H Hyatt Hotels Corporation

By Dave Sebastian 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (August 27, 2020).

Roadside inns are faring better than Ritz-Carltons as Americans start to travel again with loosened Covid-19 restrictions.

Though the pandemic has severely hurt the lodging industry overall, budget and midlevel hotels -- the kind often found just off the highway -- have taken a milder hit than many luxury hotels and resorts. Road trippers aren't the only ones checking in: Midrange and budget hotels are also housing more essential workers on the go.

A key measure of hotel performance, revenue per available room, plunged 80.6% for the second quarter at luxury hotels in the U.S., after a 21.3% decline in the first quarter, according to data analytics firm STR, owned by CoStar Group Inc. Budget hotels, by contrast, saw a 44.4% decline in the second quarter, after falling 13.3% in the first quarter, STR data show.

Though big hotel chains have seen steep declines this year due to the pandemic, their lower-priced hotels have generally fared better. Marriott International Inc., which recorded its largest loss ever for the June quarter, posted a 75.6% decline in revenue per available room at its North American limited-service hotels, which include Courtyard and Residence Inn. That was slightly better than the 93.3% decline at its North American luxury hotels, which include JW Marriott, Ritz-Carlton and W Hotels.

The average daily rate at Marriott's limited-service hotels in North America was $99.63, compared with $293.47 at luxury hotels. Much of Marriott, Hilton Worldwide Holdings Inc. and Hyatt Hotels Corp.'s occupancy before the pandemic came from business and group travel, including at luxury hotels in big cities.

Hyatt, which saw an 89.4% drop in revenue per available room for the second quarter from a year earlier, pointed to more spontaneous travel. Three-quarters of bookings at its select-service hotels are being made just four days out from the stay.

"This is the shortest transient booking window we have seen," Chief Executive Mark Hoplamazian said on a call with analysts.

Tony Rojas was FaceTiming one Friday night in August with four friends who were en route from Massachusetts to New Jersey for their annual Six Flags trip, which Mr. Rojas had never missed in the years before the pandemic.

Afraid of missing out, Mr. Rojas hopped in his car at 11 p.m. that night and drove 2 1/2 hours from Lancaster, Pa., to East Windsor, N.J., where he shared a Holiday Inn room with his friends for about $130 altogether.

"I basically didn't sleep because we were all excited," said Mr. Rojas, 27 years old.

InterContinental Hotels Group PLC, which oversees luxury hotels under its namesake and lower-priced hotels such as Holiday Inn, cited a positive impact from road travelers like Mr. Rojas as it reported an overall 75% decline in revenue per available room during the second quarter. The company expects business travel to pick up, thanks to meeting-dependent corporate sectors such as banking, Chief Executive Keith Barr said.

"I think you'll see a slight resurgence of [business travel] coming into the fall," Mr. Barr said in an interview.

Choice Hotels International Inc., whose brands include Econo Lodge and Cambria Hotels, has more than 4,000 hotels within a mile of an interstate exit and 2,000 hotels near beaches and national parks in the U.S., making it suitable for outdoor activities that allow for social distancing.

It is attracting leisure travelers who "just want to get out of the house while staying closer to home," Chief Executive Patrick Pacious told analysts. The hotel franchiser sourced a quarter of its June revenue from customers who traveled less than 25 miles to a hotel, he said.

While much of corporate travel hasn't resumed, budget and midscale properties cater to a different kind of business travelers: essential workers.

Wyndham Hotels & Resorts Inc., which estimates that 90% of its U.S. hotels are in suburban, interstate or small metro markets, got 30% of its second-quarter bookings from those workers, Chief Executive Geoffrey Ballotti told analysts. They include medical personnel, government employees, construction and utility workers and truck drivers.

"We are also seeing increasing demand from the military, from the government, medical and small social segments like family reunions, birthdays, anniversaries and small weddings," Mr. Ballotti said.

Leisure travel usually tapers off after the summer as students return to school, but Marriott and Hilton expect families to continue making trips as they work and study remotely.

"You're going to see leisure trail off, as you always do, but I think a little less so," Hilton Chief Executive Christopher Nassetta said on a conference call. "It will take a little longer for that to bleed off because a lot of kids aren't going back to school -- or they are, but virtually."

While budget-friendly properties are performing better than others, there are some resorts and higher-end places that also benefited from road trips.

After Melody Van Ess's European cruise got canceled, she decided to road trip from Scottsdale, Ariz., to Yellowstone National Park and other sights. She and her husband paid about $5,000 to stay at five hotels from late July to early August, including a Hyatt in Salt Lake City, a Four Seasons in Jackson Hole, Wyo., and a lodge in Keystone, S.D., under Ascend Hotel Collection, a Choice Hotels brand.

"I'm going to travel the way I traveled before, understanding that most people are not serious about [wearing masks] as they should be," noting her biggest travel frustration. "I'm going to carry my Clorox, and I'm going to carry my wipes," said Ms. Van Ess.

Write to Dave Sebastian at dave.sebastian@wsj.com

(END) Dow Jones Newswires

August 27, 2020 02:47 ET (06:47 GMT)

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