LAS VEGAS—The theme of the 63rd annual Choice Hotels Convention, held here earlier this month, was “Future Ready,” a premise that was evident in all of the brand’s plans—from design to technology to loyalty.
“I’ve had people say to me, ‘Steve, with all the changes in technology, with the new ways people shop for and book hotel rooms and with a whole new generation of travelers redefining what an ‘excellent guest experience’ really means, how can Choice Hotels and your franchisees truly be ready for that future?’ And I tell them that the scenario they described is precisely the future
we’ve been preparing for,” said Steve Joyce, CEO.
“This is my ninth convention and I don’t remember one ever being this positive or this enthusiastic,” Joyce said. “We’re the hospitality leader in technology and distribution. There is no one running their systems like us and it shows in our numbers. We’re leading the industry by a significant amount in terms of RevPAR index growth; we are leading our direct competition by a major margin. We have a global footprint, which is expanding rapidly. We are now a real player in the upscale segment. We’ve strengthened our core brands and our signature brands that needed it, but have now posted some pretty remarkable results—30 months in a row of RevPAR index growth for Comfort; 34 for Sleep; Quality is gaining RevPAR index significantly. We’ve been working really hard—we have a lot more to do, but we’ve got a lot in the works.”
Among some of the strategies and initiatives unveiled or emphasized during the conference were a new prototype for MainStay Suites, one that was shaped significantly by the company’s MainStay Suites/Sleep Inn dual-brand properties; new guest amenities for the Sleep Inn brand; a newly enhanced website for Choice University, the company’s learning system for hoteliers and staff; and a next-generation reservation system to be rolled out this year. But perhaps the biggest focus—topics that came up in just about every session throughout the conference—was on the company’s new “Badda Book. Badda Boom” advertising campaign, which encourages guests to book direct; the addition of a welcome gift at check-in to all Choice Privileges (CP) Elite members—a move that began with the Comfort Suites and Cambria brands, but which all 5,500 hotels in the U.S. and Canada will adopt by August 1; the expansion of loyalty rates for CP members who book direct; and ChoiceRM and SmartRates, Choice’s proprietary revenue management tools.
Pat Pacious, president/COO, explained the appeal of SmartRates. “The whole concept behind it was these are small business owners, and the more we can automate for them, the more time we can save them, the better off their hotels are going to perform. It’s 15 minutes a day,” he said. “We had a franchisee who said he started using it for a month. That last week of the month he started checking three times a day and he realized how quickly his market is changing. Rates change in some markets eight times a day. Our franchisees, given they are doing a lot of other things, can’t always be focused on rate. Now, they have a tool that helps them do that. That tool can be used remotely, and it really puts that key decision back in the owner’s hands. And it does that in an amount of time that’s very short for them.”
Currently, about 30% of Choice franchisees log in daily. “We know those hotels are making hundreds of thousands dollars more in revenue. That’s real money to small business owners like these folks. We use the franchisees to tell those testimonials. That resonates the most with them,” he said. “We want them to make more money, to set their rates in a way that will drive more business to their hotels. Those who are using it on a daily basis have significantly outperformed those who have yet to start using it.”
Robert McDowell, chief commercial officer, noted that SmartRates began rolling out last year, so some franchisees didn’t have access until Q4 2016. “They’re still learning and adopting and we expect that to continually increase throughout the year. But the revenue upside is, we measure all of these programs pretty closely, and the average user on SmartRates is seeing a 2-4% lift.”
And sometimes, he said, that’s about occupancy. “We have had about half our hotels raise rates and the other half have actually reduced rates and seen occupancy grow significantly, so it’s not just about pushing rates higher—it’s about getting the right rate at the right time,” McDowell said.
Joyce noted that Choice franchisees run the spectrum from professional management companies who have revenue management teams on staff who live and breathe rates, to family-run businesses, where every member pitches in to help out with the front desk, housekeeping, etc. “This system is a tool for those very comfortable using it and an answer for those who may not be quite ready. We’re hoping a lot of them turn it on and let the algorithm run. For some of those hotels, they’ll do significantly better by doing that because they’re making decisions that aren’t the right decisions,” he said. “This system brings everybody up to a better level and provides additional revenue for all.”
Another area where Choice is looking to add revenue is through its loyalty program. “OTA growth rates
have slowed significantly
in recent months
and ChoiceHotels.com continues to grow,” Pacious said. “ This is driven almost exclusively by direct reservations on our digital platforms and Choice Privileges member revenue growth—which is up 17% from last year. Expanding our book-direct strategy will be key to moving forward.”
McDowell noted that last year, the company focused on relaunching Choice Privileges to make the program more valuable. It also created a book-direct loyalty discount for its BAR rate and our advanced purchase rate. “What we’ve come out with and will be launching later in June is the fact that we’ll have these discounts on all of our rates, which gives us a lot more power in terms of our book-direct message, regardless of where they’re looking,” he said. “They will always find the lowest price on Choice Hotels.com, and we worked closely with our franchisees because we recognized this is an impact for their bottom line, but the upside continues to be adding guests into our platform, getting them to book through ChoiceHotels.com, which then reduces their overall costs. They see the upside.”
Joyce noted that it’s part of a transitional shift in the industry. “We’re going to put an end to this nonsense that the lowest rates are available anywhere else. [The OTAs] spend $2 billion a year telling the public that the cheapest price is on their sites. It’s not true. By doing this, and the fact that the rest of the industry is doing it as well, we are going to teach customers that the cheapest price is on ChoiceHotels.com,” he said. “We’ll guarantee it.”
During the opening session, Joyce and Pacious painted a picture of the future for Choice franchisees. “Momentum
is still very much
on our side, and we’re looking at some very exciting and profitable times ahead. We’ve been riding the wave of one of the longest and most positive
lodging cycles on record. These opportunities to improve your business and optimize rates have never been better,” Joyce explained, pointing to other positive indicators. “Right now, the labor market is very positive and consumer confidence remains at near record levels. The unemployment rate is the lowest it’s been in a decade at 4.4%. These job figures suggest the economy continues to follow its multiyear trajectory of modest-but-steady growth.”
“This means consumers are more optimistic, which equates to more people traveling and more opportunities for you to capture more business. The long-term trends for leisure travel are positive. People are paying more attention to their health, which means they’re living longer, and that means that they will be more active travelers in their retirement years,” Pacious added.
“With the positive economy, the current lodging cycle and long-term travel trends,
if your future-ready plans include expanding your portfolio, this is an excellent timeto build,” Joyce concluded.