|
David Kong- One-On-One With Hotel Interactive
Here Best Western's CEO discusses myriad issues facing the hotel business today and how his company is taking advantage of the current market.
Tuesday, October 23, 2012
|
bookmark this
We are on Twitter
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David Kong, the CEO of Best Western International, has been making some bold moves during the last few years. He’s added descriptors to the hotels, is stealing market share from slow to act competitors, and most recently introducing a new construction prototype that leverages the extended stay market.
In the conversation excerpt that follows we get a chance to hear what he is thinking on many critical issues and why Kong thinks his organization has what it takes to continue to grow the hotel customer base and add new hotels to the system. We also discuss that negativity that’s seriously affecting the hotel business from maximizing opportunity.
Here is an excerpt of our chat, so if you want to hear the whole conversation you listen to it click listen below. As part of Hotel Interactive Radio’s This Week In Hospitality.
Listen or download the episode simply click here. You can also subscribe on iTunes!
Glenn Haussman: So, David, you know, one of the things that I’m seeing out there is I think that the hotel industry is doing awesome, right; but I still see a lot of people that are not seeing it my way. And I show them the numbers and we talked about all this growth, but there’s still a lot of doubting Thomas’ out there. How are you seeing things?
David Kong: Well things are going great. We’re already back to prerecession levels, and we’re seeing strong demand, we’re seeing strong growth in our average rate; so things are going very, very well. But like a lot of other of my colleagues, I am a little worried about the future.
You know, as you remember last year, the second half of the year was very, very strong. So this year, we are benchmarking against a very, very strong second half, so the results are not going to be as impressive.
Glenn Haussman: Right. See, that’s the kind of thing. You’re couching yourself in all of that with statements. But last year, if you look at the numbers, they’re really strong, because the year before that sucked, and the year before that sucked a whole lot more. So of course you’re going to get a really strong improvement.
So how could you rationally want to compare yourself to what you did last year when things are still moving up-and-up, when that’s a usual kind of a bump, I think, that happened last year?
David Kong: Oh, that’s why I think it’s important to look at the performance at prerecession levels – what your occupancy was, what your rep power was; and we are seeing, as I mentioned, that we’ve already past the level that we achieved at that time.
Glenn Haussman: If you had to say what year in the past it was most equal to – not necessarily Best Western – but in general, what would you –
David Kong: 2007 was probably the best year the industry saw. We are doing better than 2007.
Glenn Haussman: Oh, wow, okay.
David Kong: [Laughter] So that’s what I would say.
Glenn Haussman: Oh, okay, okay. See, I didn’t understand you, because everyone keeps telling me how supposedly terrible things are out there. But last I recall, everyone was talking about how amazing 2007 was. So if we’re getting back to that kind of point in time, again, I don’t understand why everybody is so depressed.
David Kong: Well, not everybody has gone back to that level; and there are some pockets in the country that are still struggling. And there’s over-building situations in still quite a few states, and so they’re still over that.
Glenn Haussman: So what is the psychology amongst your member owners? How are they feeling these days and what are some of the things that you do to make sure that they see things the right way?
David Kong: I think the vast majority of them feel the recovery and the vast majority have seen their business return in a very strong, meaningful, and sustainable way. Now, of course, we all worry about the fiscal cliff and the crisis in Europe, and the slowdown in China, and all these other factors that are out there, that is causing a loss of confidence and causing this uncertainty to linger in people’s mind. So we are all concerned about that.
Glenn Haussman: Yeah, it’s really interesting to me. I think there’s this major overhang of depression coming out of this last recession. I don’t think I’ve ever seen such a lagging sense of despair after other kind of periods. Do you think that’s because maybe this one was just so deep that it’s going to take longer to get over?
David Kong: It is deep and it takes longer to get over, you’re absolutely right; and in terms of a cycle, I think there are some researchers that are out there that would say it would take another two years before the industry can fully recover; although Best Western is certainly performing better. But in this particular environment, we’re also seeing that the tone that a government sets is troubling.
You know, if you think about just of late, they talk about lowering the per diem, they talk about restricting travel with a GSA, and restricting all these meetings and events and, you know, conferences at the GSA or the government might hold. The government business itself is down significantly as a result; and that kind of talk has a very negative impact on industry.
Glenn Haussman: Yeah, and especially I would think for your constituents, your members, and the people that are in the Best Western family of descriptors. [Laughter] Right? So, yeah. So I think that got to be really rough on them. But are there any ways that you guys are trying to empower your hoteliers to try to get out there and get new business; maybe focus more on the local level and that sort of thing?
David Kong: Oh, absolutely. Right now, although demand is increasing, everybody is going to tell you that EMAN is going to grow by about maybe three percent – two or three percent. So going forward, it’s going to be more about taking market-share than growing the size of a pie. You know, the boat rises with all tide, but unfortunately, the tide is going to rise very much going forward. So we have to think about taking a bigger share of the pie; and that’s what our focus is going to be.
Glenn Haussman: Yeah, that’s very true. You really need to take a more holistic approach. We’re 18 months out from you guys starting the descriptor campaign, where you broke up the regular Best Western name into different categories – Best Western, Best Western Plus, and of course, Best Western Premier. Right? And, for me, I think that’s done a really great job.
