Commercial lenders in coastal cities get boost from day-tripper trend
Many coastal communities fared better than expected this summer as more people flocked to beaches to briefly escape stress tied from the coronavirus pandemic.
Only four major markets have reported hotel occupancy rates above 50% since the pandemic spread across the United States, according to STR, a hotel research firm. Three of those markets — Los Angeles, San Diego and Virginia Beach — are popular beach destinations.
Bankers with operations along the East Coast also said restaurants in their oceanside markets received a boost from people who replaced long-distance vacations with day trips to the beach.
“People can’t do business travel or go overseas,” said Christopher Maher, chairman and CEO at the $11.3 billion-asset OceanFirst Financial in Toms River, N.J.
“That, combined with the truncation of the school year and the remote work environment, meant a great deal many more people were able to get to areas like the Jersey Shore,” Maher added. “Restaurants [on the Jersey Shore] are not having a great year but, in comparison, they’re having an OK year.”
Better-than-expected summer activity is critical for coastal communities, where revenue generated between Memorial Day and Labor Day is critical to keeping businesses in the black after tourists leave and volume tails off.
“People have been cooped up and they want to get out,” said Christopher Marinac, an analyst at Janney Montgomery Scott. “What we’ve heard for a while is that business has definitely picked up in [beachfront markets] in South Carolina, North Carolina and elsewhere.”
To be sure, no two coastal communities are alike, while more urban markets and those typically accessed by plane tend to be struggling more.
Hotel occupancy in San Francisco was just 43% in mid-August, according to STR. Only a fifth of the hotel rooms on Hawaii’s Oahu Island were filled between mid-August and early September.
Occupancy also varies by hotel.
John Asbury, president and CEO of the $19.8 billion-asset Atlantic Union Bankshares in Richmond, Va., noted during a Sept. 14 presentation at the Barclays conference that occupancy rates at some hotels are significantly outperforming the average.
“If you were to go into Virginia Beach, because of the strong summer they’ve had, you’d see occupancy rates [at some places] in the 70% range,” Asbury said.
The road warrior trend has also been a positive for companies with operations tied to recreational vehicles.
The RV backlog for REV Group, a manufacturer in Brookfield, Wis., is more than double what it was a year earlier, Rodney Rushing, the company’s president and CEO, said during a Sept. 15 presentation.
“We’re still seeing the order rates outpace our delivery,” Rushing said.
At Huntington Bancshares in Columbus, Ohio, RV and marine lending is “seeing nice, solid and improving demand,” Zachary Wasserman, the $118.4 billion-asset company’s chief financial officer, said on Sept. 14 during a virtual conference hosted by Barclays Capital.
“We do expect to see an acceleration here toward the back half of this year and particularly into the first part of next year,” Wasserman added.
Owners of rental properties and outdoor leisure businesses like marinas and golf courses also benefited from people making more day trips, bankers said.
“If you want a boat or water skis, you can’t find any of that,” said Laurence Bolchoz, president and CEO at the $551 million-asset Coastal Carolina Bancshares in Myrtle Beach. “It helps us that Myrtle Beach is more of a drive-to destination.”
Many coastal communities are also seeing strong homebuying activity.
Median home prices are up 36% year over year in New Jersey’s Cape May County, Maher said. Atlantic County has seen an 18% increase. Prices in Ocean County and Monmouth County are also rising.
“Folks are buying houses at an astounding clip,” Maher said.
“For New Jersey, those numbers are astounding jumps,” he added. “The reports I’m getting from bankers in similar areas — eastern Long Island, Cape Cod and places like that — is they’re experiencing the same things that we’re seeing here.”
The mortgage business “has been tremendous the past three or four months” along the South Carolina coast, Bolchoz said.
Myrtle Beach’s retail businesses experienced some ups and downs over the summer.
While May and June were “really good months,” business tailed off briefly in July after South Carolina reported a spike in COVID-19 cases, Bolchoz said. Recent weeks have shown more improvement.
“I’m really impressed with the resiliency of our businesses,” Bolchoz said. “August and September have been better. It’s certainly a positive trend.”
There is some optimism that people who delayed travel in the earliest days of the pandemic will remain open to more road trips, which would bring more business the coast in coming months.
“Advance hotel reservations for September and October … are actually ahead of last year,” Maher said. “The reports we’re getting are that many people … may spend all of September and into October in areas where they wouldn’t typically go.”