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TravelCenters CEO on gas prices: Drivers 'are motoring a little bit less'

TravelCenters of America CEO Jon Pertchik joins Yahoo Finance Live to discuss the decline in U.S. average gas prices, energy volatility, commodities, plans for EV charging expansion, and the outlook for the Inflation Reduction Act.

Video transcript

BRAD SMITH: One other stat that we're actually keeping an eye on this morning as well, energy prices. I mean, that came up within this report as well. That downward trend providing welcome relief for motorists. But how is the highway rest stop coping with energy volatility and rising EV use? For more, we've got Jon Pertchik, who is the TravelCenters of America CEO.

Jon, great to have you here with us today. Just as we were breaking down some of the data here on consumer sentiment, continued declines in energy prices, where do you also see that playing into your businesses, and within the rest stops perhaps?

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JON PERTCHIK: Sure. So first off, so your viewers know, we're one of the largest publicly traded travel center company in America. We're in 40 states. And we serve both motorists and 91% of America's largest fleets, remember, the Fortune 500.

Volatility for this business-- and we're coming off of a huge quarter after nine previous great quarters. Volatility in general, whether up or down, actually benefits us. And just a matter of a few pennies are very meaningful to our bottom line.

So we're still seeing a lot of activity on the freight side, meaning truckers, trucking, very robust. It's year over year stable for us. And that's coming off of a lapping couple of very strong years.

And on the gasoline side, motorists are motoring a little bit less. But we've seen it. Again, this quarter, we saw it most really crystallized, the inherent resilience of this business, where, when one area may be a little soft, other areas pick up and lead to the results we just put up a couple of weeks ago in our earnings.

BRIAN SOZZI: Jon, when gasoline prices come down, do you earn a better margin on those gas sales?

JON PERTCHIK: It's not that simple. No, we don't. It's really more a matter of the differences. And so when there is volatility, the difference between how we purchase and how we sell. And so long as there's movement up or down, we have opportunity.

And one other thing just to point out, we tend to sell a lot more diesel than gasoline. So our performance is driven more by truckers trucking than it is consumers motoring. We sell about 8 gallons of diesel for every gallon of gasoline.

BRAD SMITH: In terms of kind of the cost inputs that you have to think about with your business, where do you need to make the most adjustments at a time like this, if at all, as we've seen a lot of other businesses need to restructure their own costs?

JON PERTCHIK: So we undertook a transformation, nothing to do with current conditions, a couple of years ago. And we really reorganized the entire organization.

Now to your question about how we're reacting to the current times, high inflation, potentially recession, we're really focused on ensuring we have a wide range of offerings. And we're famous for that, by the way. Our travel centers are larger. They have more food offerings. And we're making sure we're creating combinations, we're creating special discounts and incentives and other things as well as just ensuring we have a range of options from lower-cost items to others as well as, again, offering combinations. That's really where our focus lies in the retail part of our business. And again, I think our quarter proved it's been successful so far.

BRIAN SOZZI: And Jon, is inflation-- I mean, we get that there are signs of it's peaking. But is it still so high that a trucker is opting for a Twinkie for dinner and eating out of their truck instead of going inside to one of your restaurants for a nice sit-down meal?

JON PERTCHIK: It's really interesting. So that exact question-- and truckers really, really care about having a sit down meal more than finding on the cost side. Think about it. When you're sitting in a truck all day long and you don't have any human real contact, it's maybe voice sounds over a CB, which by the way, are still used. So an actual sit-down meal matters a lot.

And we're really the only company on the highway that is doubling down and remaining committed to sit-down full service restaurants. The other companies who we compete against on the highway have moved away from that. And that's been a real differentiator for us.

BRAD SMITH: It's been a big year as well for infrastructure spending. Do you do you imagine that if there are more highway projects to be undertaken in the coming years that you're going to be ramping up or accelerating the number of locations that you have?

JON PERTCHIK: Both partly because of policy and investing in incenting infrastructure and separately, just fundamentally too, undertaking this two and a half year transformation, we're growing very rapidly. We're very focused on acquisitions, acquiring independent travel centers, and moving them into our network as well as rolling through franchise, which I think we've signed about 49 new franchise locations since 2019. And I expect both of those to continue, separate from just organically improving the efficiency of the underlying business.

But yeah, I do. I see a really, really bright future for us these next couple of years.

BRIAN SOZZI: Will the Inflation Protection Act, will that help you, in any way, roll out EV charging stations to your locations?

JON PERTCHIK: There is a lot going on the government policy side from that and there's something called NETI, which is $80 billion of federal money being passed through the states. We're very, very focused on rolling out EV, although I want to make sure we're cautious and careful. As Rob Barnett earlier said, one of your earlier guests, this is a multi-decade rollout in terms of complete conversion, particularly in the heavy duty trucking and trucking side for EV.

The grid's not ready for it. There's a lot of things that have to happen over a long time. But in the nearer term, we are very committed and are preparing to roll out EV in places like California, where utilization is going to be high very soon. It's starting already. And in other states where we expect high utilization-- and then finally, areas that utilization won't be there, meaning people are not going to be consuming EV vehicles anytime really, really soon in proliferated scaled ways, we're going to be cautious in those areas.

But most definitely, I do expect our behaviors to be influenced, and others in our industry, by government policy currently. So yes, we will be rolling out more EV.

BRAD SMITH: Even though that is kind of a years-long process, in your forecasting, what kind of net additive do you believe that that would give to TravelCenters of America in revenue that you may see or even margins?

JON PERTCHIK: It's really tricky to say because it's not clear. And the government needs to think about this. In different parts of the country, you can't, for example, resell electricity at all. In other parts, you can sell per kilowatt hour. In other areas, you can sell per unit of time. The private sector needs some clarity over, frankly, how it can make even a little bit of margin. That's directly on the re-energizing side.

What we do expect, although it's a bit hard to financially forecast, is that dwell times-- when somebody refuels with gasoline, they may be at our stop for five or seven minutes fueling, maybe inside for a few minutes. On the EV side, you're there for 30 to 45 minutes. And those dwell times, we're focused very carefully on, what do we do? What can we give our customers of the future to spend their time and to be more attractive, knowing these dwell times are different?

Frankly, I travel a lot. When I'm in airports, I look around often because you think about dwell times in airports, right? People are there. They have to be there an hour before. They're about an hour. And plus, by the time you get through security, maybe there are 45 minutes.

So there are some things we might be able to learn about how airports offer retail opportunities. And I think over the years, we're going to have opportunities to learn from places like that.

BRIAN SOZZI: All right, we'll leave it there. Jon Pertchik, TravelCenters of America CEO, good to see you. Have a good weekend.