What do Caesars Entertainment and Extended Stay America have in common? Not that much, one would be inclined to guess, but Jonathan Halkyard, the new CEO of Extended Stay America, begs to differ.
“Caesars has a few really huge units, while ESA is a large collection of relatively small units, but at the basic level the customer experience from reservation to departure isn’t that dissimilar,” Halkyard said.
When Halkyard transitioned from CFO of Caesars to COO of Extended Stay America in 2013, he said he did so because he saw similarities with where Extended Stay America was then and where Harrah’s Entertainment—the former moniker of what is now Caesars—was in the late 1990s. Specifically, he saw a segment failing to garner attention from capital markets and undervalued by the hospitality industry at large. But he also saw an underlying business model with opportunities for improvement, and that fascinated him.
Halkyard began his hospitality career with Harrah’s before being promoted to CFO of the company after its acquisition of Caesars and its subsequent name change. He held that position until 2012, when he began looking for new opportunities.
His message to the industry in 2018, however, is that the challenges of operating and the metrics for success in hospitality have been boiled down to their most basic elements. As analytics sharpen pricing power and hotel operations become more refined and precise, Halkyard said success in the extended-stay space will hinge on a hotel’s ability to do the same thing well more than 20 million times a year, one booking at a time.
He also said that Extended Stay America is perfectly equipped to manage the complexity of such an offering.
“We are in a great spot to deliver a great experience because we are one company with one brand and national distribution,” Halkyard said.
Extended Stay America’s singular brand focus has been one of its greatest assets in recent years when it comes to providing a consistent guest experience. In June 2017, the company revealed plans to launch a franchising program, with the goal of commanding a portfolio of 70-percent owned and operated properties and 30-percent franchised. Halkyard said the company was never opposed to the idea of franchising, and explained that ESA was simply not prepared to offer franchising even a couple of years ago.
“We just completed the development of some core marketing capabilities that were absent and required for franchising,” he said. “A centralized call center, a loyalty program—we were putting those together from 2013 to 2016 and we had a lot on our plate. Now I’m enthusiastic about our company’s ability to be a successful franchisor.”
Halkyard began the push for these features when he was working with previous ESA CEO Gerry Lopez, so as he steps into his new role as CEO Halkyard said the plans are not likely to change any time soon. In fact, he said if anything, there will be an acceleration in the effort to provide stronger franchise sales support.
In addition, ESA plans on selling roughly 150 hotels over a three-year period in order to improve its portfolio. Half of these hotels are expected to be sold by the end of 2018, with 25 in the process of being sold in the first quarter of this year.
“We will continue to own hotels… and we won’t introduce capital improvements we wouldn’t be willing to invest in ourselves,” he said. “We’ll find out in the coming months how much real demand there is with franchisees.”
Fewer, Bigger Names
When discussing the challenges facing the extended-stay hotel space, Halkyard said Choice Hotels International’s acquisition of WoodSpring Suites may result in more competition depending on how Choice chooses to invest in the company, but he also said the acquisition serves as an endorsement of the segment as a whole.
“I have a lot of respect for both of those brands… there may be more competition for us on the franchise development side going forward but we’re no slouch in that department. We have 625 hotels and a firm understanding of our segment and who we are, and we aren’t worried.”
This positivity colored Halkyard’s expectations for extended stay in 2018. He pointed to increased levels of construction in residential, commercial and office environments, and he said ESA’s current business model and price point are calibrated to capture new bookings as a result.
“I can’t think of a better segment to be in right now than extended stay,” Halkyard said. “The challenge for us right now is getting the message out to our corporate customers. In the casino business, we did a lot of work to understand frequency and visitation, and we had a rich data set on that even years ago. Now we have it in extended stay, and it’s time to put it to good use.”