Choice Hotels International said that it had deferred fees and suspended reputation management fees and guest relations handling fees.
The comments were made as the company updated the market on the impact of the coronavirus pandemic on its business, ahead of its first-quarter results.
Patrick Pacious, president & CEO, said: “Given the broad-based uncertainty of the current environment, we have taken decisive actions over the past several weeks to position the company for changing market dynamics and enhanced our financial flexibility to sustain the long-term health of the business. We are confident in our ability to weather this storm, while supporting our franchisees as they navigate uncharted waters. Choice Hotels has been through challenging times before and, each time, the company has always emerged stronger given its long-term focus, proven brands, high-calibre associates and broad franchisee base.”
Choice reported that domestic occupancy levels were below 50% for the month of March and softened in the last 10 days of the month to trend in a range between 26% and 33% daily occupancy. These occupancy trends had continued in early April with over 90% of the company's domestic branded hotels continuing to operate at this time.
The majority of the company's domestic hotels were in small towns, suburban and interstate locations, which the group said had experienced less severe occupancy declines related to COVID-19 than hotels in urban centres or resorts.
The company said that it continued to benefit from its primarily franchise-only business model, “which has provided a relatively stable earnings stream and low capital expenditure requirements”. The group said that it had $489m in cash and available borrowing capacity through its revolving credit facility and has additional available options to increase capacity, if needed.
Choice commented: “As a result, the company expects to withstand the impacts of COVID-19 on its business.”
In addition, management and the board of directors had echoed moves seen elsewhere in the sector, including cutting the pay of the board and CEO for the rest of the year, implementing a hiring freeze on certain positions and a temporary furlough for certain positions in Europe, where government-mandated and other closures had been more prevalent.
The company has also eliminated, reduced or deferred non-essential expenditures, discretionary capital expenditures and investments, suspended its share repurchase plan and determined to suspend future, undeclared dividends for the remainder of 2020.
The group said it was is seeking to drive business to the franchised hotels in its system across a wide variety of industries and government and emergency-management agencies. Many of the company's franchisees have committed their rooms inventory at discounted rates, or on a complimentary basis, to support their communities in dealing with the effects of the pandemic, opening their hotels for hospital overflows and providing temporary housing for first responders, the National Guard, healthcare workers, critical infrastructure workers “and others in dire need”.
In addition, Choice Hotels is working with its philanthropic partner, Operation Homefront, to provide complimentary lodging to service members and their families who have been displaced from their current housing.
The group concluded: “Given the uncertainty as to the potential duration of the crisis and its severity, the company does not expect material improvement until there is a sense that the spread of the virus has been contained, shelter-in-place orders have been lifted and economic forecasts begin to improve.
“Once the industry begins to recover, the company believes it will benefit from the expected faster rebound of leisure demand as a result of its higher share of leisure travel mix relative to competitors. Choice Hotels' properties are well distributed in drive-to markets, which many expect will lead in the demand recovery.”
Insight: Location, location, location is the watchword for hotels looking to come out of the current travel restrictions sooner than others and those who have gone in heavy on city centres are likely to open last, one of the reasons why the luxury segment has taken more of a hit.
For Choice, the impact of the pandemic could clearly have been worse. It is asset-light and nimble with it. However, as has been noted throughout the sector, no-one is getting out of this unscathed and Choice has been forced to look at its fees and how much they are not getting paid if no-one is staying in its hotels.
The company has widely decided to consider its future reputation and expansion aspirations and work with the rest of the players in its hotels. ‘We’re all in this together’ may be the line governments are using when it comes to persuading their citizens not to go out and barbecue the park away, but it also stands for everyone in the hotel stack. And will continue to once the public is once again roaming the streets.