Descriptors, new brands spur BWI’s growth plan
12 FEBRUARY 2015 7:27 AM
Four years after the launch of a descriptor program to differentiate its properties, Best Western International is ramping up its pipeline.
LOS ANGELES—Launching three brands during the past 18 months and settling into its 4-year-old descriptor program has helped Best Western International gain ground in the hotel development arena, according to company executives speaking during a break at the recent Americas Lodging Investment Summit.
Mike Muir, who joined BWI last March as VP of North American Development, said the 70-year-old brand’s image “is changing right before our eyes.”
“You get rate elasticity as you improve the image,” he said. “From an owner’s exit strategy you get the natural higher cost per key. We’re saying ‘no’ more often than we’re saying ‘yes’ when it comes to adding properties.”
“Success breeds success—they’re doing better than ever,” said David Kong, president & CEO. “People look at that and say, ‘I can trust these guys.’”
The descriptor program, which launched in 2011, created the Best Western, Best Western Plus and Best Western Premier chains and served as a jumping-off point for the company’s growth, according to Kong.
“We’ve had the three of the best years in the company’s history since the launch of the descriptors,” he said, adding that BWI’s RevPAR Index was 111.2 in 2014 and 110.1 in 2013. Best Western’s overall RevPAR Index routinely checked in between 102 and 103 prior to the move to descriptors. “The fact we can improve from 102 to 111.2 is pretty significant.”
The core Best Western brand has a 118 RevPAR Index, Kong said.
An aggressive system-wide renovation campaign—it’s in the fourth year of a five-year plan—also has contributed to the RevPAR Index ride, the CEO said.
“We can use the ones that have been performing great as case studies,” Kong said. “You’ve got to spend money to make money.”
Kong is bullish on BWI’s growth opportunities in large part because of the launches of a soft brand (BW Premier Collection), a lifestyle brand (Vib, which is pronounced “Vibe”)—both of which were announced during the company’s annual conference last fall—and an extended-stay brand (Best Western Plus Executive Residency) that was finalized in October 2013.
A strong pipeline
“We’re going to see a stronger pipeline as a result,” Kong said. “The image of the brand is being enhanced by this process. We have to ramp up to critical mass quickly.”
Muir agreed. “For new construction, the (negotiation) process takes about six months,” he said. “Our niche is upper midscale, and these new offerings have definitely helped pick up demand for development.”
The 2015 North American pipeline has 160 projects—nearly 60% of which are new-construction, according to a company news release.
Muir said he expects the first Vib hotel to be a new-construction project that will be signed by the end of March. The Hotel Mäster Johan in Malmö, Sweden, was the first BW Premier Collection property when it joined in December 2014.
The company has one Best Western Plus Executive Residency property open in Drayton Valley, Alberta, Canada. There are 10 more in Best Western’s North American pipeline, according to the company.
Kong said Best Western sees a lot of traffic on its website looking for upscale hotels in top 25 markets—hotels that would be ideal fits in the BW Premier Collection.
“The challenge is getting the word out because there are so many soft brands out there,” Kong said. “We’re underrepresented in the top 25 markets. Those markets have a lot of independent hotels that rely on (online travel agencies). They have a need for an alternative reservation source.”
Best Western’s performance-based fee model can be enticing to owners of such hotels, he said.
“A hotel that doesn’t see a reservation from us doesn’t have to pay,” Kong said.
Kong said Best Western members have been supportive of the new brand launches because they realize that more hotels in the system will help defray the escalating operating costs that all hotel brands face.
Kong pointed to the December 2014 announcement that Expedia and Best Western signed a global partnership agreement to distribute the 4,200 Best Western-branded hotels on Expedia sites as an example of how adding hotels has helped the brand.
“Expedia wouldn’t do a deal if we weren’t a 4,200-hotel portfolio,” Kong said. “That scale is advantageous.”
A new approach to the Web
A new website will go hand in hand with BWI’s growth. Best Western is reinventing its site because the current one “doesn’t meet tomorrow’s needs,” Kong said.
“We have to have the technology to push rates and inventory to third parties,” he said. “We want it to handle the tremendous amount of transactions that are going to come because mobile is going to play a major role in the future.”
The new site will incorporate adaptive design to ensure all devices are on the same platform when viewing BWI properties and making reservations, Kong said.
Kong said the transition to a new website will cost about $5 million the first year then $3 million each year after the switch is made. The first phase involves the individual property websites and includes an easy translation tool that covers eight languages.