As Choice Hotels International marks its 80th year in business in 2019, President/CEO Patrick (Pat) Pacious offered Hotel Management some insights to the superchain’s culture and strategies and how it’s positioning itself for the future.
“It’s interesting [to understand] the long history of the company and how it’s matured over time. I do think the larger you get, the more brands you have, the more global your footprint becomes, there’s a responsibility to maintain that growth,” said Pacious. “And there’s also a responsibility to keep innovating and keep thinking about what’s around the next corner for both our guests and our owners.”
Pacious has been with the company almost 15 years, and witnessed his predecessors’ leadership styles. Since entering the C-Suite in September 2017—some four months ahead of schedule—he has had his own opportunity “to really take a look at the equity that’s been entrusted to us and grow it. That long-term view and that long-term focus is pretty unique to Choice Hotels.”
The company has been known for not jumping on industry bandwagons just because it’s what its peer group is doing. “When everyone’s out doing acquisitions or launching brands, if that’s not the right decision for our shareholders or guests or owners, we’re not going to follow the herd,” said Pacious.
Founded in 1939 as Quality Courts United, Inc., a nonprofit referral chain of seven motels in Florida, Choice Hotels brands now include: Ascend Hotel Collection, Cambria Hotels, Clarion Hotels (Clarion Pointe), Comfort (Inn, Suites), Econo Lodge, MainStay Suites, Quality Inn, Rodeway Inn, Sleep Inn, Suburban Extended Stay Hotel, Vacation Rentals by Choice Hotels and WoodSpring Suites.
Over the past several years, the company put an intense focus on its Comfort brand, with several billion dollars put behind it across the board.
“Between ourselves and our owners the amount of capital that‘s gone into renovating these hotel rooms and lobbies and the new-builds adds up to $2.5 billion," said Pacious. "It’s that long-term view of a brand that’s been around over 25 years and we want to keep it around and growing for another 25 years and if you don’t keep it fresh—the guest amenities, the product itself—it will decline on you. So, Comfort, that’s half the company’s revenue so protecting that for the long term is a key focus of ours."
Five years ago 600 Comfort Inns left the system largely because they didn’t meet the standards
The CEO noted many Choice property owners have been with the company over the long haul. "I went to visit one of the owners in Shady Grove, Md.; he’s been with us for 33 years. He's seen a lot of change and just went through the recent renovation, installing the new Comfort logo signage. He’s had a fantastic investment in that 33-year period and wants to continue to do it. And that’s multiplied hundreds of times across the system. It’s really taking care of it for the long term and focusing on it. Listening to your owners and what they want to achieve with the brand has been a key to that success,” said Pacious.
He added, “We’re kind of approaching the finish line with Comfort Inn. At the end of 2019, most of the hotels will have finished the rooms modernization. In the pipeline 80 percent of our Comfort contracts that we’ve awarded are new construction so the brand will get younger as new hotels come online, which is exciting for us as a company."
Choice also in continuing to make “significant progress” with its Cambria brand. At press time there were more than 40 properties open and 23 under construction and 85 in the pipeline. “So when you take that and put it with the Ascend Collection we’ve got 20,000 upscale rooms now in the U.S. When you put the global footprint with our upscale brands outside the U.S., it’s 47,000 rooms,” said the CEO. ”We’re kind of re-establishing the company in the upscale segment.”
He noted the acquisition of WoodSpring Suites last year "has really reinvigorated our extended-stay segment (Suburban and MainStay Suites). We now have 247 of those hotels. We also launched Clarion Pointe at The Lodging Conference and already have more than 20 awarded contracts and a lot of development interest in that extension of the Clarion brand."
At its annual convention earlier this month, the company also updated its plans around some of its other legacy brands, looking to refresh and enhance them even as it celebrates their longevity and the company's eight decades of providing hospitality.
Choice considers itself a pioneer in the lodging industry, asserting it was the first to have: Daily change of linens; 24-hour desk service; no-smoking rooms in every hotel worldwide. the first soft brand, the Ascend Hotel Collection; rolled out a cloud-based property management system; and an iPhone app.
