PHOENIX — Watch for Choice Hotels International to put a strong emphasis on its Cambria Suites product in the near future. The brand, labeled by the lodging franchisor as a â€œlifestyle, all-suites brand that offers contemporary, upscale accommodations at affordable prices,â€ now has 22 franchises open across the country. Choiceâ€™s president and CEO, Steve Joyce, is optimistic that the growth will continue, due in large part to its acceptance by the traveling public.
While initial plans to expand the brand rapidly fell short with the economic downturn, Joyce says Choice now plans to use some existing capital to encourage major developers to invest in Cambria Suites. â€œWeâ€™re going to push these projects through until we get some scale and until we have a more rational lending environment when there is more construction capital available,â€ he said.
Why the investment? â€œThis is Choiceâ€™s first entry in to the upscale arena so it’s a very important piece to us in the long term,â€ Joyce says. Once a â€œmore cooperative financing environmentâ€ is in place, he expects to have about 70 Cambria Suites properties open.
Incentives will be given to a mix of developers who are already Choice franchisees. Others will go to developers with whom Joyce has relationshipsÂ from his previous role as EVP, global development/owner and franchise services at Marriott International. Joyce joined Choice as president and COO in May 2008.
Four-star product for choice?
Cambria wonâ€™t be Choiceâ€™s only foray into the upscale sector.
â€œWe would very much like to be in the upper-upscale sector with a full-service brand, but with a full-service brand that fits our company,â€ he said. For this reason, Joyce has frequently said a four-star product with a strong value proposition would be the best way to go. â€œWeâ€™re in a good position balance sheet-wise,” he said. “We have got a lot of dry powder that weâ€™ve been sitting on.â€
Read “Choice tweaks brand growth strategies”
â€œAn [upper-upscale] product would really round out our portfolio and help drive a lot more business customers into our brands,â€ Joyce said, noting that business travel is about a third of Choiceâ€™s mix.
â€œPeople say, â€˜we have so many hotels in this country, how many more you can run?â€™ The answer is, â€˜a lot,â€™ because we have a lot of different brands for different purposes. In addition to that, we hardly play at all in the upscale and upper upscale. Thatâ€™s the other half of the business. So thatâ€™s where our growth opportunity is,â€ he said, noting that the upper-upscale hotels would open in domestic markets first.
Technology fueling expansion
It’s not to say that international expansion is not being considered for Choiceâ€™s other brands, thanks in large part to the fact that the companyâ€™s proprietary Web-based hotel property management system, choiceADVANTAGE, allows it to work with properties all over the globe, as long as they have access to the Internet. The PMS, already installed in 3,000 Choice-branded franchises in the United States, Canada and Mexico, provides functionality for guest servicing, revenue management, groups functionality, and remote access and full integration with Choice’s programs. The company also is planning to roll out the system to its properties in Australia, New Zealand, Great Britain, France and Germany later this year.
â€œBasically, we can go to a franchisee and say, â€˜Look, if you have access to the Internet, you have access to all our systems. You donâ€™t have to buy a box, you donâ€™t have to buy cabling, you donâ€™t have to buy air-conditioning for your box, you donâ€™t have to pay a geek to watch over your box,â€™â€ Joyce said. â€œItâ€™s all Internet-based. It is really a huge advantage for us to be able to go to a franchisee and say, â€˜You donâ€™t have to pay anything to convert equipment.â€™â€
Expanding international portfolio
Joyce said Choice has a multi-year, multi-million-dollar investment in its IT platform, which will assist in its international expansion. â€œWe are ready to roll it out at the end of this year,â€œ he said. â€œWe think itâ€™s going to be huge advantage for us with conversions in Europe.â€
Indeed, there is opportunity across the pond, according to Joyce. â€œWe see a ton of relatively small, 50- to 100-room, independent properties that will work for us with our brands. Thatâ€™s a huge, huge play and we believe we are going to be well-positioned to take advantage of that,â€ he said, noting that the Choice has long had an extremely strong presence in Scandinavia.
â€œThe Scandinavians already know who we are like nobodyâ€™s business, which is great,â€ he said. â€œWe just need to get that kind of distribution going in Paris and Germany and the U.K. Once we do that, I think we are really going to have something.”
To achieve that expansion, the lodging franchisor will be investing in development through next year; it has also elevated David Pepper to SVP, global development. Pepper previously served as SVP of franchise development for North America for Choice.
â€œWe probably have one of the better, more aggressive sales forces in this country and we want to export that approach to selling franchises in Europe and the U.K., India and other spots,â€ Joyce said.
Quality Inn hits 1,000
While new brands and international expansion are a focus for Choiceâ€™s top executive, he is also keeping a keen eye on the companyâ€™s most tried-and-true brands. Quality Inn, which launched in 1941, now has 1,000 properties, thanks to the recent addition of the 86-room Quality Inn & Suites Conference Center in Martoon, Ill.
â€A lot of the innovation that happened in the hotel business happened first in Quality, such as the first telephones in guestrooms, the first TVs, the first 24-hour desk and the first 24/7 call center. So if look at the history of the hotel business, it’s the history of Quality, which is kind of cool,â€ he said, citing Holiday Innâ€™s arrival on the scene in the late 1950s as another important landmark for the industry.
Today, Quality plays a big role as a conversion brand.
â€œWe actually think it’s going to be one of our primary growth vehicles for the next two to three years as the conversion market remains hot,â€œ he said.
The benefits of a Quality Inn? â€œWe make sure they are well run and clean and that they are great value. Consumers react well to it; everybody knows that brand and for franchisees it represents an incredible value. Through our distribution channels, we push a lot of business their way.”
The Choice CEO also has faith in the Comfort Inn product, which has nearly 2,000 properties open. Its sister brand, Comfort Suites, has more than 600 franchises open.
â€œWe actually think this is going to be our next power brand. The box is terrific and consumers like it,â€œ Joyce said, noting that a new emphasis on the brandâ€™s design will help propel it forward. The international architecture and design firm, Gensler, has just done a series of designs for the brand, which Joyce admits had â€œa pretty sterile look originally.” At 30 years old, Comfort Inn was ready to be reinvigorated, he said, adding that franchisees have participated in what its new look and feel. â€œItâ€™s going to be a major boom for the existing product.â€
Elevating the image of the Comfort Inn and Comfort Suites up a notch will create more room in the economy niche for Sleep Inn, he said. The brand has more than 400 locations open.
â€œThere is no reason Sleep canâ€™t be 1,000 units, he said. â€œConsumers and developers like it and it’s a very economical box.â€œ
Mood of the members
Overall, Joyce said Choice franchisees are cautiously optimistic following a good summer for most.
â€œThere are still some pockets that are pretty tough and profits, while they are up, are still way down from where they were,â€ he said. Even though franchisees have made a lot less money in the downturn, â€œtheyâ€™re an optimistic bunch by nature. And I think we have done a lot to be supportive of them, both financially and by being flexible by pushing back costs. Weâ€™re doing a lot of things to try to help them, which I think they have recognized.”
And, current conditions arenâ€™t all bad. The challenging lodging development market is actually helping existing hotels â€œbecause the supply-demand balance is going to be as good as itâ€™s been in a long, long time,â€ he said. â€œThat means that you are going to get â€“ even the economy grow slowlyâ€“pretty significant demand growth.â€
That dynamic, along with an improved overall employment outlook, bodes well for Choice and its franchisees, Joyce said. â€œSo I think franchisees are getting to the point where they feel theyâ€™ve made it through. We are not out of the woods yet, we are not making the kind of money we were, but I can see the [recovery] is coming and I am looking on to what looks like a pretty good side of things.â€