Choice Hotels has joined with other major hotel companies in requiring guests to wear face masks in indoor public spaces, president and CEO Patrick Pacious said Thursday during the company's second-quarter earnings call. Neither Pacious nor the company provided any additional information about the new requirement, such as when it went into effect, to which regions it applies, or any repercussions for noncompliance.
[Update, Aug. 7]: According to a Choice spokesperson, "The face coverings requirement will go into effect on August 17, 2020, although many Choice hotels across our international portfolio are already adhering to these requirements. This requirement is applicable across the majority of our global portfolio. As far as enforcement, the hotel will ask the guest to comply and then will address on a case-by-case basis."
"As part of Commitment to Clean, we made the decision to require guests to wear face coverings in hotel common areas as an important and simple step everyone can take to help protect the safety of guests and the franchise hotel employees by slowing the transmission of Covid-19," Pacious said. "As a member of the American Lodging & Hotel Association Safe Stay advisory council, Choice Hotels stands united with the industry in adopting the guidelines in the Safe Stay guest checklist, including the required use of face coverings in common areas."
The company's quarterly results were in line with expectations that business as measured by key indicators would be down from one year ago, but those declines were less drastic than those of some competitors. Domestic systemwide revenue per available room declined 49.6 percent year over year to $26.27. Average daily rate was down 19.9 percent to $67.21. Occupancy dipped 23 percentage points to 39.1 percent.
Choice reported adjusted net income of $6.7 million, a 90 percent decrease from last year. Rooms increased 4.3 percent year over year to 597,018. The company has awarded 151 new domestic franchise agreements year-to-date through June 30, a 42 percent decrease compared with the same period in 2019.
Pacious said that the company outperformed the industry when comparing weekly occupancy rates from mid-March through July 25. At the low point of the week beginning April 5, Choice's average occupancy was 27.7 percent compared with 21 percent for the industry, using STR data. For the week starting July 19, Choice's occupancy was at 52.5 percent, compared with 48.1 percent for the industry, with improvement continuing.
"Daily occupancy levels surpassed 60 percent last Saturday," Pacious said. "Over half of domestic hotels were north of 50 percent during the last week of July."
Pacious added that the company is positioned for recovery because leisure represents more than 80 percent of its system room nights, and "leisure travel continues to lead the recovery," noting that segment has been mostly attributable to drive-to travel. In June, one-quarter of the company's revenue came from customers who traveled less than 25 miles to a hotel, he added.
Still, Choice has seen week-over-week increases in business travel room nights since the low in early April. "This is thanks to a profile of core business travelers who have been on the road these past months, including first responders, medical and other essential workers, government, trucking, logistics and construction workers," Pacious said.
Brand Analysis
The company's extended-stay portfolio continued to be resilient in the second quarter, with an average occupancy rate of 66 percent since the onset of the pandemic in mid-March through June 30. Specifically, WoodSpring Suites has reported occupancy levels above 70 percent since mid-May, and returned to prior-year levels during the last week of July. The brand reported second-quarter occupancy of 69.2 percent year over year, compared with 78.2 percent in 2019.
Choice's upscale brands have seen larger declines. Cambria's occupancy has been hurt as the brand is marketed to business travelers, most of whom are not yet back on the road. Second-quarter occupancy was 24.2 percent compared with last year's 74.8 percent. The Ascend Collection reported 32.2 percent quarterly occupancy, compared with 63.3 percent for the same period last year.
Still, the segment has seen a 37 percent increase in room count during the quarter, with a 24 percent increase for Cambria and a 42 percent increase for Ascend. "The Ascend Hotel Collection, which launched in 2008, is now the industry's largest soft brand with over 370 hotels around the globe," Pacious said, adding that developer interest remains high for Cambria, with contracts signed in the first half of 2020 in line with 2019.
Rooms Pipeline
The number of Choice systemwide rooms as of June 30 increased 4.3 percent year over year to 597,018, with three-quarters in the United States. The number of International rooms increased 12.7 percent. The company's total domestic pipeline of hotels awaiting conversion, under construction or approved for development as of June 30 reached more than 980 hotels and more than 78,500 rooms.
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