Red Roof update strategy protects from future hotel supply

In 2011, Red Roof Inn began a full overhaul of its existing hotel product. Management called for updates to hotels through its NextGen prototype, and two years later in 2013 they led the charge by updating company-owned hotels first before mandating franchises follow suit. The theory was that with fresher properties, these hotels could pull in better rates and more customers, but consistency was needed. 

Backed with hard data proving the updates were working (in 2013, the 29 updated NextGen Red Roof hotels were pulling in an average of 10.5 percent more occupancy and 36.7 percent higher ADR), Red Roof set out to convince franchisees to reinvest in their hotels. So today, at this week's brand conference in Hollywood, Fla., how many Red Roof properties are being updated?

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"Every one of our hotels has a new PIP in progress or negotiation," said Phil Hugh, chief development officer for Red Roof Inn. "We don't want to lose anyone in the process, we want to convince them to go through with updates. But in the end, we are willing to work with [franchisees], consumers are not."

Andrew Alexander, president of Red Roof Inn, said the strategy is about consistency. "Increased supply is continuing to come to the market, as well as a climate of instantaneous reviews that constantly compare your product to others," Alexander said. "That information is readily available to guests. So now is the time to invest in your property to prepare for supply growth and inevitable comparisons."

Alexander said that updates cannot focus simply on property design refreshes, and also must take place in human resources. These investments in people and property are also part of Red Roof's plan to insulate itself from industry disruptors such as Homeaway and Airbnb. Alexander said that he expects these disruptors to try to take a share of the economy market once the are fully disseminated in the midscale and upscale markets, and wants to take advantage of the head start to elevate the brand's properties to retain travelers.

"When our rates are $89 and their rates are $79, their advantage is price, but now they are selling an economy product and they will have the same issues as our competitors: consistency in quality and service," Alexander said. "When the time comes, guests will find the answer is no, we can do it better."

Currently the bottom 10 percent of Red Roof properties are investing to meet the standard set by the rest of the brand. And how has this affected franchisees?

"Nobody in the industry brags about their franchisee satisfaction scores," Hugh said. "We were proud in 2013 when we had 88-percent satisfaction. This year it's 95 percent."

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