In about three months time, the influential of the global hospitality industry's will descend upon Berlin and the 21st International Hotel Investment Forum (IHIF). There, deals will be made, while discussion will drive down into the trends and storylines that will subsume 2018.
For the first time, Choice Hotels International will have a new CEO at the conference, Pat Pacious, who assumed the role when Steve Joyce stepped down earlier this year. Pacious will be part of a CEO panel at IHIF focused on the evolution of brands. Pacious will have much to talk about in light of Choice's acquisition of extended-stay brand WoodSpring Suites this month.
Ahead of IHIF, we caught up with the CEO to get his takes on the broader hospitality industry and his company's placement within it.
1. What hospitality trends and storylines do you envision will dominate discussion at IHIF and why?
This past year reminded all of us of the power of unforeseen events and the importance of our response as an industry. The learnings and experiences from political changes, natural disasters and acts of terror will impact how we prepare and structure ourselves as an industry in 2018 and beyond.
We are also experiencing an inflection point in a technology revolution. Consumers want a more personalized experience across categories. And, in response, our industry is rolling out truly innovative offerings. At the same time, the industry is operating almost entirely on central reservation systems that date back 30 or more years. The industry’s technology infrastructure is outdated and can’t support the exponential increase in volume through digital channels that show no signs of slowing. At Choice, we are transitioning to a new state-of-the art global distribution platform, a cloud-based system with the flexibility, scale and speed-to-market to adapt as technology continues to evolve.
2. What are the markets/countries that you are looking at for future development and what makes them an attractive investment?
Our international growth strategy is focused on larger, more profitable hotels in key markets. We are seeing positive results with agreements in new markets, like Austria, Belgium and Hungary, and have expanded our presence in other key markets through new strategic partnerships. In Central Europe, for example, our partnership with Star Inn has already added more than 2,500 rooms, and another partnership with PlaceValue continues to introduce new-build, prototype Comfort hotels across key German markets. In the U.K., we just added about 500 rooms. In addition, Spain and Poland are markets where we are currently evaluating other expansion opportunities. Outside of Europe, we are focusing on the Middle East and, in particular, UAE and Saudi Arabia, where we opened our first property in October.
3. With so many brands in the marketplace, what makes them a success and are they differentiated enough in the market? Do both customers and developers understand the differences?
Choice’s footprint is expanding thanks to the strength and relevance of our brands. We are growing aggressively in the upscale segment and still have runway for future growth. Specifically in the U.S., Cambria had a record-setting year in 2017, with the most openings and largest pipeline in the brand’s history. Choice was also one of the first major hotel company's to launch a soft brand with The Ascend Hotel Collection, which continues to have strong growth.
Developers and hoteliers know that Choice has strong distribution, powerful revenue management tools, a high-performing franchisee business model, cost-effective hotel prototypes and a fast-growing loyalty program. All of this makes us a smart option.
4. What are the strategies hotels are employing now to boost revenue and curb costs?
There is no one-size-fits all solution. We focus on customizing our strategies based on the needs of our franchisees. For example, we’ve launched several initiatives over the past couple of years, such as our revenue-management service, to further improve our value proposition and help drive top-line revenue and reduce operating costs for our franchisees.
Across the industry, we’re seeing a continued investment in educating consumers that the best, most cost-effective way to reserve a hotel room is to book directly on our channels. Our marketing efforts are driving awareness and incremental revenue, as well as lower customer acquisition costs. In the U.S., the “Badda Book. Badda Boom” advertising campaign that launched in 2017 is performing very well.
5. How has the role of new technology, home-sharing disruption and online travel agencies impacted your business?
Technology disruption is at a pivotal point for the hotel industry. As a global travel business, Choice embraces disruption as a growth opportunity for both us and our franchisees. For example, we have access to a significant amount of data that is used to improve the guest experience and drive the best business decisions for our guests. Our data analytics capabilities enable us to participate in emerging technology, such as artificial intelligence and voice-based search.
In addition, we are focused on building a direct relationship with customers. We’ve created an internal ecosystem that continues to set new records for proprietary channel contribution. As a whole, the industry is working to educate consumers on the advantages and benefits of booking directly with hotel brands.
6. What has been keeping you busy in the past year and what will you be focusing on in the year to come?
We’ve had a strong year at Choice and continue to build upon the company’s foundation. In September, I officially took the helm as president and CEO. While I already knew the company, I spent much of the first few months listening, as I believe that is essential to effectively lead. I met face-to-face with associates, franchisees and international owners. I also spent time in our hotels talking with consumers.
Choice is experiencing some of its greatest momentum in our nearly 80-year history, which shows our strategy to focus on franchisee profitability and fuel our strong development pipeline is working. That strategy stands on three growth pillars: the strength of our core brands, our momentum in the upscale segment and a focus on international growth. These efforts are supported by our commitment to developing and implementing cutting-edge technology. Our unique position at the intersection of hospitality, franchising and technology differentiates us and creates opportunities today and in the future.
My role is to set the focus for Choice—execute our strategy while making sure we stay flexible, embrace disruption and respond to today’s business environment.