loans, round one. Then the banks were talking about giving us another 90 days. All of that really helped us tremendously for our success.”
DAY BEFORE: The Windows of the World Restaurant on Sept. 10, 2001, in the North Tower at the World Trade Center in New York City. The venue occupied the 106th and 107th floors with two restaurants, a bar and meeting rooms. When American Airlines Flight 11 struck the North Tower at 8:46 a.m. on Sept. 11, 2001, there were 72 restaurant staff members and 92 guests in the restaurant.
Cole with HVMG recalled in the days after 9/11 that hotels dropped their rates in an attempt to encourage bookings. It was the proverbial race to the bottom.
At the time, most hotel operators did not practice dynamic pricing. The sudden drop in occupancy immediately after the terrorist attacks alarmed hoteliers and RevPAR followed right behind, falling 20 to 25 percent on average, according to a study by Renáta Kosová and Cathy A. Enz published in 2012 in the Cornell Hospitality Quarterly.
International travel to the Americas fell 24 percent. Overall, the U.S. hotel industry did not recover internationally and domestically until 2004.
It is similar to today. STR and other analytical companies say it will be at least three years until hotels see pre-pandemic performance metrics.
However, there is one difference. Amid the crisis, most hotels have held their rates.
“We learned and are still learning today: Don’t panic on price,” Cole said. “Certainly right after the pandemic OTAs were a significant part of our business and there was a lot of competition for heads and beds through lowering price but over the last six months or so I think all of us as an industry have realized that it’s been a pretty inelastic experience. Dropping price certainly wasn’t going to drive group business. It wasn’t going to drive corporate business. And so we certainly realized that folks who wanted to travel were going to do it.” Price was not a sole factor in travelers’ booking decisions.
STR reported business performance metrics for July when occupancy was 69.6 percent, a decline of 5.5 percent compared to July 2019.
When adjusted for inflation, ADR and RevPAR were lower than all-time highs reported in 2019. On a nominal basis, July ADR was $143.30, an increase of 6 percent over July 2019, and RevPAR was $99.71, a 0.2 percent increase over July 2019.
Cole said the results are “great news for the industry.”
“We all know it’s been mostly driven by leisure and resort hotels, but the fact is that we all thought occupancy would be the first or rebound versus rate, which is less profitable.
“So I think there is a silver lining in this crisis that we can learn from going forward is not necessarily hit the panic button by dropping rates and try to hold as much rate integrity as possible and manage through the crisis.”
Bedi with Real Hospitality Group sees another bright spot amid the COVID-19 uncertainty.
“Now that I’m a veteran of two major crisis and in different roles, one at the field level and the second one more at the corporate level, what I’m amazed at is how amazing we are as human beings,” he said. “Of course there are bad elements also who will take advantage of situations, but it’s amazing to see us get together, take a crisis head-on, adapt and just get done what needs to get done to move forward and make things better.”