The Terrorist Attacks of 9/11 and the Financial Crisis of 2008

The U.S. hotel industry faced two major external shocks in the decade of the 2000s, the terrorist attacks of September 11, 2001, and the financial crisis of September 2008, which led to an economic recession. Using data from STR covering nearly 35,000 hotels, this study isolates the specific effects of the two shocks by controlling for other market factors (e.g., inflation, seasonality) and hotel characteristics (e.g., hotel size, segment, or operation type) that affect a hotel’s daily operations. The study shows that hotels were significantly affected by both events, but they started to recover relatively quickly, within four months of each shock. Because of the nature of the shock, the 9/11 terrorist attacks had an abrupt and dramatic impact in reducing hotels’ occupancy, and rates briefly followed occupancy downward. The effects of the financial crisis took longer to develop but were less striking and apparently well handled by most hotel managers. Looking specifically at New York City’s hotels which stand next to ground zero for both shocks, the study found a pattern of occupancy, ADR, and RevPAR similar to that of the nation as a whole. New York’s luxury hotels felt the brunt of the shocks, but they were able to recover. Overall, the study paints a picture of an industry that maintains its ability to address the effects of environmental shocks, and focuses well on revenue management. Far from being in disarray, hotel management addressed the effects of these two shocks, as evidenced by the hotels’ recovery.