DALLAS—Last year, La Quinta Inns & Suites identified three strategic priorities—driving consistency in the delivery of an outstanding guest experience, driving engagement with its brand, and driving consistency in product—and came up with a plan to execute on these initiatives. At the 2017 La Quinta conference here, the company updated attendees on these goals and elaborated on plans for the future.
“Last year was a year of significant investment at La Quinta—we invested in our people, in our hotels and laid the foundation for the future of our brand,” said Keith Cline, president/ CEO. “We made these investments because we believe all of these things will propel us forward and position La Quinta for long-term growth. We grew systemwide RevPAR—excluding the impact of oil—2.9% in the fourth quarter, about 0.5% for the full year. We grew our franchise and other fee-based revenue 7.2% in the fourth quarter and 6.4% for the full year. We continued to see significant positive movement in net promoter scores. Our franchise hotels continue to generate net promoter scores well above the average for our upper-midscale competitive set. At our owned Inns & Suites hotels, we saw a double-digit improvement year over year. In addition, we accelerated the recapture of market share with improvements in RevPAR index in both the third and fourth quarters. We firmly believe the investments in our hotels and in the guest experience are beginning to take hold. The continued and increasing momentum in our guest satisfaction scores and the market share growth we’re seeing are all incredibly positive indicators.
“All of these priorities and the investments we’re making are designed to drive revenue at all of our hotels. We’re transforming our business and brand in a very intentional way,” Cline continued.
Altogether, La Quinta has some 888 hotels in its portfolio with 248 in the pipeline. Ninety percent of those are new-construction.
With regard to driving an outstanding guest experience, Cline said, “Last year, we continued to build on several important changes to better align our hotel operation on the owned side to deliver an exceptional guest experience. The most obvious change is we hired John Cantele as our EVP and chief operating officer.” He added that the company also restructured its field leadership team and separated the operations group into two divisions: one responsible for Inns product and one dedicated to Inns & Suites properties. La Quinta also deployed additional sales leaders in key markets to drive revenue and market share at the local level.
As for driving engagement, the brand made additions to its loyalty program, La Quinta Returns. “These include new ways for members to engage with the program and our brand on a regular basis,” said Cline, pointing to new programs, such as Redeem Away!, Instant Free Nights and thousands of aspirational hotels added to the program. “We’re doing this with two goals in mind: offering outstanding benefits and features to our guests so they feel really rewarded for their loyalty and attracting new guests to the La Quinta brand.”
With regard to driving consistency in product, the company identified some 50 company-owned hotels to be repositioned upwards from midscale to upper-midscale within their respective markets; it also sold 19 hotels last year that it deemed to be improperly positioned in order to free up the market for new development. Additionally, 25 franchised hotels were removed from the system in 2016 and more than 100 franchise hotels have undergone or begun renovation. “By the close of 2017, just this first strategy will have meaningfully impacted almost 20% of our brand by either removing the hotels or significantly improving them,” said Cline. “Our belief is that with the appropriate scope of capital investment, these hotels have the opportunity to reposition upwards within their market, capturing additional occupancy, additional share and being measured against a new, higher-quality competitive set.”
He pointed to the company’s Clifton, NJ property, which completed its renovation last November. “During the subsequent three months, net promoter scores were almost double, product quality scores were up significantly, RevPAR was up 14% and market share was up almost a thousand basis points against the comp set,” Cline said.
During a media event, Cline elaborated on whether more corporate-owned hotels could be identified for renovations. “Could there be another list? Likely. Is it 50? At this level of spend, probably not another 50 that will look like these, but there could be another subset that has a different flavor to it,” he said. With regard to the possibility of more sales, he added, “We’re going to have an ongoing prune and plant strategy. A lot of them are cases where we’re selling corporate hotel and, at the same time, maybe even with the same person, selling a franchise in that market. Over the past several years, we’ve continually done that with our owned hotels. I would imagine that likely would occur in ’17 as well.”
Additionally, the company has also focused on hotels that have fallen behind. Last year, it introduced brand experience consultants, who visit locations that are falling short. “During the last year, the properties they visited showed growth in service quality, product quality and net promoter scores at a higher rate than the brand average,” said Raj Trivedi, EVP and chief development officer. “However, sadly there are still some that don’t elevate… We will not shy away from making tough decisions when it comes to protecting our brand’s best interest. In many markets where we sold our company-owned assets, or terminated franchise hotels, they are being replaced by new-construction Del Sol design or a qualified conversion.”
Trivedi also introduced LQ Up, a new program designed to elevate the guest experience “through better bathroom amenities, an expanded breakfast offering, providing a Bright Side Market and redesigned public space to create a great room theme at all hotels as they renovate.” Better bathroom amenities will include new Pantene products in place of the 2-in-1 shampoo and conditioner used now, while the expanded breakfast offering will include eggs, a meat item, oatmeal, yogurt with additional toppings, muffins, fresh fruit, waffles with additional toppings and regional items, such as biscuits or grits. La Quinta is also making a transition to brewed coffee, including a dedicated serving area 24/7.
Cantele tied the enhanced amenities in with the ongoing renovations. “The renovation and repositioning strategy is part of the essence of the bigger plan we have for our brand. This isn’t only about renovations. To varying degrees, our plan is to elevate every one of our hotels on some level,” he said.
In order to drive consistency, non-Del Sol properties will undergo enhancements to align better with the Del Sol prototype, focusing on the exterior, public spaces and guestroom, in addition to the amenities. “Our idea is to narrow the gap between the two generations of product,” Trivedi told members of the media. “Our design and construction teams spent a lot of time, finding an efficient way of incorporating those elements, colors, tiles, signage, etc., so that can allow us to make those properties fit into the modern look at a minimum cost to ourselves and our franchise partners. We started looking at various generations of our prototype as well as some generations of conversions we have, and put together a plan that would allow us to incorporate elements that come close to Del Sol and modernize the facility.”
Cline reflected on the strategy. “About a year ago, we talked about the new strategy we unveiled in terms of [our three strategic initiatives]. The plans we laid out many viewed as daunting, trying to accomplish a lot at once. It’s pretty foundational in terms of the mindset shift to accomplish all of these things and we’re extraordinarily encouraged that in 2016 the needle started moving pretty quickly. We gained a lot of momentum on all of the things we think are positive indicators that the strategies are working,” he said. “If you generally believe people in the lodging industry make selections based on experience, which I think we all do, then that metric is moving pretty meaningfully and obviously you’ll chase that back with market share gains on the street corner.”