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The Value Proposition Choice positions itself to retain customers gained during the recession. Friday, March 19, 2010 Beth Kormanik

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Related Companies Choice Hotels International

As hotel owners prepare to gather at Choice Hotel Owners Council summit next week in St. Louis, Choice Hotels President and CEO Steve Joyce spoke with Hotel Interactive about the state of the chain's relationship with franchise owners, its plans for expansion and its approach to enliven existing brands.
 
"The relationship is incredibly strong," Joyce said. "It's really a hallmark of how we're working together that the friction isn't greater given the pressure everyone is under as a result of the economic circumstances."
 
Despite what Joyce called "the worst year on record," Choice moved forward on a number of indicators. It gained share on its competitors and improved guest scores. Because rates were never sky-high, they had less room to fall. The price points also were more attractive to business travelers -- a group that traditionally has overlooked Choice brands in favor of hotels such as Hilton Garden Inn or Courtyard by Marriott.
 
"The relative consumer sentiment out there has been enormously shaken by what's occurred," Joyce said. "Everyone is looking for value. That's our calling card, because we provide what's expected: a great stay with free breakfast, free Internet and free parking."
 
The outlook for 2010 remains tough to predict. A federal proposal to expand small business loans would help, Joyce said, but financing is still tight.
 
"You're starting to see a trickle of capital coming available for existing hotels," Joyce said. "the construction financing for new hotels is practically nonexistent. We have yet to see significant volumes of hotels begin to transact. In part because there's still a sense of people holding on to see if things get better."
 
Once that happens, Choice is ready with a strategy for expansion. Choice, which franchises more than 6,000 hotels representing more than 485,000 rooms, is focused on expansion to the upscale segment, urban areas and the international market.
 
On the upscale front, Choice started its expansion with the introduction of Cambria Suites. A lack of financing has stunted the brand's growth, but Joyce believes in the concept and its ability to bring in more business travelers to balance Choice's traditional reliance on leisure travelers. Another route to upscale expansion is to acquire a brand from a struggling chain, and Choice is actively looking. Joyce declined to say which brands Choice is eyeing, but as an example, he said Hilton's Doubletree would have been an attractive target.
 
Some of the chain's biggest opportunities are urban settings. Joyce said Choice simply doesn't have the inventory right now to serve its customers.
 
"We have enormous demand from our consumers, but we don't have the product," he said. "Customers looking for our product are entering other hotels. We need to take advantage of the massive draw we have."
 
Choice's Ascend Collection has been one avenue to address the demand. The 28 Ascend hotels operate independently but use Choice's distribution system. Seven more properties are under development, and Joyce predicted the total could reach up to 100 hotels in the next few years.
 
"We've gotten a great response from independent hotels," he said. "They're looking for distribution channels but don't want to change the nature of their hotels. It works well for us."
 
While a new full-service brand and Ascend will both target urban markets, Joyce said the brands can coexist without competing because they will target different customers. Ascend, with its boutique and historic properties, will attract "experiential" travelers who are seeking a unique hotel stays. The new brand would be a more traditional full-service hotel that attracts guests who want consistency and a brand they can count on.
 
Finally, Choice is working on expanding internationally. Its biggest targets are India and Europe, particularly in the United Kingdom, Poland and other Eastern European countries.
 
"With our value proposition, we have a very strong opportunity in a number of international locations to pick up significant distribution and inventory," he said.
 
With its existing properties, Choice also is embarking on several strategic renovations. The highlights include:
 
- Sleep Inn: An interior design overhaul is being rolled out to existing properties and made standard for new properties. "The basic infrastructure of the Sleep unit is the same, but the design is much more colorful, up to date and current," Joyce said. "It refreshes the brand and makes it more relevant."
 
- Comfort Inn and Comfort Suites: The hotels in Choice's flagship family of brands are set to be repositioned within their segment, Joyce said. Smaller, lower-performing Comfort Inns will be upgraded to Comfort Suites. "It will move the whole portfolio up, but also the rate and the revenue intensity," he said. The effort has already started.
 
- Clarion: Joyce believes that other hotel chains have abandoned the niche that Clarion fills -- moderate tier, full-service properties that service secondary and tertiary cities. These hotels are local gathering place for rotary clubs and weddings in a smaller town setting. "That for the most part is a forgotten segment," he said. "It's an important segment. Focusing Clarion on that market will provide some growth and unique positioning for that brand."
 
Other changes will apply to all of its brands. One is an initiative to focus on room conditions, getting back to the basics of providing a "pristine, crisp, clean room experience in every brand." Another is requiring that general managers earn certification for their jobs. Joyce said the certification will drive best performance in individual hotels.
 
As the economy improves, the chain will put the pressure back on to improve room amenities, such as upgrading to LCD televisions. Franchisees were granted a one-year reprieve from the conversion deadline because of the economy, but Joyce said now the TVs have become a guest expectation and need to get in rooms. While the TVs are non-negotiable, Joyce said the company will hold the line to avoid amenity creep. At other hotels, adding frivolous amenities was more about justifying room rates rather than addressing a consumer need, Joyce said. Choice focuses on value instead.
 
"Our view is people are looking for real value," he said. "Real value is a free breakfast. It's not an extra 2 ounces of shampoo. Real value is free Internet, not a shoe mitten. We will continue to do that, not through adding things in the room that aren't critical to the customer. The things that are important we will push for."