Welcome to the 28th edition of the PlaceIQ Social Distance Tracker. 

Happy Friday. It has been quite a week. Thankfully, buried within the deluge of news is a positive sign in the US: over the past week we’ve seen every key COVID metric move in the right direction. American Coronavirus cases fell by 15% this week. This news, combined with moderate foot traffic growth from low traffic categories has us calling an end to The Summer Slump:

CHART: Reemergence Index, Foot Traffic Year-Over-Year, 7-Day Moving Average

Categories that are susceptible to high infection rates (like malls, movie theaters, hotels, and airports) gained the most ground in the year-over-year Reemergence Index. This hints that the perception of contagion is dropping in regions across the country, encouraging people to venture out more.

Today, we’ll be focusing on more good news. We’ve often repeated that the key to succeeding and being resilient in today’s context is to be cheaper, closer, and safer than the alternatives. In this week’s issue we’ll take a look at three businesses who’ve checked those boxes and have been rewarded with stronger than average foot traffic.

Key Themes for Success While Social Distancing

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Be Cheap

  • Consumers are trading down for more affordable options.
  • Even if not directly impacted, a recession mindset has settled in.
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    Be Close

    • Without their usual commutes, most stick close to home.
    • Road trip vacations visit closer destinations.
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      Be Safe

      • Low-touch or outdoor venues are more resilient than others.
      • Consumers are willing to venture out, but they care about conditions.

        We are gratified to see our analyses being included in various reports, since it is our goal to contribute to the #dataforgood effort. If you choose to re-use one of our analysis, all we ask is that you attribute the analysis or content to PlaceIQ. Thank you!

        Resilience Story #1: Drive-Throughs

        We’ve talked about drive-throughs a lot over the past few months, but it’s worth reviewing just how beneficial these safety infrastructures have been to the fast food industry and to a few brands in particular.

        In the Dining Webinar we held last week (here’s a link to the recording in case you missed it), we reviewed the results of a survey we’d recently conducted with our partners at LoopMe. In this survey, we asked people to pick the single most important factor they considered when selecting a restaurant to order from:

        CHART: Survey-What factor is most important when choosing where to eat?

        We knew safety measures were important, but we were shocked just how important they’d become. Second only to taste (and not by much), safety measures were the most important factor for 31% of the population surveyed. This nuance helps explain some of the foot traffic patterns we’ve observed over the year, especially the relative health of the fast food sector:

        CHART: Reemergence Index, Foot Traffic Year-Over-Year, 7-Day Moving Average

        Foot traffic to fast food restaurants fell less, recovered faster, and has proven more resilient than other dining categories when infection rates rise (as they did during the Summer Slump). The drive-through is a major reason for this resilience. Fast food was the only brick-and-mortar business category to enter the age of COVID with social distancing infrastructure in place. This meant not only did they have an existing distribution channel to shift to, but they also had existing consumer awareness of said channel. 

        Compare this to fast casual restaurants like Potbelly or Chipotle who not only had to create pickup windows at their doors or build car drop-off services, but also had to aggressively market to customers to inform them of these new services.

        To illustrate how significant the drive-through infrastructure is for fast food, let’s take a look at a restaurant whose business is almost entirely drive-through: Sonic Drive-In. We covered Sonic in the early days of COVID (they were notable because their average visit duration hadn’t changed following shelter-in-place), but check out how well they’ve fared since we last looked:

        CHART: Reemergence Index, Foot Traffic Year-Over-Year, 7-Day Moving Average

        Traffic to Sonic fell only 10% below 2019 norms, recovered within the first week of the Quarantine Routine, and has remained more than 20% above their 2019 benchmark. Much of this is due to the fact that only 10% of Sonic locations have any indoor seating — the rest are entirely outside or car-based. Sonic President Claudia San Pedro recently summed it up: “I don’t think that there’s any doubt that our physical format absolutely was in line with exactly how we are living during this pandemic time period.”

