CHICAGO—The internet has leveled the playing field for hotel operators across the board, but can the average hotel get by without a brand? Depending on the market, the positioning of the hotel and the uniqueness of the asset it’s feasible, but in most cases the power of a strong brand cannot be matched. This broader discussion on brand dynamics came up at the Hotel ROI Midwest conference, where a panel of hotel experts discussed the relationships between brands and hoteliers, and how they are working to remain beneficial to each other.
Brian Quinn, VP of franchise development at Choice Hotels International, referred to the franchisor/franchisee relationship as one of the most successful partnerships in American business. Despite this, Quinn said there remains a wealth of programs available to franchisees that they fail to take advantage of, and it is in these situations where Quinn sees hoteliers feeling a lack of satisfaction with the relationship.
"There are a lot of programs, policies and procedures that aren’t being taken advantage of,” Quinn said. “Take advantage of them. It surprises me that even with all that we have invested in when it comes to technology that there are tools that aren’t being used.”
In discussing the Chicago market, where the event was being held, Quinn said local hoteliers are feeling pressured from multiple angles—supply and wage increases, to name a few—and called on operators to lean on their franchisor for support.
“They can help you leverage relationships at the local level,” Quinn said. “Local organizations don’t realize how many people [hoteliers] hire, how many people you promote from within. That needs to be a talking point, that needs to be part of the partnership.”
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Mike Woodward, VP for Wyndham Hotel Group, said it's the first time in several years where hotel supply is outpacing demand in a majority of the U.S., so operators have to pay attention and take advantage of every relationship at their disposal to keep ahead of supply. Wyndham president and CEO Geoff Ballotti was named vice chair of the American Hotel & Lodging Association’s board of directors in November of 2016, and Woodward said since then both companies have worked together on a macro level to get the word out about what is pressuring operators.
“We are letting the government know what is happening with payroll, as it hurts the bottom line for owners and franchisees,” Woodward said. “One other aspect of the brand partnership concept is that by becoming a partner with a brand as a franchisee you are then able to negotiate rates and fees. There is that aspect to the relationship as well, lobbying for all the subjects that matter to operators.”
The Best Defense…
Quinn applauded the Chicago hotel market for its efforts leading the opposition of Airbnb, but said the industry is still in a precarious position due to the growth of the home-sharing market. He referenced the recent Lollapalooza music festival that rolled through Chicago from Aug. 2-5, which resulted in a burst of activity from Airbnb and its ilk as they soaked up supply and stifled rates. Quinn’s takeaway from these developments is that the franchisor relationship is changing again, and now more is expected of them in defense of operators.
“The issue of cost will move further and further into our arena because we know the pressures you are under,” he said. “It’s an interesting time, because guests, regardless of price point, are looking for a minimalistic experience.”
Two segments Quinn said that hospitality companies need to keep a watchful eye of are retiring baby boomers, who are leaving the work force with an average of $250,000 in the bank, and millennials as a generation with some of the highest travel aspirations in history.
“Millennials would rather travel than fix their car or the roof of their house,” Quinn said. “To exploit that need and give the consumer what they want in the way they want it, that’s the opportunity we see.”
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On the development front, Woodward said hoteliers who are in a hurry to open a new property have another trendy idea they can jump on: Modular construction. This development method involves building a series of rooms off-site in a large manufacturing facility before shipping them to the hotel’s physical address. This way, nearly every room can be completed in a uniform fashion, reducing the time required to churn out the rooms, albeit for a larger up-front investment. The payoff, however, is a hotel that opens sooner as opposed to later.
“Modular costs a little more, but time is money,” Woodward said. “If something speeds up the process, then the revenue stream can start coming in. If you are building a project and it’s not returning revenue, then you have a different problem.”
Who Do You Know?
At the end of the day, the brand concept is all about trust. Ask Matt Hostetler, SVP of franchise sales and development for Red Roof Inn, and he’ll tell you about a regional operations expert that has worked at the Red Roof brand for 34 years and knows the asset inside and out. To Hostetler, employees like this are priceless, and because Red Roof owns many of its more than 500 hotels the company is able to recognize that value and has a stake in putting out tools to benefit these employees.
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“A lot of franchisees are owners and operators with family in the business, and the difficulty there is sometimes getting them to let us in,” Hostetler said. “We only want to be in to help you. If you aren’t pulling [profit-and-loss statements] out to help us, for example, then we can’t advise you.”
Currently, Hostetler said Red Roof’s economy and upper-economy properties are pulling in revenue per available room of $56 per month in secondary and tertiary markets. The company relies on providing a high-quality product and customer service, as well as an open ear for questions and concerns from franchisees.
“Advice is great; it’s better to ask a question than move on without knowing. It allows you to manage the process of whatever you are doing and stay in the groove,” Hostetler said. “We have two customers: Our franchisees and the people staying in our hotels.”