If 2019 was a “challenging year” for RLH Corp., 2020 has been a whirlwind. This week's 2020 RLHC Virtual Conference and Expo is John Russell’s first as the company’s new CEO—and the changes are already evident, with marked improvements in retention and a new brand launching.
GuestHouse Goes Extended Stay
The biggest news from the first day of the conference was the relaunch of the GuestHouse International brand as GuestHouse Extended Stay, an upper-economy brand suited for conversions.
The company—and particularly the team of Harry Sladich, EVP of lodging development & franchise operations at RLH—were working on the new brand long before the pandemic paralyzed the industry, Russell said. “We saw an opportunity in a category that we weren't in,” he told Hotel Management. “We felt that there's a lot of conversion opportunities out there to take existing hotels [and] convert them into extended stay in certain markets.”
So far, the company has six new-build GuestHouse properties in various stages of planning as well as 15 conversion prospects in the pipeline. The first hotels will open with hoteliers with whom RLHC already has existing relationships, Sladich said: “Some developers we're working with [were] looking specifically for this product.” Right after the announcement at the conference, he added, he received several texts from developers asking for more info on the brand.
“We wanted to create something that was easily convertible, that you could take your existing property and swap it out for an extended stay with a reasonable cost,” said Sladich. “It was done with practicality in mind. So the kitchenette or the kitchen, depending on what you want in your hotel, is on the wall with the bathroom, so the plumbing is all on the same wall.”
The prototype is meant to work with conversions from both traditional guestrooms or extended-stay rooms, with at least 10 percent of the rooms having full kitchens with the remaining guestrooms having modified mini kitchenettes, making conversions from non-extended stay or suites concepts achievable for nearly all properties. As franchisees with other brands come to the ends of their contracts, he said, he expects to see increased interest for conversions, including dual-brands.
While the guestrooms will probably follow strict brand standards, Sladich expects each of the brand’s lobbies to reflect their locations. “We’re not stringent on what the lobby needs to look like,” he emphasized. “We think that's an advantage to Red Lion.”
Appealing to Owners
At last year’s conference, Russell said, the company had some decidedly “unhappy” franchisees who felt brand standards were being forced upon them and that fees were being raised indiscriminately with no discussion between owners and the company. “People were unhappy with the brand,” he said. “They didn’t like the way they were treated.” As part of the company’s “back to basics” initiative announced earlier this year, the company began reviewing all brand standards and fees and determining what needed to change. “I've asked the management team to perform a comprehensive review of every single fee that is currently in place or scheduled to start in 2020 with the intent of ensuring that all our fees are within industry benchmarks and have value to you,” Russell told attendees during the conference. “If they don't, they will be eliminated.”
The $2 fee per reservation has been cut and property improvement plans have been reconfigured to fall in line with what owners could afford. Other initiatives, like flat fee models and three months of no fees each year for a five-year contract, have also appealed to owners. “We also offered [furniture, fixtures and equipment] packages,” Sladich said. “If you want to sign up with GuestHouse, we'll help you put rooms together.” And while brand standards will remain, the company will allow owners to source their own supplies and materials if they can find better deals than what approved vendors are offering.
After several quarters of outreach and updating policies, the number of properties leaving the system is down 22 percent, Sladich said, which he credits to the ROAR—Recruit, Onboard, Add value and Retain—initiative. At the same time, the company reported signing a record number of new franchising licensing agreements in the first quarter of this year. “Our pipeline has never been bigger, and we have a team to really move the needle as we move into 2021,” Sladich said.