Seasonal Hotels Banking on Tourists Who Skip Plane Travel This Summer

The seasonal hotel industry is hoping that summertime travel destinations typically accessed by car will suffer only limited impact from the COVID-19 pandemic, according to a report from S&P Global Market Intelligence.

Big cities, or “gateway” destinations are typically the first to recover from an economic downturn, but S&P notes that executives at large hotel brands such as Hilton Worldwide Holdings and Hyatt Hotels Corp. are saying the so-called “drive-to” markets stand the best chance of a short-term recovery this summer, compared with areas where hotels depend heavily on group and corporate travel bookings.

Demand for rooms in some warm-weather tourist markets like Jekyll Island, Ga., and Navarre Beach, Fla., picked up sharply in May as governors lifted stay-at-home orders in those states, according to Atlanta-based Peachtree Hospitality Management, which manages hotels predominantly in the Southeast.

For lodging in those types of destinations, “it’s not nearly as bad as what the rest of the industry is going to go through over the next year,” Mat Crosswy of Stonehill Strategic Capital, Peachtree’s lending affiliate., told S&P Global  Market Intelligence. “Normally the big cities, the gateways are the first ones to come back. This cycle is going to play differently. I don’t think people are going to be flying and running into New York to set up meetings.”

Crosswy told S&P that it’s still early in the summer tourism season, and much could change before it’s over.

Phil Kronenthal, a managing partner at Maine’s Migis Hotel Group and a board member at the industry group HospitalityMaine, told S&P the outlook is mixed. He believes his company’s hotels can open in July and operate safely, but he is also writing “very conservative” budget forecasts that show business off 50% to 75% for the remainder of the season.

After performance in 2018 and 2019 that was the company’s best ever, “today’s problems are affecting our five-year forecast,” he said.

Financial challenges are bound to ripple through to lenders, especially for seasonally oriented lodging that often depends heavily on credit, S&P reports.

S&P lists Wells Fargo & Co., US Bancorp., Citizens Financial Group Inc., Western Alliance Bancorp. And East West Bancorp Inc. as the five lenders with the highest balances of outstanding loans to the lodging industry overall. OceanFirst Financial, First State Bank of Florida and CNB Bancshares are a few examples of community banks S&P lists as having presences in tourist regions such as Atlantic City, N.J., the Smoky Mountains and the Florida Keys.

Mike Marshall, whose Marshall Hotels manages seven hotels in the Ocean City, Md., area, told S&P he’s looking at COVID-19 “as a generational thing” for the seasonal lodging industry. “It could set you back years,” he said. “And there will be lenders that get the keys handed back to them.”