As Conventions Cancel Over COVID-19 Fears, Hotel Industry Waits Anxiously

The novel coronavirus has killed 10 U.S. residents, including nine fatalities in Washington state, and at least five people in the Chicago region have tested positive for the virus. It is unnerving for the local hospitality industry, which had been expecting a rebound in conventions in 2020 and which worries about cuts in business travel if the virus spreads further.  

Too little is known to make confident predictions. Public health experts still don’t know if COVID-19, the disease caused by the virus, will mirror the SARS pandemic of 2003 and fizzle out before it hits the U.S. in a big way, or turn out to be less deadly than initially feared.

“COVID-19 is a new disease and we are still learning how it spreads, the severity of illness it causes, and to what extent it may spread in the United States,” an official statement from the U.S. Centers for Disease Control and Prevention reads.

It is already making itself felt in the Chicago region’s economy, most notably in the convention industry. Officials from the International Housewares Association, a Rosemont, Illinois-based trade group, said Monday they are canceling the group’s four-day convention, The Inspired Home Show, in Chicago’s McCormick Place Convention Center.

McCormick Place consists of four interconnected exhibition halls, as well as the 10,387-seat Wintrust Arena, and with more than 2.6M SF, it is the largest convention center in North America.

That event was initially set to take place from March 14 to March 17, and was expected to draw 52,000 attendees from around the world, including many from China. Its cancellation is a big hit to the city’s hotels, which after a somewhat lackluster year for conventions in 2019 had been counting on McCormick Place’s packed meeting schedule this year to fatten bottom lines.

More bad news for hotel operators may be on the way. In the wake of the terrorist attacks of Sept. 11, 2001, the SARS pandemic and the scare over the H1N1 virus in 2009, many companies adopted a more cautious approach to travel.

Corporate leaders are reluctant to put employees and customers in situations perceived as risky. Even if public health measures slow the spread of the coronavirus, the new corporate mantra of “safety first” may still cut deep into business travel and cause the cancellation of other conventions.

“It’s a very awkward thing for a CEO to invite customers to an event in an environment where the coronavirus is so talked about, and restricting travel in such situations has been taken on board as a best practice, as well as moral and ethical requirement,” according to Kevin Mitchell, founder and chairman of the Business Travel Coalition, a trade group for corporate travel managers.

“Deciding whether or not to make a trip is very much a family decision, and people make it after sitting around talking at the dinner table,” he added. “It’s the kind of thing that today people can take to their HR department, who are likely to say, ‘I understand, you’re not confident, your family is worried, so you don’t have to go.’”

The International Housewares Association’s decision to cancel their giant event happened quickly.

“As of last Friday, we still felt relatively good about the number of exhibitors who planned to participate,” IHA Vice President of Marketing Leana Salamah said.

The group’s annual convention was supposed to draw about 2,200 exhibitors, and early precautions had already been taken. In mid-February, IHA canceled the International Sourcing Expo, one of five expos to take place at the event, which would have brought in hundreds of companies from China, the epicenter of the coronavirus outbreak.

“We felt that action was sufficient, since at the time the virus seemed limited to China, but over the next few weeks it started popping up in other countries like South Korea and Italy, and in just the past week or so, Washington State and Chicago,” Salamah said.

“The sentiment of the industry changed dramatically over last weekend,” she added, and Monday afternoon felt like a do-or-die moment, when exhibitors were getting set to ship their display products to Chicago.

The new cases of infection and an increase in the number of deaths prompted the association’s board to vote unanimously in favor of canceling the event.

The economic hit to Chicago won’t be slight: Salamah estimates that attendees would have spent about $77M in the city, including costs for hotel rooms, transportation, restaurants and other entertainment.

The IHA show’s cancellation may be an outlier, largely because it expected huge contingents from both Asia and Europe, where the worst outbreaks of COVID-19 have occurred.

“Those that do not have the same international character may feel differently than we do,” she said.

“At this time, the IHA is the only cancellation we’ve had in our convention schedule, but the whole situation is evolving every day, so I can’t speculate on what might happen,” Cynthia McCafferty, a spokesperson for the Metropolitan Pier and Exposition Authority, the municipal corporation that owns Navy Pier and McCormick Place, said on Tuesday.

McCormick Place’s schedule looked even more unpredictable on Wednesday morning, when software firm Oracle announced it was canceling its Modern Business Experience conference, expected to attract about 5,500 people to McCormick Place for three days starting March 24. Company officials said they would hold an online conference instead.

Chicago and McCormick Place are not unique. Other cities, including San Francisco, New Orleans, Denver and Houston, recently saw conventions cancel due to COVID-19 worries, she said, so it is unlikely Chicago will lose business to the competition.

In the meantime, MPEA officials have launched an action plan to help curtail any possible spread of the virus. The facilities are now cleaned more frequently with hospital-grade disinfectant, especially high-touch areas such as elevators and railings, according to McCafferty, and visitors will now see a greater number of hand-washing stations.

“We are also working closely with both the city and state departments of public health, and will take up any further recommendations they have,” she said.

The city’s hotels are not sitting still either, Maverick Hotels & Restaurants CEO Bob Habeeb said. The former CEO of First Hospitality Group is now developing the seven-story, 222-room Curio Hotel set to open this summer on Navy Pier.

“Most of the flu epidemics of the past evaporated with the changing of the season, but this time around, no one is banking on that,” he said.

