Why hoteliers are pinning hopes on drive-to leisure
REPORT FROM THE U.S.—Drive-to business has become essential to the early stages of U.S. hotel recovery as states ease restrictions and guidelines aimed at lessening the spread of the COVID-19 virus.
Hotel company executives as early as the first quarter predicted that markets with high drive-to-leisure demand would benefit first, and that’s proving to be the reality now.
Defining a drive-to market can be tricky because optimal driving distance varies greatly across the country due to multiple factors, such as geography and traffic, said STR Research Analyst Kelsey Fenerty. STR is the parent company of Hotel News Now.
Hotel industry sources have noted that the distance travelers are willing to drive has increased because of COVID-19.
Scott LePage, president of the Americas region at Wyndham Hotels & Resorts, said via email Wyndham considers drive-to markets to be places travelers can easily reach by car in one day. On average, they might drive for a span of three to four hours, he said.
He said it depends on the traveler, their preferences and reason for traveling. Since the start of the pandemic, he said he has noticed travelers driving from both further and closer locations than they have before.
“There’s a bit more willingness to drive a little further than normal this year, if that means getting both peace of mind and the vacation (guests) want,” he said.
RLH Corporation CEO John Russell said historically RLHC considered a drive-to market as within a 100-mile radius. Now, he said, there is an uptick in guests driving up to 300 miles. He said RLHC is also noticing an increase in RV travel.
“I’d say (now) the trend is more longer distance than shorter distance,” he said.
Elie Maalouf, CEO of the Americas at InterContinental Hotels Group, said although air traffic is picking up slowly, the movement out there now is predominately road travel. He added that drive-to business has always been part of the industry, and it is typically within a 100- to 200-mile radius.
Justin Knight, president and CEO of Apple Hospitably REIT, said via email that Apple does not have perfect visibility into the distance guests are travelling. However, he suspects that in the current environment, guests are willing to forgo a trip where they would have historically needed to fly, and they may opt to travel to destinations that are close by or be willing to travel longer distances by car.
Drive-to, leisure demand expectations
Knight said he expects leisure transient demand to be first to return, with drive-to destinations among the first to benefit.
“With the majority of our hotels located in markets outside of major urban city centers and (with) low dependence on large group business, we believe our portfolio will be among the first to benefit from loosening restrictions and the early stages of economic recovery,” he said.
Several states in the U.S. began lifting stay-at-home orders in late April and early May.
LePage said Wyndham is cautiously optimistic about the positive week-over-week trends, “especially as it relates to occupancy.”
“As long as we continue to see a reduction of regional restrictions and continued progress in managing COVID-19 outbreaks, we feel our hotels are well-positioned to continue a successful recovery,” he added.
Maalouf said IHG’s portfolio is well-distributed across the country. While the company does have its flagship properties—InterContinental Hotels and Resorts and Kimpton Hotels and Restaurants—in major cities, most are on the roadway network in small towns and suburbs, he said.
Jan Freitag, STR SVP of Lodging Insights, said 2.4 million people were checked by TSA during the first week of June. While that number has continued to increase over the last month-plus, “it is a far cry from the 14.2 million to pass through TSA checkpoints during the first week of March,” he said.
Previously, STR was able to explain roughly 60% of hotel rooms sold in the U.S. as coming from air travel, he said. That’s not an exact measurement, but it provides the right idea that a majority of rooms sold were tied to air travel, he added.
“That relationship has completely collapsed, and today, we are only able to explain … one in five rooms sold as being connected to (air travel),” he said. “The smaller ratio implied that that a lot of people are driving to their destination. That is exactly what we are seeing in our weekly data when we look at Florida, Texas and smaller markets like Gatlinburg, Tennessee—markets that have access to beaches, or mountains, or state or national parks. These are markets that see a lot of drive-to demand.”
National park, beach destinations to win
LePage said what’s interesting about summer travel this year is that people don’t just want to get away, they want to go to places where they can easily practice social distancing.
“For those reasons, markets with easy access to beaches and national parks are in more demand than traditional urban destinations,” he said. “We are also seeing a pickup in local sports, so areas that host tournaments are benefiting from increased travel.”
LePage said Wyndham’s portfolio is in a unique position to benefit from that. More than 90% of its hotels in the U.S. are in secondary and drive-to markets, and 75% of its U.S. hotels are in the economy and midscale segments.
“Brands like Days Inn, Super 8 and La Quinta have always been built to cater to road trippers and road warriors. It’s these brands, along with many others in our portfolio, that are best positioned as we get into the summer travel season,” he said.
RLHC’s Russell also said 90% of his company’s portfolio falls under the “smaller, more affordable properties along interstates in secondary and tertiary markets,” providing easy access to beaches, national and state parks.
He anticipates the system’s hotels that are in Florida, California, Georgia, Alabama and North and South Carolina will do well. He’s also glad to see that the Disney and Universal theme parks are reopening as RLHC has properties near those, too.
Russell said a key aspect is partnering with the right organizations and marketing to their audience. RLHC partners with AAA and AARP to provide discounts and rewards to its members as they are frequent car travelers.