In February, Choice Hotels International announced stellar full-year earning results for 2016, when the company record revenues, operational income and net income performance. Domestic systemwide revenue per available room increased 3.9 percent. For nine consecutive months and nine out of the past 10 quarters, Choice’s RevPAR performance growth outperformed the industry. New franchise agreements were also signed for 650 new hotels, approximately a third of which are for new builds—an increase of 16 percent over 2015.
The results follow last year’s announcement of the new Designed to Dream prototype for the Sleep Inn brand, as well as the ongoing transformation of the Comfort hotels brand that began in 2013 and has since seen more than $250 million in combined investment by the company and the brand’s franchisees. More recently, this month Choice unveiled its first Sleep Inn to feature the new prototype and then announced plans to more than double the Cambria hotels & suites portfolio this year. Here, HOTEL MANAGEMENT checks in with Choice’s president & COO, Pat Pacious, to talk about how the company maintains momentum.
1. What drove the decision to expand the Cambria portfolio?
Pat Pacious: Our accelerated growth and performance in the upscale category has created new opportunities for franchisees, specifically our Cambria and Ascend brands. Choice recognized the growth opportunity to expand into the upscale segment with a focus on major, urban markets. We are making a significant amount of investment behind the Cambria brand to spur developer interest. As a result, our Cambria hotels & suites pipeline, at the end of 2016, had a more than 50-percent increase from 2015. We have entered major markets with groundbreakings and grand openings in Philadelphia, two projects in Chicago, Nashville and New York’s Times Square, and have executed contracts in other major markets, including two projects in Los Angeles, Boston, Seattle and Dallas. In addition to strong development numbers, the brand is also generating very strong business performance. For hotels that have opened within the last two years, RevPAR was at $128 for 2016, and the entire portfolio ended the year at over $100. Today, Ascend has 173 open properties globally, with more hotels open than its top three competitors combined.
2. Over the past four years, the Comfort brand’s franchisees—along with Choice—have demonstrated serious commitment to the brand’s transformation. What has the impact of this investment been for franchisees?
PP: Brand strategy decisions always keep our franchisees’ bottom line top of mind. The Comfort brand transformation illustrates how we work with franchisees to solicit their feedback and improve our system. Based on their input, we developed a multiyear strategy to ensure great hotels in great locations. The Comfort strategy resulted in exceptional results for our franchisees, and delivers travelers a consistent, higher-quality guest experience. Specifically, Comfort is experiencing sustained all-time-high guest-satisfaction scores and is beating the upper-midscale segment on RevPAR growth, and stealing share, recording 27 consecutive months of RevPAR index gains compared to its competitors. There are also more than 120 Comfort executed agreements in 2016, two-thirds of which are for new construction hotels.
3. What attracts franchisees to Choice over its competitors?
PP: Our goal is always to show the value and success we deliver to our franchisees. Choice has 11 different brands to serve a range of developers, from single-unit owners to multiunit development, ownership and management companies. We partner with franchisees to help them make strategic decisions to drive business performance, like stimulating direct bookings to ChoiceHotels.com and serving more than 30 million guests with our loyalty program Choice Privileges. For example, in addition to the immediate perks Choice Privileges delivers to our guests, we launched exclusive member rates in 2016, enabling visitors to Choicehotels.com and our mobile apps to access discounted member rates that can’t be found anywhere else on the internet. In addition to the positive impact this has to fill rooms, it also increases the contributions generated by our proprietary reservation channels.
Two more initiatives that contributed to our success in 2016 include the SmartRates proprietary pricing-optimization system, and our customer-acquisition strategies with our relaunched loyalty program, Choice Privileges. Choice provides unprecedented access to tools and resources to help our franchisees be more profitable, including SmartRates. SmartRates is a pricing-optimization tool that tracks demand patterns so it can recommend the best possible rates, which helps drive franchisee revenue. Choice created its own technology to offer this powerful tool to franchisees.
Choice continues to be highly committed to its franchisees, providing ongoing education via Choice University learning modules.
4. Are there any new trends that Choice franchisees are latching onto?
PP: One trend is the dual-brand offering. Our franchisees have had great success with our Sleep Inn and Mainstay dual-brand prototype that allows them to efficiently address multiple customer segments all under one roof. More than half of the new Sleep Inn projects signed in 2016 will be part of the dual-brand prototype with MainStay Suites. This delivers construction and operational efficiencies through shared public space, back-of-house facilities and hotel staff.