By Brett Edgerton, Economist, CBRE Hotels’ Americas Research

  • According to the World Health Organization (WHO), the Zika virus is spreading rapidly throughout the Americas. The outbreak is a potential health risk to individuals, especially pregnant women, as birth defects have been associated with women who were infected during pregnancy. The potential for the virus to spread to regions of the Americas thus far uninfected is extremely high.
  • Past disease outbreaks similar to Zika have not caused severe declines in aggregate hotel demand, but local areas, such as Toronto during the SARS outbreak in 2003, saw meaningful declines in rooms sold as a result of public health fears.
  • Countries and regions with poor healthcare infrastructure are most at risk of having a prolonged outbreak that can cause long-term impacts on tourism demand. International health organizations have begun to ramp up activity to fight the epidemic, a hopeful sign that the epidemic will not have a prolonged impact, if any, on the hospitality industry.

The recent outbreak of the Zika virus in the Americas has raised global concerns about the health threats posed by the virus. On February 1, 2016, the WHO declared the microcephaly cases and other neurological disorders reported in Brazil as a result of Zika infections to be a public health emergency. Similarly, the Centers for Disease Control and Prevention (CDC) has urged pregnant women to postpone any travel to countries where the outbreak is occurring (see Figure 1 for countries currently at risk).

Since mosquitoes are known to carry and spread the virus, Zika has the potential to spread to unaffected countries throughout the Americas, including the United States and parts of Canada. Florida, where the mild climate is ideal for mosquito-borne disease to spread, has declared a state of emergency in five counties where residents have contracted the virus abroad live.

There have already been reports of airlines refunding tickets to travelers as tourists seek to avoid active transmission regions. The lodging industry is particularly exposed to the risks caused by short-term health and safety issues like Zika because the industry relies on daily demand rather than long-term leases that shelter other real estate classes from volatility. To gain insight into what effects, if any, the Zika outbreak may have on the hotel industry, we examine past disease outbreaks and industry performance.

Past Performance during Global Disease Outbreaks Over the past 15 years, there have been several large-scale disease outbreaks that had the potential to impact lodging demand. Most notable was the outbreak of SARS in 2003 and Ebola in 2014 to 2015. Figure 2 shows the major recent public health concerns based on Google’s search index which measures how often people are searching for the topic, a metric of the level of public concern about the disease. While the SARS outbreak peaked in 2003, Google’s Search Index only began in 2004. Therefore, the search volume was likely higher in 2003 than represented in the figure.

As can be seen, the current Zika outbreak’s exponential growth rate in public concern is on par with past large-scale international public health events. As fears rise, there is an increasing threat that hotel demand may suffer as people avoid areas with high health risks. While rising public health risks do cause some changes in travel behavior, the rapid surge in public concern is matched by an almost equally quick decline in anxiety once public health services can react and begin to moderate the pace of disease transmission. As a result of swift action on the part of health care systems to limit the spread and severity of disease outbreaks, there is not a measurable impact on aggregate hotel demand in response to a public health crisis based on these data. Most recently, the Ebola outbreak in the U.S. from 2014 to 2015 had no meaningful impact on hotel rooms sold either nationally or locally in Dallas or Atlanta, the two most affected US cities. In these cases, the public health systems were able to isolate and treat the infected patients with minimal effects on the vast majority of the population. Conversely, markets with large exposure to international tourism may see more negative effects from lost visitors. The World Bank estimated the economic costs of Ebola in West Africa due to disruptions in travel and trade exceeded half a billion dollars.1 Another estimate published in Health Economics placed the cost of lost tourism revenue in Mexico during the 2009 Swine Flu (H1N1) outbreak at $2.8 billion.2 The current Zika outbreak has been thus far mostly concentrated in the state of Chiapas in the south of Mexico, and expectations are for Zika to have a much smaller impact than the 2009 event.

