Will hotels ever return to pre-pandemic levels?

John Bonds, SVP, Enterprise Operations and Technology, Choice Hotels International, joins The Final Round to discuss the hotel industry and when travel and business travel may return in order to help offset all the losses the industry has seen since the start of the coronavirus pandemic.

Video Transcript

SEANA SMITH: Let's turn to the travel industry. Hotel operators are struggling to fill rooms and rebound from the COVID-19 pandemic as the number of cases continue to rise across the country and also worldwide. So here to talk a little bit more about this and what they're doing to get the travelers back inside their doors, we have John Bonds.

He's the senior vice president of enterprise operations and technology at Choice Hotels International. And John, it's great to have you on the show. We know it's certainly been a challenging year, to say the least, for the hotel industry. And Choice, I know, has a very large portfolio, over 7,000 hotels, you're located in 40 countries. So what are you seeing just broadly now across the country and worldwide from travelers?

JOHN BONDS: Sure. Sure, you know, thanks for having me, first of all. And you're right, it's been a tough time for the hospitality during the pandemic. But we know one thing, and we know that that is people want to travel. They want to get back to travel. I think there was a recent USTA survey that said that during the next year, you can expect people to travel more next year as we come out of this confined year that we've been in.

And so what we're seeing in our data is people are traveling, but they're traveling a little bit shorter. So these are shorter trips that they're taking. They're going in their car because they're concerned about traveling by air. You know, one of the things we saw in our data in August that just about 25% or so of the stays that we had came from people traveling under 25 miles to the hotel.

And, you know, that really makes sense for Choice. We have about 4,000 hotels in our portfolio across suburbs, small towns, your interstates. In fact, they're-- of that 4,000, they're within one mile of an interstate exit. So we're seeing the travel trends lean towards the shorter occasions and to closer to home.

SEANA SMITH: And John, it's interesting because the leisure travel demand, at least, is picking up a little bit. I know we have a ways to go. But when you take a look at business travel, that hasn't come back yet. There's estimates that that will never really reach the levels that it was before the pandemic. How much of your demand is from business travel, and do you see this changing in the long term because of COVID?

JOHN BONDS: Sure, yeah, that's a great question. It's something we look at closely. So Choice is, for the majority, leisure travel, but we do have some business travel. And we really break that business travel down into what we kind of call the suits and the boots. So that's going to be more of your business travel for the executives, consultants, folks that are traveling different distances, maybe by air.

And then the boots, right, so that's going to be your technology consultants, your hospitality workers, logistics, and trucking. And so during the pandemic, we've had strong demand for first responders and what we would call essential workers. And we continue-- we expect that to remain strong for the rest of the year.

RICK NEWMAN: Hey, John, Rick Newman here. Is this slowdown forcing you to call underperforming properties? Are you having to close anything and then sort through, you know, the ones you just don't think can make it to the other side? Or are you able to keep all of your properties online, basically?

JOHN BONDS: That's something that we've been really focused on since the beginning of the pandemic. Choice represents 13,000 small business owners, and we recognize that they're facing very difficult challenges right now. So we wanted to help them. We set up a team of people in the office, not only that, but we pulled from other parts of the office to do an outreach to understand what was going on with each of our individual properties.

And to date, we've completed 31,000 calls. We-- during the pandemic, we only had-- we were about 98% open, and right now, we're about 100% open. So we've managed to stay open during the pandemic, and we think we've benefited from that based on the sporadic and regional nature of the recovery.

SEANA SMITH: John, how many of these changes that we're seeing, how many of them do you think are permanent? And are there any parts of your business, any of those brands that you were just talking about that are more at risk than others and that you do need to adjust in terms of their long-term plans because of the pandemic?

JOHN BONDS: Right, I think one of the trends that we're seeing that's a positive trend is the extension of Extended Stay, and we're really pleased with how that's performing for us. The Extended Stay segment has tremendous demand right now. In fact, for second quarter, our Extended Stay segment up 414 properties, nearly double the industry average. So we're at 66% occupancy.

I think that that trend is going to continue over time. I also think you're going to see some reduction in business travel over time. I think you can look at what-- that it may take a few years to recover, but there's a lot of questions around excess travel, some of the more on the fringes of travel that you might say for excess business travel. But getting back to the basics of business travel, I think, will always be front and center during the recovery.

INES FERRE: John, and just speaking off that timeline of recovery, when do you see the recovery for hotels happening to pre-pandemic levels? When talking about business travel, like Seana was mentioning, that may not come back for a while. But as far as just seeing the same kind of traffic that hotels were seeing before the pandemic, when's that projection?

