Drive-To Market Key to Choice Hotels’ Quick Return to Profitability

Despite the travel industry’s ongoing struggle to collectively keep its head above water amid COVID-19, Choice Hotels—owner of 12 brands that span the hospitality sector’s economy, extended-stay, midscale and upscale segments—managed to make a $14.5-million third quarter profit, the company reported yesterday.

So, what’s the secret here? Choice Hotels’ brands include budget-range EconoLodge and Rodeway Inn, and midscale Clarion, Quality and Comfort Hotels—with its Cambria and Ascend Hotel Collection on the higher end. Company leaders have attributed Choice Hotels’ relative success in recent months to the fact that the majority of its brand portfolio falls into the more-affordable categories.

Skift reported that Choice Hotels CEO Patrick Pacious explained during an investor call on November 5: “We believe in uncertain times, as in previous downcycles, consumers will be looking for more moderately priced limited-service hotel offerings, presenting an opportunity for our portfolio to capture this demand.”

On top of which, the vast majority of its properties are situated ideally to cater to the drive-to market, which, as has become evident, is currently leading the U.S. domestic travel industry. While Americans are still nervous about committing to flying in a sealed airplane cabin among strangers, they clearly feel far more confident in road-tripping, where they feel more in control of their interactions.

Of Choice Hotels’ over-7,000 properties, roughly 4,000 are located within just one mile of a U.S. interstate highway exit, and another 2,000 are situated near outdoor draws like beaches or national parks.

“These core strengths have positioned us well to capture the shifts in consumer demand that occurred over the last eight months,” Pacious stated.

Wyndham, which also owns several brands that cater to the road-trip market—including Days Inn, La Quinta, Travelodge, Microtel, Super 8 and Howard Johnson—reportedly also managed to post a small third quarter profit. It also admitted that its advantage likely comes from the initial increase in drive-to and leisure travelers, as the travel industry tries to regain a foothold.

While Choice Hotels’ third quarter revenue per available room (RevPAR) key performance metric was down by almost 29 percent, the company claimed that it had outperformed the rest of the hotel industry by 20 percent in those market segments in which it operates, based upon STR data.

“We expect the impact of COVID-19 on [revenue per available room] will be less significant in the fourth quarter compared to the third quarter,” said Dominic Dragisich, Choice Hotels’ chief financial officer. “Unlike the Great Recession, which was caused by underlying fundamental economic problems, the current downturn is tied to the course of the COVID-19 pandemic, which we believe could lead to a faster recovery.”

For more information, visit choicehotels.com.