I think of clarifying what you guys are about, and showing that you’re in different strata in the industry. I think Best Western is such a unique and eclectic brand, it’s really hard to put a finger on it, and I think that this really helped clarify that. So that’s, I think, one way that you guys are focused on it. What else are you doing now to try to get out there and steal that market-share?
David Kong: No, absolutely. The descriptor program has helped Best Western tremendously; and if you think about it, it’s really a marketing strategy. So just launching the descriptor and putting a hotel into three levels, so it’s easier for the customers to understand, is the very first step. So we’ve taken a first step. There’s a lot more that we have to do to get the word out there, to help people understand that there are now three choices at Best Western, and they can be empowered to find the right hotel for the right travel occasion.
Glenn Haussman: Right, and I’m finding that I think it really gives people more confidence in what they’re booking, because they have a clearer sense of what to expect.
David Kong: You’re absolutely right. Not just from a transient independent traveler standpoint, but especially when we go to the worldwide sales clients – travel managers at chain and consortia – they can send a lot of business our way. Having that clarity is very important, because nobody wants to send their traveler to a hotel and then come back and complain about it. So that reassurance is getting us a lot more business. We’re seeing a significant shift of these big companies, including Best Western hotels in their selection about these.
Glenn Haussman: That’s really important; because, again, it’s a market-share, market-share, market-share. And by putting those names on it, I think it’s really a great way for those travel purchasers who are buying in bulk to really get what the difference. And when you’re dealing with those per diems, it’s got to be helpful as well.
But you’re going to be doing some other stuff as well. I’m seeing a small uptick in new construction. I hear you guys are going to be focusing a little bit in that arena as well.
David Kong: Yeah, no question. There’s been some encouraging developments in the new construction world. This year, we have about 35-40 percent of our projects are new constructions –
Glenn Haussman: Really?
David Kong: – which it’s not where we’d like to see it. We like to get it up to 75-80 percent range. But it’s encouraging, nevertheless.
Glenn Haussman: Well I’ve got to tell you, as an outsider, I think 35-40 percent is really pretty good. Growing up, I always thought that you guys as a company that has fairer rights for owners, so they come to you after they’ve become disgruntled a little bit. So it’s nice to see that so many people are building; and you really feel that you’re going to get that number back up to 75 percent.
David Kong: Oh, yeah. You know, Best Western has gone through a period of renaissance in the last, I think, 8-10 years; and I think our brand image has been significantly enhanced as a result of us separating from hotels that would detract from the brand us introducing, or the new standards and requirements about hotels to make sure that we’re delivering the expense in a very relevant and contemporary way. And if you think about the marketing and promotions and the rewards program, and just all the sales and marketing efforts that were put into reviving the brand, I think, it’s paying dividends right now.
Glenn Haussman: Okay, so, you know, you’re talking though about maybe stealing market-share; and there are other markets that you don’t have, namely extended stay. You’re going to be looking into getting into that as well?
David Kong: Absolutely. We looked at the market and we looked at the product of extended stay. We don’t really want to launch a product that’s 100 percent extended-stay rooms, because if you think about it, even full extended-stay hotels are not getting 100 percent of their customers that are staying with them for a month or for an extended period of time. So I think a mixed use hotel would be more suitable and more relevant today.
Glenn Haussman: I think that’s interesting and I think it kind of touches into another trend that I’m starting to see where brands are building these buildings with two different properties within it. So are you saying it could go something like that, but all just be under a single Best Western name?
David Kong: Yeah, one single building, but have very flexible room types. If the market demands that the mix be 80 percent extended-stay rooms, they could bill it that way; or they can bill it with a 20 percent mix or 40 percent mix, depending on the market. But we want to come out prototyped and make it really easy for the developers to build such a building; but very flexible also.
Glenn Haussman: So what kind of premium do you think that owners can get on rooms that are geared towards the extended-stay market?
David Kong: Well, we have quite a few hotels right now that offer a similar experience, meaning that they have – for example, there’s a hotel in Chicago that had taken over the condo next to them, and they’ve converted that into a Best Western hotel. So they basically have expanded the hotel into this other kind of building; and this kind of building has primarily one bedroom and two bedroom suites. Those suites were the first to be sold out on a regular basis, and their rates are like $200.00, $300.00, $400.00 a night.
Glenn Haussman: Wow.
David Kong: So you can see, there’s a strong demand for that type of room; and there’s a high price premium to be had for that type of room.
Glenn Haussman: You know, and I’ll tell you, when I’m traveling with my family, that’s something that I really, really like. I was at an extended-stay hotel recently visiting some family, and we had two bedrooms, which was amazing. We had a kitchen that, of course, was not used, but we had it and we had a nice living space. It was just so great that we could all spread out yet still be together; and I think that’s fun that you’re going to be able to add that into the mix a little bit more efficiently.
David Kong: Absolutely. We have that in mind, and we also have people that are going to be there for a period of time to make it as comfortable as we can make it, like a residence.
Listen or download the episode simply click here. You can also subscribe on iTunes!
|
 |
|