JOHN BONDS: Sure, you know, that's a tough one to make. Uncertainty reigns supreme, as I've heard from a couple of the other guests today on the show. You know, I think you're looking at several years before it returns back to the pre-pandemic levels. We were at, you know, one of the highest performing component-- highest performing eras of hospitality right before the pandemic. And so I just think getting back to that is going to take several years.

SEANA SMITH: John, part of the equation here is convincing travelers that it's safe, convincing them that when they stay at a hotel, they don't really have anything to worry about. So what are some of the things, some of the protocols that you've put into place in order to better insure some of your customers that they have nothing to worry about when they stay at Choice hotels?

JOHN BONDS: Right. You know, first and foremost, the health and safety of our guests and our franchisees and their associates is paramount during the pandemic. And one of the things I was really pleased to see as we kind of emerged through the cycle of the pandemic was an understanding that it is safe to travel and stay in hotels. And so I was really pleased to see that.

But we initiated what we call the Commitment to Clean program to really help guests understand how we've bolstered the existing protocols for cleanliness. So the first thing that you would see is it's required to wear and get a mask in all common areas. So both associates at the hotel and the guests are wearing masks.

The second thing that we've done is that we've changed the check in process to make it less-- more frictionless and make it so it's less contact involved with screens and less back and forth with the desk. So that's been something that we've added. We've added social distancing to those steps in the common areas.

And then we've also put hand sanitizer at all the key areas where guests might congregate, think, you know, the elevator bays or the fitness center. We've also modified our breakfast considerably, so, you know, no more buffet right now. That doesn't seem to be something that's going to work during COVID. But we do know that prepackaged items and grab and go works really well, and we've received really positive feedback for that.

And then the last thing that we've done is we've, through our own technology, we've enabled something we call housekeeping upon request. So we know from the pilot that guests, when they stay with us, they would prefer not to have people come in and stay and clean the room. And so we enabled with our technology so that when guests stay with us for longer than a night or two that there will not be housekeeping unless they request it.

And so we're really pleased with that because that's a key area, where someone in and out of your room, where you may not know who they are and what they've been doing, that makes you feel safe and secure. The other thing that that does is it really support sustainability because you're using less chemicals. And then the last thing that does is it actually helps the hotels with our profitability in a really tough time because they're not having to employ as many, you know, housekeepers through this process.

SEANA SMITH: John, what does that mean, then, for just hiring plans down the road? Do you see a workforce that's, I guess, a third of this? I mean, how many jobs could that potentially impact, then, in the hotel industry over the next couple of years?

JOHN BONDS: Right, it's tough to say. I think that in our space, in the economy, in the mid scale space, in the Extended Stay space, we've seen the employment flex and shift as it needs to be. And we really believe that that's going to be what you're going to see coming out of the pandemic is that folks will staff back up.

The challenge that they're going to have is making sure that they can do that. And so one of the tools that we provide them is a technology tool to allow them to manage their costs and look at their bottom line through various cost segments, whether or not that's labor, whether or not that's taxes. And so that tool allows them to flex and adapt their hiring as needed to understand where the most profitability can be achieved.

SEANA SMITH: John, you were talking about some of the help that you guys are giving to your franchisees. It's interesting because we were talking to the CEO of the American Hotel & Lodging Association on the program last week, and he was out with a few numbers. He was telling us that it was nearly 75%-- 74% of hotels will be forced to lay off workers, about 2/3 wouldn't make it another six months if we didn't get any help and it's another stimulus bill from Congress.

What are your-- what's your reading on that, and how important do you think more stimulus is to the hotel industry in the short term?

JOHN BONDS: Oh, I think it's tremendously important right now. I was really pleased to see the breaking news about some potential progress in the stimulus package. I think that it's something that we really need to continue to advocate for and continue to support the stimulus package around the PPP program, the loan program, the loan forgiveness.

And in particular, I would really like to see some limited liability in this bill so that we can make sure that as individuals stay with us and hotels have taken all the reasonable precautions they could take that hotels can't be held liable for somebody who might contract COVID while they're staying. Because I think that that's a pretty difficult challenge to overcome, given the spread of the disease. But I'm very pleased to see some of the progress we've seen, and hopefully, we'll get pushed through and it'll be able to help provide greater stimulus to the hotels.

SEANA SMITH: All right, John Bonds, senior vice president of enterprise operations and technology at Choice Hotels International. Great to talk to you. Thanks for taking the time to join us.

JOHN BONDS: Thank you. Take care.