In the year since Choice Hotels International finalized its acquisition of Radisson Hotel Group Americas, the company has made significant gains in the upscale sector. For the first half of 2023, the company increased its upscale openings 83 percent compared to the same period of 2022, and the Radisson Hotels brand alone grew nearly 13 percent year over year in the second quarter. In total, the company reported 32 percent year-over-year domestic unit growth that CEO Patrick Pacious credits to the acquisition and the growth of the upscale Cambria Hotels brand and the Ascend Hotel Collection soft brand.
The acquisition, said Raul Ramirez, Choice’s new chief strategy and international operations officer, “cemented our position in the upscale area,” although he feels the company already had a “material presence” in the segment before the deal was announced. “With this acquisition, we were able to cement our position in the upscale arena, moving from two brands—Cambria and Ascend—to eight brands in the upscale area.”
Most importantly, Ramirez added, those eight brands—Cambria Hotels, Ascend Hotel Collection, Radisson, Radisson Blu, Radisson RED, Radisson Collection, Radisson Individuals and Park Plaza by Radisson—complement each other rather than compete with one another. “We have been spending a lot of time making sure that those guardrails—where one brand starts and one brand ends, what type of guest goes to one [brand and] what type of guest goes to another one—is very clear. We avoid competition within our portfolio because that's part of the essence of our corporate strategy, to maintain that diversified portfolio.”
Diversification
In developing its brands, both organically and through acquisitions, Choice has been focused on diversification both in terms of guest experience and owner experience, Ramirez said. For example, Cambria properties are always select-service, new-build hotels while Ascend hotels are all conversions. The range, he said, lets the company “pivot” to meet different environments and ecosystems, and the addition of the Radisson brands will give the company a foothold in the upper-upscale segment as well.”
Choice’s aspirations for the upscale segment are very clear, Ramirez said: Over the next five years, the company hopes to more than double the revenues coming from its upscale segment. “We believe we have the tools, we have the brands, we have the teams, we have the investment [and] the balance sheet that will allow us to get there.”
Adding Focus
While Choice’s bread and butter has traditionally been in the midscale segment, Indy Adenaw, senior vice president and general manager of the upscale segment, sees the company adding a focus to upscale rather than shifting focus. “We understand the requirements at the upscale tier add new things around distribution, around operations, around group and sales and marketing,” he said. “We are building on strength versus necessarily thinking about it as a transition.”
As a hotel company gains ground in the higher tiers, Adenaw continued, its leadership needs to keep several questions in mind: “Am I focused on the right types of markets? Am I thinking about my cost the right way? Am I thinking about the value proposition from multiple ends? Does the customer see value? Does the owner see value? Are we seeing value from operating in these [segments]?” Choice’s leadership, he added, has been asking these questions as the company grew its midscale portfolio. “They have always been inherent in how the company has approached this business. We just now have the joy of actually doing it in a completely new tier.”
Competition and Collaboration
Choice completed the integration of the Radisson brands in late July, and more than 30,000 upscale rooms officially joined the company’s portfolio. Now that the deal is done, the brand leaders are learning from each other and “pursuing the synergies” each company traditionally offers. “We believe that the answer is not one or the other, but [rather] the combined effort of the stronger elements that each brand brings to the table.”
“The scale, the infrastructure, the ways of thinking are not moments of evolution,” Adenaw added. “They're really moments of transformation for us as a company and as a segment.”
In the second quarter of 2023, the Ascend Hotel Collection signed six new agreements and added seven new properties to its domestic portfolio, while the Cambria brand grew by 15 percent year-over-year. As Choice continues growing its upscale portfolio, Adenaw said he enjoys watching the company compete “on a completely different level, in a completely different way and in a completely different neighborhood” with other upscale brands. That competition, of course, requires constant assessments and reassessments, he noted. “This inherently gives us an opportunity to compete differently, but to also take a blank-page approach in how we approach it.”
At the same time, Adenaw said it was important for Choice to know how its different brands complement one another, both from an owner’s perspective and from the perspective of guests. “When an owner is looking at Choice, they should share a certain amount of infrastructure—procurement, distribution, all of the engineering,” he said. “There's value in making sure that those are common where it matters most, that we're providing seamless solutions to our owners.”
From a customer standpoint, Adenow believes this is a valuable moment for the Choice team to reassess how its brands are positioned. “Are they positioned in a space that's unique for that brand, for where it is in its lifecycle, for its customer base and for the commercial models it's trying to deliver? And then, what does that look like across the upscale tier? We have eight brands now. That's an opportunity to actually really win and own eight different boxes.”