How Choice Hotels is redefining itself
18 MAY 2015 8:19 AM
Choice Hotels International is writing a new chapter to its 75-year history. Here’s an analysis of the four key ways the new Choice will be different than the old Choice.
LAS VEGAS—Choice Hotels International is in reboot mode.
Prior to its annual conference last week, executives announced a pivot in the company’s strategy that features a renewed marketing push, a revamped website, overhauled loyalty program, new logo and more.
“There’s a lot of things going on that I wouldn’t say are necessarily transformational, but it will be shaping the way the company will be for the next 20 years,” Steve Joyce, the company’s president and CEO, said last week during a media roundtable session.
During the company’s convention at the Mandalay Bay Resort & Casino, however, executives touched on additional initiatives that will guide Choice as it begins a new chapter in its 75-year history. Following are four more key takeaways:
1. Cambria’s rebirth
Launched as the most recent downturn was getting underway, Choice’s upscale Cambria brand has struggled to find traction. That might not be the case for much longer, however, as Choice is injecting $350 million into building out the brand in urban markets, which represents the largest single injection of capital into a brand in the company’s history.
Cambria has 23 hotels open, but more are on the way.
“One hundred hotels either open or under construction (by 2018), right, Pep?” Joyce asked David Pepper, senior VP, global development for worldwide lodging at Choice, who was also at the roundtable.
“That is fit for print,” Pepper responded.
The brand has 12 properties that are either under development or have executed contract. That number, officials said, is expected to climb to 20 or 22 Cambria properties by the beginning of next year.
Going along with the jumpstart in development for the new brand is a new look, which includes updated signage and the brand’s interior bar area, Joyce said. “We have got our traction now,” Joyce said. “The wind is officially at our back for Cambria.
One potential stumbling block could be the timing of the next downturn, which Joyce said the company estimates will begin in 2018. He believes Cambria will weather that storm.
“We have something no one else has, and that’s in every major urban market we have millions and millions of customers looking for Choice hotels and we don’t have product,” he said.
For instance, the company has 1,900 rooms in the New York City market, Joyce said. Choice is looking to boost that numbers with new hotels in the Times Square and Chelsea submarkets within New York City.
“We’re not immune to people building in the segment, but we have customer demand other people don’t have,” he said.
2. European growth
Outside the United States, Europe is taking center stage for Choice’s global development plans. Joyce said he views Europe as the next U.S. for Choice.
On a net basis, the company will add between five and 10 European hotels this year, he said. Choice has opened an office in Amsterdam to help drive multi-unit development deals.
The three brands Choice is pushing in Europe are Clarion (a 4-star brand on the continent), Quality Inn and the company’s Comfort product.
In France, Pat Pacious, executive VP and COO at Choice, said the company is beginning to take a longer look at secondary rather than tertiary markets and is also upgrading the Quality and Clarion brands. “We’re trading out some older product and shrinking the system size,” he said. “In Germany, we’re doing a lot of new construction with Comfort Inn.” He added the company is trying to get Clarion into additional suburban markets.
3. Property renovations
During many of the individual brand sessions at the convention, officials stressed to franchisees the importance of renovating their hotels. There’s no hard and fast deadline as to when renovations need to be completed, though Joyce suggested that day will be here soon.
“We are getting close to saying, ‘OK, let’s be clear: This works. We know it works. So, at some point in the future, you will have to do this, otherwise you will be one of the 600,” Joyce said in reference to the 600 franchisees terminated during 2014.
The company is going through a series of targeted property improvement plans now on hotels that have a spot in high-guest-impact markets. “We’re not asking for volunteers,” he said. “We want you to do it.”
That’s not to say Choice won’t be flexible. If a particular hotel is performing well that hasn’t yet been updated, company officials will be more lax on the renovation standards.
“If there’s a hotel particularly loved by the customer, who are we to come in and say, ‘Well, we have these rules.’”
4. New brands?
There could be more changes on the way for Choice, including the potential acquisition of a full-service brand or the launch of an upscale extended-stay product. Full service would have to be done via acquisition because the build-out of such a brand likely would take too long, Joyce said.
Joyce said the company has bid on brands in the past and is continually on the prowl for a good fit but hasn’t found a brand that fits what the company wants to pay. Being largely family-owned means Choice focuses more on the medium to long term rather than the short term, Joyce said.
“They don’t care about the short term,” he said. “I can’t get the family to listen to an earnings call. They don’t care. They want to make sure we’re building for the future.”
Choice has engaged in “several” off-market discussions for a brand. Joyce singled out Hilton Worldwide Holdings’ DoubleTree brand as one that he tried to acquire prior to Hilton’s spinoff as a public company.
Choice is no longer pursuing the DoubleTree brand. “That worked out pretty well for those guys,” he said. “I am a big fan of what those guys did. It’s one of the better stories this industry has ever seen.”
Joyce declined to comment specifically on any consolidation that might occur related to Starwood Hotels & Resorts Worldwide’s ongoing strategic review.
“If something happens, would we be interested in adding a couple brands? Sure we would,” he said.