If you can't make a long-haul trek to Paris this summer, why not just a short hop, skip, and a jump to a roadside hotel two towns over? That mindset seems to be working in Choice Hotels' financial favor.
Hyper-local travel helped Choice Hotels perform significantly stronger than its competitors over the course of the worst months of the pandemic.
The same week major hotel companies like Hilton and Hyatt reported hundreds of millions of dollars in second quarter losses, Choice Hotels posted a relatively small $2.4 million loss. Choice’s leaders attribute the above-average performance to its portfolio centered around drive-to, leisure destinations.
More than 4,000 Choice Hotels properties in the U.S. are located within a mile of an interstate highway exit. But a growing traveler base for Choice may not have even required a highway trek to get to their final destination.
“In June, one-fourth of our revenue came from guests who traveled less than 25 miles to a hotel, a sign that more guests just want to get out of the house while staying closer to home,” Choice Hotels CEO Patrick Pacious said Thursday during an investor call.
That figure is significantly higher than the “high single-digits” of revenue share typically seen by such local travelers, Pacious later added. He attributed the growth to continued travel restrictions in some U.S. states warning against visitors from other states. If you’re in Phoenix, why go to Santa Fe across state lines when a spa weekend in Scottsdale is perfectly fine?
“What we’re seeing is a shift in consumer behavior,” Pacious said. “People still want to get out and travel. We’re seeing a lot more intrastate travel than interstate travel than we’re used to seeing in prior years.”
Even beyond the local traveler base, Pacious touted Choice Hotels’ portfolio as vital to its performance relative to its peers.
More than 2,000 of the company’s U.S. hotels are near beaches or national parks — both attractive destinations during the social distancing era. The trend led Choice Hotels to launch in June “On The Road Again,” a U.S. television ad campaign aimed at road trip travelers.
Choice Hotels still reported a nearly 50 percent systemwide drop in revenue per available room, the hotel industry’s key performance metric, over the second quarter. But that outperformed the overall hotel industry by more than 20 percent, according to STR data.
“Our hotels are located in the right market to capture growing demand from travelers who increasingly choose to drive to their destinations than fly,” Pacious said. “We expect our strong presence in drive-to locations will lead to continued outsized performance, as gas prices remain low and travelers feel safest in their own cars.”
Looking to Washington
A portfolio rooted in drive-to, leisure hotels buoyed Choice Hotels through the worst of the coronavirus-related travel downturn, but the company still wants help from Washington in the next stages of recovery.
Pacious joined American Hotel & Lodging Association President Chip Rogers this week in a roundtable with U.S. Speaker of the House Nancy Pelosi (D-CA) in outlining key hotel industry needs in the next round of federal coronavirus economic relief.
“We’re looking at the back half of year, if we do see more spikes, local jurisdictions, state government, and business owners have figured out how to work together to keep hotels operating at a good level of occupancy as long as people do the right things: Wear your mask, socially distance, and wash your hands,” Pacious said. “All those things are positive, but liability protection and liquidity are two things we’re looking for out of the upcoming government legislation.”
The AHLA and many hotel companies continue to push Congress for a variety of relief measures, ranging from liability protection against coronavirus exposure lawsuits to an extension of the Paycheck Protection Program small business loan initiative and even tax incentives to encourage Americans to travel.
While Pelosi indicated she did not think a traveler tax incentive would be included in the next round of coronavirus economic relief, she did signal support to extending the PPP program.
Pacious noted Thursday that congressional action along with the ability for schools and accompanying activities to resume in the fall will steer the trajectory of the hotel industry’s recovery through the end of 2020.
“It’s going to depend on three things: stimulus, schools, and sports,” he added.
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Photo credit: Choice Hotels is pivoting to local travel, as a quarter of June revenue came from visitors who lived less than 25 miles from a hotel. Choice Hotels