Executives with Choice Hotels International gave an update on the company’s direction and initiatives on a webinar with franchisees.
ROCKVILLE, Maryland—Choice Hotels International’s brands have shown resilience throughout the pandemic and are well-positioned for pent-up demand from leisure travelers in drive-to markets this summer, executives said.
Challenges still exist for the industry, but Choice President and CEO Pat Pacious said he believes the road is paved with opportunity.
“This is undoubtedly the most difficult environment our industry has ever seen,” Pacious said on a leadership update webinar with franchisees Thursday. “The virus is still with us, but the performance of our brands exceeded the industry, and people are noticing.”
Positive performance trends have continued through May, he said, adding that the company’s worst week for systemwide occupancy was 5 April at 28%.
“While no one can predict the future, it appears that this was rock bottom,” he said. “We’re now in our 10th week of recovery and our systemwide occupancy as of 31 May was just shy of 45%. As you can see, (Choice) brands have higher occupancies than the industry average every single week since 15 March.”
Memorial Day weekend was pretty strong, but the weekend after was stronger, Pacious said, “which indicates there is pent-up demand for travel in our customer base.”
Brands under the company have also seen gains in revenue per available room every week since 5 April, he said, with last week marking the highest systemwide RevPAR since March.
In March, Choice’s hotels in the extended-stay segment reported an average occupancy level of 68% while the industry average for hotels in the U.S. was 40%, according to a news release.
Choice’s extended-stay brands are performing well and have some operational efficiencies the company has decided to roll out to other brands in its portfolio, Pacious said during a media roundtable after the leadership webinar.
The extended-stay model’s offering of housekeeping when guests need it or want it is an approach that could be branched out to other hotels amid the pandemic, he said.
“What we’re looking at now is housekeeping as more of an opt-in for guests … something that started in extended stay … and now we’re offering it as an opt-in for some of our other brands,” he said.
Anna Scozzafava, VP of extended-stay brands, strategy and operations at Choice, said it’s important to think about the types of occasions extended-stay guests are traveling for and the length of stay they are looking for, which tends to be weeks or months.
While optimizing labor to meet guests’ housekeeping needs, the extended-stay model generally doesn’t call for daily services, which ensures “guests and associates stay safe throughout this time,” she said.
The company also launched a Commitment to Clean initiative, which enhances Choice’s existing cleanliness protocols and gives franchisees recommendations for deep cleaning, hygiene and disinfecting, executives said.
During the media roundtable, Choice executives also fielded questions on furloughs, and the deals and development environment.
Q: The industry recently heard that Hilton is laying off a percentage of its workforce—can you talk about how Choice has approached corporate layoffs as a result of the pandemic?
Pacious: “Back in April, looking out at what we thought the operating environment was going to look like for the rest of this year and also into 2021, we made the decision to furlough 15% of our domestic workforce. That for was a 60-day furlough. We’re in the process right now of determining what will happen with the furloughed associates. Furlough expires here on the first of July, so there will be more coming on that front. As a company, we took a look at what we expected, the lower consumer demand environment, not too dissimilar from the Great Recession, and we looked at setting our company up for success, not just in this year, but in 2021 as well. That was the strategic lens we went through.”
Q: Does Choice have an appetite to do deals right now? What’s the appetite like for conversions at the moment?
Pacious: “It's actually been … a pretty good development environment. … We’ve already awarded 70 new franchise agreements, and three quarters of those are with conversion hotels, so existing hotels that are joining Choice and not in construction. When we look back at the Great Recession, the Choice (portfolio) outperformed the rest of the industry with regard to net unit growth, primarily driven by conversion brands, so we do expect a similar type of interest level.
“What we see in lodging downturns normally is (conversion of) independent hotels to branded, and also from weaker brands to stronger brands, and Choice has traditionally benefited from that. I want to call out a couple of things that are different today than where we were 10 years ago in the Great Recession. … First of all, the Ascend Collection, which we started right before the last downturn 10 years ago. During that downturn, the Ascend Collection got a significant amount of growth. Today there’s over 300 Ascends around the world, and we grow that brand at about 50 units per year that are, again, conversion hotels. The strength of that soft brand, I think, will be a real driver for growth going forward. The second brand I would point out that we didn’t have 10 years ago was Clarion Pointe, which is a conversion brand in the midscale segment really targeted at boomers or empty-nesters as well as millennials who have yet to have kids. Really, that’s for that traveler that’s more interested in a healthy breakfast or interested in a larger workout space, as well as a local flare in the in the guestroom.”
Q: What will signal a full recovery for the industry, from Choice’s perspective?
Pacious: “On the leisure side, 90% of our hotels are in interstate locations, small town or suburban, so they’re very much a stop along the way … or they are in a destination like a national park or a beach. We have a lot of our inventory that is in the right locations for that leisure traveler. On the leisure side, what everybody has been waiting for are really two elements. (One is) the point of interest that people are traveling. It may be Disney World or Universal Orlando; those types of venues will drive a lot more leisure travel. The second thing is really what happens with fall sports. Think about (college-level) sports that do drive a lot of leisure travel, particularly in the fall months as we get up later on in the year.
“On the corporate side … our corporate traveler really falls into two categories. There’s the suits. These are your professional-services-type firms. Those travelers tend to stay in our Comfort brand and not in our Cambria and Ascend brands. But we also have a business traveler we call boots; we have suits and boots. The boots travelers are really a lot of the folks who can’t work behind a laptop (or in) work-from-home environments, so they are out on the road. They may be in trucking; they may be in logistics; they may be construction. That segment of the business traveler has continued to stay at our brands over the last three months, and I think that will continue. But it’s really that professional services traveler and getting them back on the road. A lot of that will depend on when large events, conventions and the like, begin to come back into the equation and I do think, as most of our competitors have talked about, that’s likely next year or the following.”
Janis Cannon, SVP of upscale brands, Choice: “We’re in eight of the top 10 markets in the United States. We do a lot of international traffic as well and so seeing international come back will be a big part (of a full recovery). … We’re seeing really strong demand from leisure, but what recovery will be for us is for (business) travel to come back and the international contributions as well.”