During the early months of the pandemic, American travelers changed their behavior, many choosing to forego their annual trips for summer vacation. Those who did venture out often traveled by car to avoid airports and airplanes. As a result, demand in highway hotels as a ratio of total U.S. room demand increased markedly. This category of hotels is defined as those located close to an interstate or major highway that cater primarily to passerby travelers.
Before the pandemic began to take hold in July 2019, an average of 9.2% of all occupied hotel rooms were classified as interstate properties. In July 2020, that percentage jumped to around 11.9%. This was partially caused by the slower decline in highway hotel room demand. Room demand declined 39% in July 2020 from the prior year, but interstate hotel room demand declined only 18%.
This speaks to the resilience of hotels in these locations. Operators benefited from the perceived safety of hotels that allowed drivers to access their hotel rooms while avoiding long elevator rides or crowded lobbies. Some older interstate motels still offer open corridors and outdoor access to rooms. And while those properties with so-called exterior corridors, are rapidly becoming obsolete, they were often the accommodation of choice in the early days of the pandemic since they minimized exposure to staff and other guests.
As the immediate impact of the pandemic waned, highway hotels continued to be the accommodation of choice for U.S. travelers, even for shorter weekend trips. In July 2021, interstate properties reported performance that surpassed the 2019 records. Operators showed a weekend occupancy of 78.7%, two points higher than the 2019 results. However, by July of this year, this record occupancy was not repeated, and the weekend average dropped to 73.3%.
The temporary robust performance also made properties in these locations more attractive to investors, and total sales of interstate hotels have surpassed 2019 results. The recent decline in occupancy is not yet reflected in sales activity, however. Through July of this year, interstate hotel sales have already reached last year’s total, and based on projections, it is reasonable to assume that the 2022 total sales amount will be the highest in the past five years.
While occupancy at interstate hotels is not expected to return to the record levels seen at the height of the pandemic, the outlook for hotels located near major highways continues to be positive as airfares continue to increase and prices at the pump moderate, making car travel more attractive for a significant number of travelers. Also, the strong demand for goods is expected to keep America’s trucking industry busy and roadside hotels full. In addition, the newfound appreciation for exploring nearby attractions and national and state parks should continue to drive demand to interstate hotels.