Before the pandemic, the promise of room service and spa treatments made staying at a hotel a potential vacation unto itself for those willing to pay for it. Now safety, thrift and a wholesale change in how and where Americans travel has favored establishments that are a simple means to a journey’s end rather than destinations themselves.

That has spelled disaster for much of the hospitality business. U.S. hotel revenue per available room is expected to decline by more than 52% in 2020 with a full recovery to pre-pandemic levels not happening until 2024, according to a projection by hospitality data tracker STR and Tourism Economics last month. The decline in demand has been especially damaging for real-estate investment trusts that own hotel properties.

Host Hotels & Resorts,

a REIT that is one of the largest owners of luxury and upper-scale hotels, has lost 44% of its market value this year.

Globally, some of the world’s largest hospitality companies, particularly those that cater to higher-end customers, also have suffered.

Marriott International


Hyatt Hotels

are down 39% and 41% this year, respectively. Hilton Worldwide Holdings and InterContinental Hotels Group are each down roughly 24% over the same period. At the height of the pandemic in April, Hyatt said it had temporarily closed over a third of its global hotels, while Marriott temporarily shuttered more than a quarter of its own. Many destination hotels also lost share to home rentals as Covid concerns peaked, with Edison Trends reporting that spending on Airbnb had doubled this summer compared to a year earlier.

But not all players in the industry turned out so many lights. American travelers seeking safer outdoor, remote vacations have hit the open road this summer, forgoing air travel and big cities. That has been a saving grace for midscale and economy roadside hotel franchisors. They are likely to remain relative outperformers as the pandemic persists, even as the weather becomes less balmy.

Data from STR shows revenue per available room for those hotels fell significantly less than for their luxury and upscale counterparts, as well as compared with all hotels in urban areas. It has recovered at a much faster pace too. For the week ending September 12, STR’s data show revenue per average room is down just 25% for interstate hotels versus the same time last year compared to a 73% drop for hotels in urban areas. For the same week, economy and midscale hotel chains were down just over 12% and 25% on the same metric, respectively. Luxury hotels were nearly 69% lower.

Choice Hotels International,

which counts over 7,100 properties across 13 brands in its portfolio, including Comfort Inn, Rodeway Inn and Quality Inn, has been a relative outperformer this year with the majority of its locations in now highly convenient areas across the country. The company says more than half of its domestic locations, nearly all of which are franchised, are within one mile of a highway exit, while 90% of them are in suburban, small town or interstate locations. According to travel trend site Skift, 81% of all U.S. vacation trips taken in August were to National Parks, the beach, small towns or the countryside.

Choice said over 90% of its domestic branded hotels remained open at the worst point in April. Its share price is down over 17% this year, but has rallied more than 46% over the last six months, significantly outperforming many hospitality peers. That outperformance should continue given the company’s favorable business mix. Roughly two-thirds of Choice’s business caters to leisure travelers, according to UBS analyst Robin Farley, compared to roughly 30% leisure travel for upscale hotel operators, such as Hilton and Marriott. With business travel expected to remain limited for the foreseeable future, recovery for industry players heavily dependent on business travel could be limited in the fourth quarter, when business travel has historically been high, she said.

While it has underperformed Choice year-to-date, shares of

Wyndham Hotels & Resorts

are up a whopping 64% over the last six months due to its own exposure to roadside inns and leisure travel. Like Choice, Wyndham’s hotels are largely all franchised. Its own portfolio includes reasonably priced brands such as Super 8, Days Inn and Travelodge, among others, said in July that leisure travel represented about 70% of its business, noting its leisure mix isn’t seasonal and that the vast majority of its portfolio isn’t reliant on international travel.

The extended stay market, to which both Choice and Wyndham have exposure, also has been a relative Covid outperformer.

Extended Stay America,

which says it plays in the mid-scale market with virtually no pure play competition in the U.S., has significantly outperformed the broader hotel sector of late. It has benefited from its own favorable mix of long term stays versus transient travelers, noting early this month that revenue per available room was down just 14% system-wide in August. That compares to a 63% decline globally for Marriott’s hotels in the same period.

Progress toward a vaccine or broader pandemic recovery is likely to tip the balance of travelers toward more exotic urban, upscale and international travel. Until then, though, no frills hospitality chains may pack even more value than investors bargained for.

Write to Laura Forman at [email protected]

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