LAS VEGAS — During Choice Hotels International’s 68th Annual Convention, held last week at Mandalay Bay, the company’s leadership gathered to discuss the company’s next steps and new areas of focus for the rest of 2024 and beyond.
President and CEO Patrick Pacious kicked off the roundtable with an update on how the company is reorganizing in the wake of integrating Radisson Hotel Group Americas properties into its portfolio and system. “We're really organized now, internally, around three key segments: The upscale segment, the core brands (as we call them) and then extended-stay,” he said. As part of the company’s new structure, Dom Dragisich, who joined the company as CFO in 2017, was promoted in August to executive vice president, operations and chief global brand officer. Dragisich now oversees all of Choice's brand segments, brand development, segment services and corporate development.
“When you’ve gone through a transformational acquisition like we have, it requires a new work structure to get really close to the customer,” Pacious explained, adding that the new structure will help the company’s leadership “interact more closely with the extended-stay owners [and] with the upscale owners.”
As a company, Choice has undergone “significant growth” over the past five years, Pacious said. “We had 12 brands in 2019. We now have 22.” While some of those brands came through acquisitions like the Radisson deal, several of them like Clarion Pointe and Everhome were organic launches.
Over those five years, revenue per property increased 13 percent while revenue per available room grew 14 percent. Franchisees looking to acquire a hotel or renew their agreement want to know how much direct revenue the parent company brings to the table, Pacious said, and noted that Choice has increased this metric by 23 percent over the past five years. “So that is really the drumbeat of what keeps franchisees coming back for more.”
Upscale
Choice has the “challenger brands to watch” in the upscale segment, Dragisich said. Over the next year, the company plans to launch new prototypes for its Cambria brand and the Ascend Collection soft brand. “And we're really going to relaunch the Radisson brands,” he added. The Radisson Blu, Radisson and Radisson Individuals flags will get “a fresh identity with a fresh framework to offer our developers.”
The company currently has 550 upscale hotels in its global portfolio, and properties in the pipeline bring that total to 700. “So we feel great about the progress we've made in upscale,” Dragisich said. “We really think that we're going to disrupt some of the more cookie cutter-brands in that segment.”
Once Choice has a bigger presence in the upscale and upper-upscale segments, Pacious added, the company will look to gain a foothold in luxury hospitality—“a little bit further down the road,” he said. “There's always an acquisition opportunity to potentially in that space and if the right is the right thing came along.”
Core Brands
The company’s “core” brands are slated to get new investment, with new prototypes already launched or underway for the Sleep Inn, Country Inn & Suites and Comfort brands.
Dragisich sees an “untapped market” in what he calls the “premium value” segment, and noted the company’s relaunch of the Park Inn by Radisson brand, which fills the space underneath the Quality Inn brand. The company is “optimistic” about Park Inn’s growth prospects, he said, and had already signed one new franchise agreement for the updated model before the relaunch was officially announced. “We feel great about that brand and we feel great about the core segment overall.”
Choice's core brand portfolio includes the Comfort, Country Inn & Suites, Sleep Inn, Quality Inn, Clarion, Clarion Pointe, Park Inn by Radisson, Econo Lodge and Rodeway Inn brands.
Extended-Stay
Choice opened 61 extended-stay hotels last year, bringing the total portfolio up to 460. The Everhome Suites brand has 16 properties under active construction and 69 in the overall pipeline.
“The demand for extended-stay is double what the purpose-built supply is in the U.S.,” Pacious said, noting a “huge amount” of extended-stay travelers who are staying in transient guestrooms.
Pacious also noted that the infrastructure act and the growth in domestic manufacturing is driving extended stays, not just for building facilities but for inbound travel once they have opened. “So that's really what's driving extended-stay, particularly in the segments we're in—both midscale and economy,” he said.
The key factor for an extended-stay owner is extended-stay occupancy, not overall occupancy, Pacious said. “Can you get that 12- to 24-night stay? Because if you can't, the economics and the return to your hotel go up significantly. If you build an extended-stay hotel and fill it with transient travelers, you're not going to realize the real opportunity that’s there in front of you.” Many of the competition’s brands, he added, have up to 70 percent transient occupancy.
Pacious noted “gaps” in Choice’s portfolio that the company is looking to fill. For example, the company does not yet have an upscale extended-stay brand. “Given the success we're having with the four brands we have in midscale and economy, that's a real opportunity for us moving forward.”