Choice Hotels has a mandate in place for franchisees. Will it work?


LAS VEGAS — Momentum is the chosen battle cry for Choice Hotels International at its annual conference here at Mandalay Bay. And with old mo on its side, the company says it is poised for big things in 2016 and beyond—but, just to make sure, it is instructing its franchisees to shape up their product, now.

Steve Joyce, Choice Hotels’ ever-candid CEO, said as much during his opening remarks to the some 6,000 assembled Choice franchisees and employees. “This is a year of movement for Choice. When we are aligned, the impact we can make is astounding,” he said.

The power of Choice’s 11 brands is only as strong as the operating environment, which, Joyce said, remains favorable. “We are still in a sweet spot. The environment is enabling us to invest and optimize rates. This is one of the longest and positive cycles on record,” he told the audience, then queried the crowd: “Are you having fun yet?”

Steve Joyce
Choice Hotels CEO Steve Joyce addresses the audience at the company's annual conference in Las Vegas.

Joyce said everyone should be, pointing to further strong economic indicators, such as lower household debt and millennials now joining the work force and finding meaningful work. “We expect wages to go up and confidence to rise,” he said.

Choice is embarking on strategies to stay ahead of trends and the competition. To wit, Vacation Rentals by Choice, the company’s quasi-version of Airbnb, wherein customers can accrue Choice Privileges points. “Vacation rentals are big business. We can own that,” Joyce said.

Choice also unveiled enhancements to its Sleep Inn prototype and came out with a new direct-booking strategy.

Getting Comfortable

Choice’s Comfort brand—Comfort Inn and Comfort Suites—is garnering much attention, with the mandate clear to franchisees: renovate now, or risk being removed from the system.

Since 2010, a total of 600 Comfort-branded properties have been let go from the system.

Now the stakes are high, with Choice executives admitting that the brand has become less competitive with its upper-midscale brethren.

“Too much of our system is too old and dated,” said Anne Smith, VP of brand strategy at Choice Hotels. “We need to do something more now. There has been inconsistent product across Comfort for too long. We need to make a bigger impression, now.”

Added Megan Brumagim, head of domestic brand management for Comfort, “Guests perceive other brands to be more modern. We need to close that gap.”

To do so, Comfort has embarked on an enforcement plan for its Comfort franchisees. In its “Move to Modern,” Choice has implemented the following mandates, to be phased in—all linked to its Truly Yours design program.

Phase 1: All Comfort hotels must be compliant to Truly Yours public space standards by 2017, including flooring, window treatments and other items.

Phase 2: All Comfort hotels must be compliant to Truly Yours guestrooms by end of 2019 or next contract renewal.

Other mandates: By June 1, business centers will need to be up to date; new terry initiatives must be met; and, by July 1, a new key card initiative must be in place.

By March 2017, Wi-Fi must be upgraded to include 3 MB of download capability and 1 MB of upload.

“Refreshing your hotel always pays off,” said Ralph Thiergart, VP of franchise services. “Guests will pay more money, but if you want more rate, you have to look the part. Get it done now while credit is available and your partners have cash to invest.”

Still, the news has been strong for Comfort. The brand had 7.7-percent RevPAR growth in 2015, compared to 6.3 percent for all of upper midscale, Choice said.

David Pepper, SVP of global development, added that the brand executed 84 new-construction contracts in 2015 and that 150 new-construction sites have been identified. “Now is the right time to build a Comfort,” he said.

The Cambria Challenge

While Choice’s flagship brand is going through a modernization, its upscale Cambria brand is getting its growth engine revved up.

To date, there are 25 Cambria hotels open with a corporate capital commitment of $350 million to spur growth. “Cambria is Choice’s No. 1 commitment,” said Rebecca Mervis, director of brand strategy and marketing for Cambria.

A total of 26 new Cambria deals were signed in 2015, with a conversion strategy in high-barrier-to-entry markets.

According to Mark Shalala, Cambria’s VP of development, the brand is most interested in growth in high-visibility, urban locations, where there is pent-up demand and “where we are under supplied.” He alluded to cities such as Charleston, S.C., Houston, Atlanta, Memphis, Seattle, San Antonio and Philadelphia.

“We are competing in the big leagues,” he said. Cambria also has projects in secondary markets, including College Park, Md.; Morristown, N.J.; Durham, N.C.; Columbia, SC; Clearwater Beach, Fla.; and Bloomington, Minn.

New Cambria conversions include two in Chicago—the Loop and River North neighborhood.