The Illinois Hotel & Lodging Association is helping coordinate the response from hotels throughout the Chicago region, Habeeb said, and all agreed to adopt stricter standards for healthy workplaces.

“The hotel industry is working in close cooperation with federal, state and local officials to monitor this rapidly developing situation and ensure the safety of our guests and employees,” the association’s president and CEO, Michael Jacobson, said in a prepared statement.

“While there are already strict guidelines and protocols in place to help prevent the spread of illnesses, hotels are taking further precautionary measures including engaging health and sanitation experts to bolster cleaning procedures, providing access to hand sanitizer and retraining staff on a real-time basis.”

This year’s health scare hit Chicago hotels at a bad time. The city’s convention business tends to run in three-year cycles, Habeeb said, as groups like to rotate where their meetings are held. And 2019 was one of those years where many chose other convention hubs like Las Vegas, New Orleans or Orlando.

“We had baked last year’s low expectations into our numbers, and 2020 was supposed to have been a better convention year, and it had been shaping up that way, but if the coronavirus lasts into the fall, we’ll all feel it, and that would mean we had two bad years in a row,” he said.

From now until the end of the year, 48 events are still on McCormick's schedule, including the Black Women’s Expo in April, the National Restaurant Association’s Restaurant Hotel-Motel Show in May, with more than 65,000 attendees expected, and in October, the 2020 Bank of America Chicago Marathon Health and Fitness Expo, expected to be the year’s largest Chicago convention with more than 141,000 visitors.   

“It’s a very strong calendar of events, and we expected it to be a huge boost for the market, especially because only a small number of hotels were slated to open this year, which would have allowed demand to catch up with all the new supply that was created in recent years,” HVS Managing Director Stacey Nadolny said.

The hotel supply boom started around 2015 and continued through 2018, with nearly 10,000 units added to the city’s inventory, according to HVS, a consultant group for the hospitality industry. The new stock included the 1,200-room Marriott Marquis and a 466-room tri-brand Hilton hotel, both near McCormick Place. Developers added only about 1,500 units in 2019, and expect to finish even fewer this year.

The fundamental strength of the Chicago region’s hotel industry was seen in 2019, when, even in the face of a soft convention year, occupancy increased to 70.3%, up from 69.2% in 2018, although RevPAR did decline from $105.73 to $104.35, according to a year-end research report from Newmark Knight Frank.

Nadolny also said it is possible that if any more McCormick shows get canceled, the events will get rescheduled if the coronavirus scare subsides over the next few months.

Salamah said it is impossible to reschedule IHA’s event no matter what happens, even though it plays a key role in pairing up manufacturers and retailers from around the world, and each year sets the tone for the entire housewares industry.

“With a show our size, the move-in and move-out times are really long, and the challenge is finding a window of time, which frankly, does not exist,” Salamah said.

Habeeb said Chicago may be somewhat protected from the coronavirus since it sees fewer foreign travelers than coastal areas. Tourism hit a historic high in 2018 with almost 58,000 visitors, according to Choose Chicago, the city’s tourist information center. But market research firm Euromonitor International found Chicago attracted fewer international visitors than New York City, Miami, Las Vegas, Los Angeles, San Francisco, Orlando or Honolulu, and was not among the globe’s top 100 destination cities.

Even if a large number of people are infected in the U.S., past experiences with other pandemics, such as the H1N1 virus of 2009 and SARS, showed Habeeb that both the travel and hotel industries are quite resilient.

“The day after the coronavirus is over, travel will bounce back. It’s literally that quick.”    

Still, Mitchell, of the Business Travel Coalition, said he is worried the U.S. is particularly vulnerable to new pathogens like the novel coronavirus. The country still has millions of people either uninsured or underinsured, he said, and many will be reluctant to visit a doctor after developing symptoms, which in the case of COVID-19, are frequently no more than slight fevers or coughs. That could allow the disease to spread quietly, followed by a rush of cases that pop up in several places at once.

“That’s when things will hit home that we have a problem in the U.S.,” he said.

The approach to the crisis taken so far by U.S. political leaders has also not provided Mitchell much comfort.

“The information coming out of our own government, to be kind about it, has been confusing,” he said. “And the recklessness has been on both sides of the aisle as far as I’m concerned.”  

Although briefings from the CDC have become more frequent with solid information, as late as a few weeks ago the Trump administration was discounting the possibility that a crisis was developing. Appointing Vice President Mike Pence, rather than a medical expert, to lead the U.S.' response to the outbreak was another warning sign for Mitchell.

“Right away, that tells you that politics are involved, and that hurts their credibility,” he said.

Mitchell said he would like to see daily briefings from relevant experts as events unfold, ones that provide all the facts, and make clear what steps the government is taking to combat the disease. Especially important for the convention and hospitality industry will be better information on whether travel restrictions are essential to stopping the coronavirus from spreading.

“The next couple of weeks will be telling,” he said.   

Habeeb said he wants to know if the pathogen can spread only through person-to-person contact, or if it can also be carried on goods manufactured in other countries and shipped to the U.S.

“There are so many unanswered questions,” he said.

But whatever the results of the coronavirus outbreak, Salamah said she expects the economic disruption to be temporary, at least as it concerns the IHA’s convention.

“Some shows like to move around, but not us. We always use McCormick Place, and will definitely be back next year.”