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Rooted In ROI

Brand Leaders Explain Focus When Adding Mandates During AAHOA Conference

Thursday, April 20, 2017
Dennis Nessler
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An unprecedented 11 hotel brand leaders convened on stage during the recent Asian-American Hotel Owners Association (AAHOA) Conference in San Antonio to discuss a handful of critical issues impacting the hotel industry. The discussion was highlighted by a focus on brand mandates as they relate to return on investment (ROI) for owners.

The brand executives were asked by Chip Rogers, President and CEO of AAHOA, about the internal process with regards to adding amenities that are ultimately mandated to franchisees.

Steve Joyce, CEO, Choice Hotels Corporation, shared some of his experience and perspective. “What we sell is ROI. We generate 55 percent of your revenue, on average. We don’t make decisions around investments that don’t improve ROI. I’ve been at other hotel companies where some brand manager got a flavor of the month and wanted to see that invested in. I think the idea is you got to do what you got to do stay current; you’ve got to do what you need to do to make sure the customer feels you’re providing a relevant experience; but you also have to time it with when the customer is demanding it, versus five people want to do it…Our view is we’re going to be very careful about what we change in the program. We want the changes that we make to be ROI driven and if there is not an ROI there better be a pretty good reason why we’re doing something,” he said.

Geoff Ballotti, president and CEO, Wyndham Hotel Group—who like Joyce noted the company works closely with the franchise advisory council—offered a candid response. “It’s interesting we’ve been accused in the past of being perhaps too flexible on this issue and we’ve heard in spades from our franchise advisory council members. We need to get tougher on the types of programs that have ROIs that our competitive brands might mandate that we haven’t mandated before in the past, whether it’s the amount of bandwidth for high speed Internet access or a minimum number of rewards members we are mandating our franchisees enroll at the front desk,” he said.

Ballotti later added, “Chip you [AAHOA] keep us in line. You were the first to say to us that you’re hearing from this membership group here in this audience that what we might be doing, or more importantly how we’re doing it, is not fair. So I think it’s fair to say, and I think you’d agree, that based on AAHOA’s recommendations we’ve adjusted and we adjust along the way, but it’s got to have an ROI,” he said.

Meanwhile, Andrew Alexander, President, Red Roof Inns, pointed out that being a privately owned company, with a substantial amount of owned assets, alters its approach. “Our ownership of 127 of our 500 properties gives us great insight into what mandates actually make money. And it’s the advantage we have. We love to work with our franchise advisory council but also all our franchisees and use our properties as test kitchens before we roll anything out…When we roll out something across our 15,000 rooms we wouldn’t roll out anything that wouldn’t be successful across the entire 50,000 rooms across the brand,” he said.

Keith Cline, President and CEO, La Quinta Inns & Suites, echoed that sentiment. “We’re in a similar position, we own 40 percent of the [La Quinta] hotels. Rest assured we’re not going to roll something out across the entire chain that doesn’t generate ROI in the hotels that we own and we test everything as part of our strategy,” he said.

Jim Amorosia, President and CEO, G6 Hospitality, touched on the subject as it relates to overall growth. “It’s the obligation of a particular chain to have the kind of structure; whether it has to do with technology, or it has to do with people skills, or it has to do with commitment to the owner, that everyone is going to benefit from. Really that’s what it is that we try to do from that perspective. So whether it’s a mandate in regards to a particular standard or a mandate in regards to growth, the two of them have got to go hand in hand. If we’re not achieving positive growth for you than I’m the first one to say you’ve got my phone number and email come and tell me, because I’ll be the first one to try and correct it,” he insisted.

The CEOs also commented on the importance of increasing the industry’s influence in Washington, DC, and protecting the interests of owners.

David Kong, president and CEO, Best Western Hotels & Resorts, referred to ongoing issues such as NLRB, OTAs, and Airbnb, as being critical going forward. “All these things happen because there is not a powerful voice in our industry to speak on our behalf. In Arizona the state Governor just signed a bill that basically precludes any municipality in the state to enact any law regarding home sharing; that’s absolutely obscene. When you think about all these challenges that we face, it’s really critically important that we all unite behind voices like AAHOA and the AH&LA and we explain the tremendous economic impact our industry brings,” he said.

Eric Danziger, CEO, Trump Hotels—who made a point to emphasize that President Trump is not involved in the business at all—expressed optimism. “I’ve been around this business 46 years and I’ve never seen a more powerful constituency as AAHOA and AH&LA. It was never as potent and powerful as it is now. It’s run by great people and I think it may take it a little longer than putting a call into the White House, if you could, but it’s going to get done right,” he said.

Ballotti reinforced the point. “We all think because Eric’s former boss is in the White House that NLRB is going to go away, it’s not. It requires all of us to fight for a one sentence bill that’s never been more important and that is protecting local business opportunity and what we all know as franchisees is our lifeblood,” he said.
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Dennis Nessler    Dennis Nessler
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