Extended Stay America's first-quarter comparable systemwide revenue per available room declined 5.8 percent year over year to $43.98, according to the company, a drop less steep than some other companies and illustrative, according to the company, of ESA's less-exposed position in the pandemic.
Most ESA hotels generally are located in suburban and highway locations, convenient to customers who drive rather than fly, ESA president and CEO Bruce Haase said during a Thursday earnings call. Those markets are performing better than metropolitan areas, and drive-to business is expected to recover faster than fly-in business, according to recent STR reports.
"We have virtually no exposure to the group business segment that has essentially evaporated and will take a long time to recover," Haase added. "And our suites have kitchens, which is essential in an environment when you can't dine out."
ESA first-quarter average daily rate declined 6.5 percent year over year to $61.14, a drop partially offset by comparable systemwide occupancy increasing 60 basis points to 71.9 percent. Net income declined 72.4 percent to $7.8 million. As of March 31, ESA had a pipeline of 73 hotels representing approximately 8,800 rooms. Two hotels opened during the first quarter. Planned renovations have been put on hold, except for properties in South Florida where supplies already had been procured.
Haase added that in keeping with the company's prior stated goal of shifting the business away from short-term transient and toward more traditional extended-stay guests, Covid-19 has accelerated ESA's transition to a true extended-stay brand. "We earned 80 percent of recent revenue from various extended-stay segments compared to 63 percent pre-Covid-19," he said.
The company has not closed any hotels during the pandemic. Some measures to cut costs include temporarily suspending its "grab and go" breakfast, and formerly weekly room cleaning for long-term guests now takes place every two weeks. Like other hotel companies, ESA is taking extra measures with new cleaning protocols and supplies. It also has increased Wi-Fi speeds at its properties to accommodate those working from its hotels, and each room is inspected by the property's general manager before being assigned to a guest.
The company's RevPAR percentage decrease is significantly less than the 23 percent Wyndham Hotels & Resorts reported on Tuesday, when it was the first major U.S. hotel company to hold its first-quarter earnings call, the 28 percent decline Hyatt Hotels Corp. announced on Wednesday evening, and the 22.6 decrease Hilton Worldwide reported Thursday morning.
"March and April saw the highest RevPAR index scores for [ESA] in the company's history by a wide margin," said Haase in a statement. "We believe that our positive RevPAR performance relative to the industry during this difficult time period demonstrates the resiliency of our extended stay business model and the unique characteristics of our business compared to traditional transient lodging brands."
The company's RevPAR index is calculated using STR data by comparing RevPAR for owned hotels or system-wide hotels to the aggregate RevPAR of a group of competing hotels generally in the same market. ESA reported a comparable system-wide RevPAR index for the quarter of 107, a 12 percent increase compared with the first quarter of 2019, and a RevPAR index of 122 in March, a 32 percent increase compared with March 2019. April's index was at 155, more than a 60 percent year-over-year increase.
Haase noted that ESA's hotels collectively had 67 percent occupancy May 6, and ESA has continued to see RevPAR dollars increase the past few weeks.
"It's early signs of some spring shoots here, but also it's clear to all of us that we're not going back to a pre-Covid environment anytime soon," Haase said. "Life has really changed and that means travel habits have changed. When we talk to consumers in the coming months, we'll focus on three things. One is providing a clean and healthy room. Everyone else is doing that, but we've been doing that throughout the pandemic. We'll communicate to consumers that they can control their stay, and kitchens are a big differentiating factor. Finally, we provide great value."
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