Pacious said Choice continues to innovate and recently developed choiceEDGE, an advanced CRS and distribution platform; partnered with Amazon web services and Google; launched new features to help capture group and corporate business; partnered in the Middle East for seven hotels, primarily in Saudi Arabia, a new market; inked a multi-unit deal for Sleep Inns in Mexico; pushed the Choice Privileges loyalty program from 25 million in 2016 to 40 million this year; and implemented the Your Extras program, which provides fast rewards at check-in
Connectivity a Key Corporate Element
Pacious added maintaining connectivity among its widespread stakeholders is a key element of Choice’s culture. “Even though we’re 7,000 hotels (and more than 560,000 rooms), the personal relationships, which were started back in the days with [former President/CEO] Bob Hazard and continued through the years, those relationships are still there. For example, when one of our owners’ daughters got married this past summer, a number of us were invited to the wedding. One of our hotels was impacted by the California wildfires and we all know who that owner is. They’re not just a number. We get to know these folks and they invite us to their kids’ graduations.”
Having veteran staff and executives on hand also is a plus. “Our field people have long, long tenure and that helps you sort of get through the ups and downs of the hotel industry. When you have that long-term view, you’re not that concerned during the downturn and you don’t get too excessive during the upturns; I think it’s something unique about our business,” said the CEO.
Pacious noted the Bainum family’s involvement (Stuart W. Bainum Jr. is Choice’s chairman. See exclusive interview here on our site) also helps the steady-on approach.
“It gives us that sort of ‘patient capital.’ The family’s also impatient capitalists, meaning there’s an expectation that you take that equity and grow it for our shareholders. We’re also a public company, which gives us access to the capital markets and allows us to use our balance sheet in times where it makes sense for the long-term growth of the business,” said the CEO.
So is Choice made up of hotel guys or Wall Street guys?
“I talk about our company really being in three businesses,” said Pacious. “Yes, we’re a hospitality company. So having people on the leadership team who understand what it means to run a hotel [is key]. Think about Janis Cannon, who runs our upscale brands. She comes from that background; has been a general manager, has been a brand person. There are a number of people in our company who have worked in hotels and have had that experience.
“We’re also a franchise business,” continued the executive. “Which means we have to take care of those owners; it’s their asset, not ours. And that’s [a] responsibility that is something beyond just doing everything and loading up all your investments into brand programs. Sometimes companies get carried away with the brand side of the business and forget there’s a P&L that a small-business owner is trying to hit. And small decisions matter at that level. So that thought about being a franchisor is very close to our heart.
“And the third business we’re in is technology,” said Pacious. “When I look across my leadership team and my own background, we’ve got hoteliers, we’ve got franchisors and we’ve got technology people, all of whom come together to create that business that we have today and I think it’s going to really stand us in good stead as we move forward,” said Pacious.
80 Years and Counting
Long before hundreds—make that thousands—of franchise properties dotted the U.S. lodging landscape, independently owned hotels, from “fancy” high-end city hotels to roadside mom-and-pops, were the welcome agents for the nation’s traveling public. It was from this community that a prescient group understood there’s strength in numbers and working together. The opportunity to leverage this wasn’t lost on Choice’s pioneering hoteliers, who knew a good thing when they saw it. Their vision remains acute 80 years later as the franchisor marks its anniversary. Here, a snapshot of the chain’s journey.
1939: Seven independent hotel owners in Florida join forces and determine how they can better accommodate the needs of their customers. They share best practices and implement a system to refer business to each other.
1941: The hoteliers formalize their relationship, creating a member association dubbed Quality Courts United, considered the first hotel chain in the United States. Headquartered in Daytona Beach, Fla., Quality Courts innovates and establishes a mandatory set of quality standards and operating practices for all properties within the association. QC publishes the names of properties complying with these standards to create a network of guest referrals that helps revitalize the business of each individual hotel.
