Building better roads and airports across the U.S. will help build hotel profits, but not everyone will see an infrastructure windfall. This is largely a boost to brands like Choice and Wyndham — already profitable and not facing the uncertain recovery hurdles that some competitors face with business travel.
Most of the world’s major hotel companies reported first quarter earnings over the last two weeks, and executives largely focused on expected record levels of summer leisure travel.
But the CEOs of the only two companies to post a profit — Wyndham and Choice Hotels — also focused their rosy outlook on another potential growth driver: U.S. President Joe Biden’s $2 trillion infrastructure package.
“We're really excited,” Wyndham CEO Geoff Ballotti said. “Whatever shape the country's infrastructure plans might take, our teams are working at trying to find new infrastructure accounts.”
Wyndham, with brands like Ramada and Days Inn, and Choice Hotels, with Comfort and Woodspring Suites, both have extensive portfolios of roadside hotels. More than 4,000 Choice Hotels properties in the U.S. are located within a mile of an interstate highway exit. These are the kind of hotels construction companies would likely book blocks of rooms for employees to stay while they work on rebuilding nearby highways.
Ballotti and Choice Hotels CEO Patrick Pacious indicated on their respective earnings calls they expect more bookings from construction crews at their hotels, especially extended-stay brands, in the event the infrastructure bill passes.
Business from construction companies continued through the pandemic, and it is currently close to 2019 levels, Pacious said. But the infrastructure plan — which calls for improvements to roads, airports, bridges, and tunnels — could push that demand to record levels.
“The more investment the country puts into those assets, the better off it is for productivity and for our business as a whole,” Pacious said.
Another Selling Point: The strong forecast for hotel performance as a result of a passed infrastructure deal produces more than optimism at Choice and Wyndham's respective headquarters.
Both are among the most eager hotel companies to sign new deals with owners of existing hotels, especially in light of slowed down new construction in the U.S. These so-called conversion deals accounted for 70 percent of the hotels Wyndham opened in the first quarter. It was more than 80 percent at Choice Hotels.
But there has to be a strong pitch to win over current hotel owners and maintain deal momentum.
Both companies sometimes use "key money," a financial incentive to convince potential owners to take on a brand affiliation. The infrastructure pop in business will also help sway potential franchisees, especially for the company's extended-stay brands.
Investors like Starwood Capital and Blackstone flocked to the extended-stay sector