NATIONAL REPORT— You have to spend money to make money. The slogan may never replace the industry mantra of location, location, location, but it may run a close second in 2002 as brand purveyors find themselves slogging through a year that’s financially complicated on several levels. A key challenge for brands in 2002— even if Sept. 11 hadn’t happened— would be wrestling with staying profitable in an economy that’s expected to remain pretty stagnant until at least the third quarter. To do that, and with the added impact of the terrorist acts now layered onto both the economy and the industry, players are scrutinizing cash outflow to ensure it’s being maximized. Just how much is doled out— and on what— is critical. A sampling of companies shows budgetary issues are varied. Among major concerns are the spending on development growth, marketing programs, training, technology and financial assistance. Using Smith Travel Research classifications, HOTEL BUSINESS® asked representative brands if pinching pennies will help dollars make sense this year. Travelodge Spending At New Jersey-based Travelodge, president Robert Foley expects to spend only 10% more this year than in 2001 on the Cendant Corp. brand. “And it will be [spent]on us marketing the brand to potential franchisees,” he said. “Of a 100% pie, we’ll spend 30% on development, 40% on marketing, about 10% on training— it’s still a game of service and you still have to pay attention to that— 10% on technology upgrades and 10% on financial incentives.” With the lion’s share of the dollars, marketing will focus on “the franchisee’s customer, the guest, then marketing to that potential customer of ours, the franchisee. I’m still tasked with growing the brand, and that’s exactly what we’re going to do,” said Foley. As of Nov. 30, 2001 (Y-T-D; latest figures available), Travelodge opened 60 hotels for a total of 574, and Foley expected 75 at the close of the brand’s fiscal year in mid-January. “We’re projecting 65 openings in [fiscal]2002. The Southeast and Northeast are the two big targets, specifically Florida, the Carolinas, Pennsylvania and New York state,” he said. Of those, 90% will be conversions, with the remainder new-builds. “New-builds are very hard to get financed right now,” said Foley. “Conversions are pretty quick. In Florida, for example, we’ve added almost 40 properties there in the last three years. We want to look for opportunities there for folks who aren’t doing well, convert their properties, and help them to do better through our distribution channels.” Especially appealing is a combo pad, where lodging is adjacent to a restaurant, gas station or both. Forty two percent of Travelodges have a restaurant on the same plot of land. Asked if Cendant would consider building its own hotels in markets it wants to be in if financing proves difficult for franchisees to get, Doug Patterson, COO of Cendant’s Hotel Division, said, “We’re committed to our franchise model. That’s why we have re-organized the hotel division to provide superior service to franchisees and help ensure their profitability. We have no interest in owning or operating hotels, which could put us in direct competition with our franchisees.” As far as tightening purse strings, Foley said the brand is “very bullish on recovery,” but had “cut back on certain administrative expenses in the fourth quarter.” For example, the number of hours an ISP was used by field reps and “a lot of the normal, day-to-day operational expenses. It really helped in terms of balancing things because of the downturn of business,” he said. Beyond the strategies already in place, Foley said if an extra $1 million was dropped into his budget, he’d spend it on hiring and putting more people in the field to support local sales efforts. “It’s a war out there. We’ve got 40 direct competitors. Anything I can give to the franchisee out there that’s going to give them a one-upsmanship on those 40 competitors— there