1946: The association hits the 50-hotel mark, each bearing an iconic sunburst Quality Courts logo created to define each property as a member of a select group of hotels with high standards.
1949: Quality Courts becomes the first in the industry to offer wall-to-wall carpeting, daily linen changes, 24-hour desk service and in-room telephones.
1952: The number of hotels reaches 100, and members now have more benefits available to them even before they open for business. These include assistance with site selection, revenue projections and operations guidance.
1957: Stewart W. Bainum Sr., who runs a Washington, D.C., plumbing business, opens his first hotel in Silver Spring, Md.
1961: Bainum Sr. joins Quality Courts’ board of directors, bringing his own hotels, then known as Park Consolidated, with him. The board of directors considers restructuring the organization from a nonprofit member organization to a for-profit corporation to allow the group to leverage the financial resources needed to drive long-term growth and profitability.
1963: Bainum Sr. franchises his first Quality Courts motel; Quality Courts becomes a for-profit corporation and changes its name to Quality Courts Motels, Inc. Stock is sold for the first time to members and employees.
1968: Bainum Sr.’s Park Consolidated merges with Quality Courts Motels, creating the size and strength needed to compete with other lodging companies. Bainum becomes president/CEO of the company and moves its headquarters to Silver Spring, Md.
1969: Quality Courts membership increases to more than 24,000 rooms.
1972: Quality Courts Motels changes its name to Quality Inns International to reflect its growing global presence, The company continues to expand in international markets such as Belgium, Canada, Germany, Mexico and New Zealand.
1980: Quality Inns International merges with Manor Care, Inc., a health-care company founded by the Bainum family. The merger helps fuel the lodging company’s growth into new segments.
1981: Introduces the strategy of market segmentation, dividing its lodging system into three distinct brands: Quality Royale, Quality Inn and Comfort Inn; The first Comfort Inn opens.
1986: Quality Inns buys the rights to the Clarion Hotels name, and all Quality Royale properties become Clarion-brand hotels. The Sleep Inn and Comfort Suites brands launch, introducing industry options such as all-suites, no-smoking rooms and in-room amenity packages.
1987: Stewart Bainum Sr. departs Choice Hotels International; His son, Stewart W. Bainum Jr., takes over as chairman/CEO.
1990: Quality Inns International changes its name to Choice Hotels International, Inc., bringing all its brands together under the name; Adds Econo Lodge and Rodeway Inn brands to its portfolio.
1995: Launches ChoiceHotels.com, the first website in the lodging industry to offer real-time access to a central reservation system.
1996: Choice Hotels is spun off from Manor Care and becomes a separate, publicly traded company (CHH) on the New York Stock Exchange. The company launches MainStay Suites, one of the first midscale extended-stay brands.
1998: Launches loyalty rewards program, Choice Privileges.
2003: Debuts ChoiceADVANTAGE, a cloud-based property management system.
2005: Introduces Cambria Hotels & Suites, a select-service upscale hotel; acquires its tenth brand, Suburban Extended Stay Hotels.
2008: Introduces the industry’s first soft-brand concept with its Ascend Hotel Collection, a global portfolio of upscale unique, boutique and historic independent hotels and resorts that retain their local identity while gaining access to Choice’s global reservation system, revenue management and Choice Privileges rewards program.
2009: Launches a global iPhone application, allowing travelers to search all its brand hotels, view hotel amenities, manage their rewards program, etc.
2013: Moves its corporate headquarters to Rockville, Md.
2015: Establishes a new, single-brand corporate identity to increase consumer awareness, highlight its brands and position itself for future growth.
2016: Launches Vacation Rentals by Choice Hotels, expanding its portfolio of lodging options.
2017: Patrick “Pat” Pacious is appointed president/CEO and member of the board of directors.
2018: Acquires the WoodSpring Suites brand and business, nearly tripling its extended-stay footprint; launches Clarion Pointe.
2019: Choice Hotels International celebrates its 80th anniversary.