        Fast food restaurants with drive-throughs checked the ‘be safe’ requirement from day one of this pandemic. Combine that with their status as an affordable luxury (‘be cheap’) and omnipresence across the American landscape (‘be close’), the fast food industry has weathered COVID as well as anyone could and will continue to perform admirably.

        Resilience Story #2: Dollar Stores

        We’ve covered fast food copiously, but a category we’ve almost entirely overlooked are dollar stores. They aren’t featured in our macro charts (an oversight we’ll be fixing shortly) and as a result we’ve missed their resilience:

        CHART: Reemergence Index, Foot Traffic Year-Over-Year, 7-Day Moving Average

        Dollar stores are the green line, which spikes during Panic & Prepare along with Grocery, Pharmacies, and Big Box. But unlike Big Box, Dollar Stores remain stubbornly at their 2019 levels.

        Dollar stores certainly are cheaper than the competition, but nearly as important – they were perfectly positioned to be closer than the competition, especially in rural communities. For example, Dollar General had been rapidly expanding for more than a year before the pandemic. They entered the era of social distancing with more than 17,000 stores, often located in underserved communities — who now weren’t driving their usual commutes. 

        Another aspect of our ‘be close’ mantra is consumers continue to look to reduce or consolidate trips. We see more pre planning before shopping trips, longer durations at stores, and strong financial performance from big box retailers that allow shoppers to pick up groceries for several weeks and much more. Dollars stores have benefited strongly from this consolidation: both Dollar Tree and Dollar General cite this consolidation as a major benefit to them in driving their growing sales.

        Resilience Story #3: Motels

        While we haven’t left the hotel category off our usual macro chart, we have done it a significant injustice by grouping an incredibly diverse industry into a single category. More than any other category we track, “Hotels” has the greatest breadth of performance when you examine the individual brands or subcategories.

        CHART: Daily Normalized Foot Traffic, 7-Day Moving Average

        Foot traffic to luxury hotels is down more than 60% year over year while traffic to motels is only down less than 10%! While the encompassing ‘Hotel’ category allows us to track macro demand for travel, clearly we’re missing a story when we group a St. Regis Resort with a Motel 6.

        We’ve broken out these specific subcategories — motels, extended stay hotels, and luxury hotels — to illustrate another success story: the resilience of roadside motels.

        The Washington Post recently listed many of the reasons why Motels are thriving:

        • They strongly benefit from the return of the road trip as the default, socially distant vacation.
        • Their single-story design, lack of indoor common areas, and doors that often open directly onto parking lots are less risky for safety-minded consumers.
        • They’re cheaper than other hotels formats. And when you aren’t going to be using shared amenities, there’s less of a reason to pay more.
        • Their usual business customers — “truckers, doctors and construction, maintenance, food-processing, agriculture and government workers” — were less likely to work from home.

        This story is strongly compatible with the foot traffic picture we’re seeing above. For Motels, traffic fell less, recovered quicker, and remained resilient throughout the Summer Slump.

        CHART: Daily Normalized Foot Traffic, 7-Day Moving Average

        When we break down the subcategories by brand, the story holds well. Almost universally motels are fairing similarly, suggesting a macro trend is at work. Further, these brands have almost universally been highlighting safety measures and cleaning routines in their messaging, ensuring they check that box in consumers’ minds. 

        Worth mentioning are the extended stay hotels — like Extended Stay America, Suburban, Homewood Suites, and Residence Inn. This category fell further, but recovered quickly compared to the broader market. Reviewing our travel data, we believe this surge is due to the presence of kitchens and kitchenettes in these venues, allowing diners to continue to dine in and cook comfortably while maintaining social distance during vacations. 

        As we can see, to succeed during social distancing businesses need to be cheaper, closer, and safer than their alternatives. These are the new table stakes. Businesses that can check these boxes better than the rest of their category – and communicate it effectively to consumers – stand to steal share during this tumultuous time.

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