NEW YORK—Coming off a year that saw a Q4 RevPAR increase of 11.2%, close to 500 new hotels open globally and a year ahead that sees at least as many again in the pipeline, Choice Hotels International EVP/COO Pat Pacious sees nothing but momentum heading down the growth runway for the mega chain.
Pacious, who was here last month discussing the franchisor’s year-end results, indicated that, with 566 new franchise agreements inked, there’s nothing happenstance about the pace.
“There are two drivers: We have spent—particularly with our largest brand, Comfort Inn—an enormous amount of time in the past couple of years lifting the product. It has gotten better and, in 2014, its guest satisfaction scores hit an all-time high. Secondly, consumer demand is up,” he said, noting middle-class employment has risen, which toggles back to RevPAR increases in the segments Choice offers.
Similarly, the drop in gasoline prices is proving “net positive” for Choice, said Pacious. “If you think about it as a tax cut for consumers, there’s more money in their pockets and they’re more likely to travel. They’re also more likely to drive, because what we haven’t seen are airline prices come down… The majority of our portfolio is in those drive-to locations.”
While the bulk of projects remain conversions, 159 of the signed contracts are for new construction, a more than 70% increase over the 2013 period, with three brands in particular seeing new-build growth. For the Comfort brand, 70 deals were signed last year. Sleep Inn, which is offering its “Designed to Dream” new-construction prototype as part of a system-wide redesign, added 38 new-build contracts, a 50% gain over 2013.
And, Cambria is building on a prototype it launched at the end of January during the ALIS conference.
“We’re really looking at designing the brand for the consumer of today—the Millennial who’s coming up, the business traveler who’s looking for that design aspect. But, it’s also with the thought in mind that developers want to build an efficient building on an efficient footprint, ” said Pacious.
Developers on board with Cambria projects include Meyer Jabara Hotels (182 rooms in Washington, DC), Concord Hospitality (132 rooms in White Plains, NY) and O’Reilly Hospitality Management (129 rooms in Plano, TX).
Right now, new-construction Cambrias will utilize the prototype, whose room bays have been reconfigured to be“much more of a liveable space for work and leisure in the room,” said the COO.
For example, a daybed hugs a window wall in front of the bed, which faces away from the guest as he/she enters the room. A desk and seating are located behind and against the headboard, creating an economy of space for the components.
“It’s really a reaction to what we’re seeing in the marketplace, what consumers are asking for and also what we see from a design [perspective]that works in some of the Cambrias we have developed. It’s keeping the existing brand flavor but adding some of the design elements consumers are looking for,” said Pacious.
Other Cambrias slated to open include two in Manhattan and a flagship for the brand proximate Choice’s headquarters in Rockville, MD.
One of the most notable changes for Choice this year is the paradigm shift in its soft brand, the upscale Ascend Hotel Collection, which added nine hotels last year. Historically a group of independent boutique/historic hotels that have come under the Choice umbrella for support services such as marketing, technology and reservations, the portfolio in 2015 includes agreements for 11 purpose-built Ascends.
A “significant amount” will be built in New York City, said Pacious. “For us, it’s really showing the value of the distribution platform that these developers want to plug into.”
Ascend also is seeing significant growth overseas and in the Caribbean, said the COO. Locations include Australia, Canada, Curaçao, Ireland and St. Maarten.
Overall brand expansion in Europe has been a focus for Choice CEO Steve Joyce, and Pacious sees opportunity coming largely from conversions. “That’s our sweet spot. We see great opportunity particularly in Western Europe—the U.K., France and Germany—where we have an established presence. Last year, we established a regional office in Amsterdam to drive growth. We’re pretty excited about the opportunity there. Right now, Europe’s in a bit of a slowdown. It looks like they’re going to go through a bit of turbulence over the next 18 months or so, but we always see that as a time for opportunity as hotels are looking for distribution, particularly in markets as they begin to slow down,” said the executive.
Plans to expand in Asia are in focus as well. The chain last year connected with a developer that is building a Quality Inn and a Clarion. “You have to find the right partner,” he said, particularly in a market where a franchise model is not the norm.
Choice also entered Turkey with two new Clarions.
Pacious sees the U.S. lodging industry’s next great target—Cuba—as a “great opportunity,” particularly with the amount of inventory Choice has in the Caribbean. “We think tourism, particularly since it hasn’t been open [to Americans]for the past 50 years, will be a big driver. U.S. consumers will want to experience Cuba, experience the cultural aspects of it. And, there’s also a large Cuban-American community here as well,” he said.
In addition to bricks and mortar, Choice anticipates continued growth of its cloud-based SkyTouch Technology platform, which has generated approximately $30 million in revenue on the chain side, with third-party revenue at some $600,000.
“It’s just starting to build,” said Pacious. “We have 97 hotels signed up for the system, representing about 6,800 rooms. We’re starting to see the pace of contracts pick up and we’re also in some pretty deep discussions with some larger chains.”
Choice in January inked a contract with G6 Hospitality, LLC, which operates and franchises the Motel 6 and Studio 6 brands, to provide a PMS for its Mexican/Latin American properties (Hotel 6 and Estudio 6 in those markets). Others include Cobblestone Hotels and Vantage Hospitality Group, said Pacious.
Noting Choice has been involved in technology for some 30 years, the COO felt SkyTouch puts the company in a different light beyond being just a franchisor. “Where we see SkyTouch going over the longer term is it may evolve into something more than just a hotel operating system. It may truly be a platform company that others would want to build applications on top of. When you look at what’s starting to go on inside a hotel today—the amount of digital and mobile services, everything from mobile check-in to ordering food to, ‘Hey, what’s going on in the neighbourhood?’—we think there’s a real opportunity there for companies like ours that have that platform to grow just beyond processing checking in and checking out of a hotel, and whether the room is ready. That’s really the vision that we see, and others see it as well. So, we feel like we’re in a good place.”