Partnering with colleges and universities to turn hotel rooms into temporary student housing is a viable short-term revenue stream for Choice Hotels, but it still won't be enough to snap the company back to 2019 performance levels anytime soon.
Executives at Choice Hotels are evaluating taking on a new kind of hotel guest later this year to help struggling hotel operators move from months of record-low occupancies.
The coronavirus pandemic continues to take a greater toll on the global travel industry than what analysts anticipated at the initial outbreak. One possible alternative revenue stream during these lean times for Choice Hotels is striking deals with colleges and universities to house students returning to campus this fall amid social distancing guidelines.
“We are actually in active discussions across the country on multiple hotels for multiple universities and colleges,” Choice Hotels Chief Commercial Officer Robert McDowell said. “We’re looking at actively managing this for our hotels across the U.S.”
Many higher education institutions haven’t made a final decision on whether to hold in-person learning later this year. The ones that do are likely going to need to house students beyond a traditional dormitory to avoid dense living arrangements vulnerable to the spread of coronavirus.
Colleges and universities normally thin out on-campus populations through measures like study abroad programs, but those are largely off the table due to international travel restrictions and institutions waiting for an acceptable treatment or vaccine. Until one arrives, campus could begin to get crowded without an alternative solution.
“Something we know is colleges have reached out to our owners around using a hotel as a relief valve,” Choice CEO Pat Pacious said. “I do think that decision point is still out there, but it’s hard for me to know exact percentages.”
Wyndham Hotels & Resorts expected higher education institutions to make a final decision on hotel-turned-student housing by mid-June to the start of July, a Wyndham executive told Skift earlier this month.
Choice Hotels anticipates its own talks will wrap in a matter of weeks.
“Some of it is on how the universities are going to get the funding, especially the state universities,” McDowell said.
Not Yet a Recovery
An alternate revenue stream like student housing partnerships could provide operators and Choice Hotels with occupancy and capital at a time when it still isn’t clear how the greater travel industry will perform.
Corporate travel is highly unlikely to return to its 2019 performance level in the next two years, Pacious said. Group business and convention bookings are likely to lag until a vaccine is widely distributed.
“For it to get fully back to where it was in 2019, I think [the availability of a vaccine is] why most people in the industry do expect that segment of travel to be [back by] 2022 at the earliest,” Pacious added. “That is something that is more of an impact on our competitors than us because we don’t have many convention hotels, but we do have hotels that depend on convention business.”
The Choice Hotels chief executive is still bullish on growth opportunities, even in a downturn. Since March 15, the company signed 70 new franchise agreements — 75 percent of those being conversion deals, Pacious said.
But that doesn’t mean the company will skirt job cuts like some of its competitors. Hilton laid off roughly 22 percent of its corporate staff last week, and Pacious indicated some degree of permanent employment reduction is coming to his own company.
Choice Hotels put roughly 15 percent of its domestic workforce on a 60-day furlough in April, Pacious said.
“We’re in the process right now determining what will happen with the furloughed associates as the furlough expires on the first of July,” he added. “There will be more coming on that front.”
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Photo credit: Choice Hotels expects to make decisions on its recovery mode employee headcount and college partnerships in coming weeks. Choice Hotels International