U.S. May Require COVID-19 Testing for Domestic Air Travel: Impact on Real Estate Investors
2020 has been a brutal year for hotels, and so far 2021 is not looking particularly good. The American Hotel & Lodging Association estimates that 50% of US hotel rooms will remain empty in 2021.
A slowdown in business travel is partly to blame. These trips typically account for 65% of hotel bookings, but this year they’re projected to decrease 85% by April. And business travel may not return to pre-pandemic levels for two to three years.
Because of this, hotels and their investors can’t afford another blow. But the Biden administration may have one in the works.
Coronavirus testing requirements could soon become an obstacle to air travel
The Biden government is considering implementing a rule requiring all air travelers to present negative COVID-19 test results before being allowed to board a plane. This requirement already exists for travelers coming to the US from overseas, but domestic travelers may now also be affected. And it is highly unlikely that this will go down well with many members of the public.
The purpose of this mandate is, of course, not to make travel difficult, but to ensure people’s safety. Given the slow roll-out of coronavirus vaccines and new COVID-19 variants that continue to emerge, asking for a negative test result is just another layer of protection.
Some passengers can even accept this requirement. But for others, that might be exactly what is holding them back from booking a flight. And if more people fail to travel in the next three to six months as the pandemic rages on, hotels could lose whatever limited revenue they are otherwise queuing for. And that is exactly what those who invest in hotel real estate investment trusts (REITs) should definitely be prepared for.
So far, a number of airlines have spoken out against the requirement of coronavirus tests for domestic travel, especially since there is evidence that the risk of COVID-19 transmission on airplanes is relatively low. Others who opposed the idea of mandating negative test results for air travel argue that it is a logistical nightmare.
But unless the pandemic situation really improves, proof of a negative coronavirus test could be something air travelers will have to do for some time. And if that prompts people to cancel their travel or vacation plans and stay home instead, the hotels will be buried even deeper into their current hole and many are at risk of permanent closure.
Of course, this also raises an interesting question: will the submission of proof of vaccination also be required for air travel once coronavirus vaccines are widespread?
That’s less likely than a negative COVID-19 test for boarding an airplane, but it’s an issue that can surface as more doses hit the market. Some employers already say that they require workers to get a vaccine before they can return to the office. Hence, it is conceivable that vaccine needs will soon emerge in various areas of our daily life – including travel.