National Report – There’s a first for everything. Red Roof Inn, the iconic U.S. economy brand, is picking up and taking its red-shingled roofs across the border for the first time in the brand’s history.
Announced in December, Red Roof is partnering with Brazil-based Nobile Hotéis to develop some 35 to 40 properties in Brazil, South America’s largest country, through a mix of new construction and conversions. The first property, a conversion of an existing hotel, is slated to open in Brasília, Brazil’s capital, in 2015. Nobile Hotéis is the fourth largest hotel operator in Brazil and has a portfolio of 22 hotels, including a Days Inn. The exclusive master franchise agreement goes up to 2040.
To hear it from Red Roof’s CDO Phil Hugh, opening hotels outside the U.S. was a result of what he called “phenomenal” growth and achievement in the U.S.
SOUTH AMERICA MOVE
“It was really proven out of what we’ve done in the U.S.,” Hugh, who joined Red Roof in December 2013, said. “The metrics for this brand over the last four years have been extraordinary. Guest satisfaction ratings are high. Franchisees are happy. Every metric has been strong.”
With substantial growth happening in the U.S., which included the launch of Red Roof Plus and the NextGen design prototypes, the natural move was to test the strength of the brand outside its domestic confines.
“The challenge has been: Why haven’t we seen substantial growth outside the U.S. when we had growth inside it?” Hugh said, alluding to some rosy growth numbers, which included the signing of more than 75 new franchise agreements in 2014, 50 more than in 2013, and the opening of 51 hotels last year compared to only around 19 in 2013.
Finding the right partner in a foreign destination isn’t just key, it’s compulsory. Hugh said Red Roof, which is owned by Ontario-based Westmont Hospitality Group, has that relationship with Nobile. “They understand how to operate in the economy segment; understand the strength of iconic brands like Red Roof and what they can do with that outside the U.S.: not only leveraging customers within the U.S. who might travel back and forth, but also introducing a U.S. brand in Brazil. It made sense,” he said.
“Red Roof is a textbook fit,” added Roberto Bertino, founder, president & CEO of Nobile Hotéis. “A U.S. brand with a very bright future, good management, quality and an impeccable image.”
Brazil is becoming a more competitive market with an influx of global brands across segments, such as Accor’s Ibis and Wyndham’s Days Inn. However, Hugh is confident of the opportunity. “It’s competitive, yes,” he said, “but it’s a market that will allow for a nice mix of new construction and conversions. There is also unbranded product that we have had conversations about bringing into the Red Roof family.”
MORE TO COME
According to Hugh, expanding outside Brazil is likely in the coming years, and conversations are frequent with developers and franchisees the world over. He said Canada is a logical next step—with EMEA still also possible. “The brand is strong in the U.S., and hoteliers are saying if we can get a U.S. brand that has that strong loyalty and high guest satisfaction, we can capitalize on that across the world. We just want to make sure we take the correct steps with the right partners,” Hugh said.
While Red Roof is concentrating on growing its brand globally, it knows that the U.S. is still its bread and butter. And while Hugh said that Wall Street has been focusing on select service and luxury, Red Roof has taken the time to heavily invest in capital improvements and such, to the tune of some $200 million. He said the recession actually helped Red Roof when it saw travelers moving from the select-service space to the economy space in an effort to save money. What they didn’t expect, he said, was the value. “I don’t need to move back up,” he said of travelers. “I’m getting all this with Red Roof.”