Local Market Impacts Past disease outbreaks have not caused a meaningful decline in U.S. demand as a result of health fears for potential travelers. At a local level, however, there have been quite strong negative repercussions from past epidemics. The most notable historical example of the risks disease outbreaks can create for the lodging industry can be seen in the Canadian hotel market in 2003 at the peak of the SARS outburst. In April 2003, the CDC and WHO issued travel advisories for Toronto in response to the severe SARS outbreak occurring in the area. Figure 3 shows the sharp monthly decline in rooms sold for Toronto, Montréal and New York City during the epidemic.

While not included in the CDC and WHO Toronto travel advisories, cities in proximity to Toronto including Montréal and New York City saw hotel rooms sold fall in response to SARS fears. In 2003, Canadian hotels saw a five percent decline in rooms sold nationally even as GDP, a strong predictor of demand, rose by approximately two percent. In contrast, the New York City market recovered more quickly, returning to year-over-year growth in May as concern about the disease outbreak in the U.S. subsided. It is possible tourists who had planned to visit Canada, instead went to New York as an alternative location without a travel health advisory. In the context of Zika, this type of behavior could mean fewer people traveling to areas with high infection rates and instead opting to go to areas perceived to have less risk.

Caribbean, Central, and South American Market Impacts Zika is currently actively transmitted in numerous Caribbean, Central, and South American countries. Tropical climates have the most sensitive environments for the spread of the disease as the mosquitos which carry the virus thrive in warm and wet surroundings. Some of these countries have high volumes of international tourists whom may opt to stay away from the region if the outbreak is not contained. The U.S. accounts for approximately half of all tourist arrivals in to the Caribbean. Based on CBRE Hotels’ Americas Research 2015 Caribbean Trends® report, 12 of the 13 countries covered in the report had experienced positive growth in occupancy and RevPAR (revenue per available room) at the time of publication. While Zika may threaten this trend, CBRE Hotels’ and Caribbean lodging expert, Scott Smith, expects the impact to be mostly negligible, noting some countries will suffer more because of a larger population and inferior health care infrastructures. Other countries such as the U.S. Virgin Islands, Grand Cayman, and Aruba, may benefit as they will have tighter controls (health screening) for those coming in.

Thus far, Brazil has experienced the worst of the outbreak. However, according to reports from the region, Zika has not disrupted Carnival as the hotels contacted by CBRE Brazil report full occupancy. The potential for disruption of the 2016 Olympic games in Rio de Janeiro is expected to be low as Rio authorities are cleaning the mosquito infested areas. Furthermore, in August temperatures should be much lower, lessening the possibility for Zika to be spread. The potential for disruption to the international segment is highest in the Northeastern region and in Rio, but at this point concerns appear to be limited. Outlooks for the year are for occupancy to grow by two percent and rates to rise in 2016, according to the Brazilian Forum of Hotel Operators (BFHO).

Zika remains a Threat however Unlikely to Meaningfully Disrupt Industry Performance

Ultimately, the risks for hotels are not easily quantifiable because of the unique characteristics of any public health event. Past data suggests that for the most part, epidemics are not a direct threat to U.S. hotel demand because public health systems can manage the outbreaks. International markets, however, may be more susceptible to adverse shocks as a result of disease outbreaks if their public health systems are inadequate and do not contain the spread quickly and efficiently. As the CDC and WHO deploy resources to monitor and limit the spread of Zika, a clearer picture of the danger posed by this new outbreak will develop. CBRE Hotels’ Americas Research will adjust our hotel forecasts as necessary if the virus becomes a major concern for the lodging industry.


1. “Ebola: Most African Countries Avoid Major Economic Loss but Impact on Guinea, Liberia, Sierra Leone Remains Crippling.” World Bank. 20 Jan. 2015. Web. 2. Rassey, D., and R. D. Smith. “The Economic Impact of H1N1 on Mexico’s Tourist and Pork Sectors.” Health Econ. (2012) Web.

Updated Zika information about health and travel risks can be found from the CDC ( and the WHO (