Pointing out that the coronavirus is still “calling the shots,” economist Bernard Baumohl called on hotel companies to remain agile and nimble in the face of uncertainty as he delivered a presentation on behalf of The Lodging Conference earlier this week.
While cautioning listeners that he was “not going to pull any punches,” Baumohl, chief global economist, The Economic Outlook Group, LLC, bemoaned an overall lack of clarity while assessing the foreseeable future of the U.S. economy.
“We’re looking at a very fragile recovery. There’s still a profound amount of information that we do not yet have, such as when will a vaccine be available, who’s going to win the election, and also when can we expect to see some fiscal package coming out of Congress? The best thing we can do right now is simply buckle up and to be as agile and nimble as possible until we get a little bit more clarity, more comfort and a higher sense of confidence in the direction of the economy,” he said.
Baumohl emphasized that the outlook for hospitality, in particular, remains decidedly negative. He noted that in each of the past recessions there was a ‘miniscule’ fall off in consumer spending on lodging and services, while 2020 has seen spending on lodging and services “utterly collapse.”
He cited a recent report from the AH&LA which characterized the hotel industry as being on the “brink of collapse.” Baumohl went on to point out “you can’t get any more stark in your description of the hotel industry.”
Baumohl further detailed the industry’s 39.8 percent average occupancy rate and the financial stress that results for hoteliers. He added, “frankly, I think travel and tourism will likely recover much more slowly than other parts of the economy, certainly more slowly than the goods producing sector of the economy.”
While other sectors of the economy have shown signs of life, the economist cautioned against getting too optimistic.
“I know that some people are a bit more upbeat these days because they’ve seen some positive economic reports certainly with respect to the housing market and we see better numbers in retail sales. There’s obviously been some industries with a rebound in hiring, but we have to be very careful about having a false sense of security. The reason is that an economic rebound is not the same thing as an economic recovery, it doesn’t tell us we’re on a sustainable economic recovery course right now,” he said.
Baumohl again asserted that the three main factors impacting the economy are the course of the virus, a second stimulus package and the upcoming Presidential election.
Of the virus he noted, “We can not fix the economy without first fixing the health crisis.”
Meanwhile, Baumohl underscored the urgency of getting government to pass a second financial package. “Both sides are obviously still far apart, so far apart that they were not able to even pass a ‘skinny package.’ We are in a race against time. We need this financial bridge as sort of a lifeline for businesses to keep them financially afloat and also to keep households whole. This package is crucial,” he said.
Baumohl went on to highlight some of the uncertainty resulting from the election. “These are two people with radically different personalities and profoundly different agendas, and we’re now entering the most contentious stage of this presidential race. Prepare for mayhem, prepare for a lot of disorder right up to the election and I’m afraid even beyond,” he said, noting that the Supreme Court may ultimately have to decide it.
Baumohl noted that the U.S. GDP (Gross Domestic Product) is expected to contract 4.9 percent this year as he further explained a full recovery could be a ways off.
“People keep asking ‘when can we see things finally get back to normal,’ whatever that now means? My answer is ‘we’re going to have to be very patient.’ It’s going to take a while, it’ll take years before we finally get back,” he said.