The current economic downturn has brought about many challenges for the lodging industry’s branded giants, not the least of which is selling hotel franchises. Faced not only with the difficulty of financing, owners and developers have to now look long and hard at all aspects of a property and its potential for profitability in an industry experiencing declining occupancy and ADR across the board.
But for franchisors, growing their pipelines is their proverbial bread and butter and it is as essential as ever. As such, they have incorporated a number of different strategies all aimed at a getting greater numbers of commitments for new deals going forward.
To get an idea of how competitive the current environment is and how serious these companies are, one does not need to look any further than the commitments made by many of their top executives. It is not uncommon these days for presidents or CEOs to work closely with the company’s top development executives and even, in some cases, get intimately involved in negotiations for the sake of helping to secure a deal.
For example, while still a relative newcomer at IHG headquarters in Atlanta, after almost five months on the job as IHG’s president of the Americas, Jim Abrahamson has proved to be a strong ally to IHG veteran James “Jim” Anhut, senior vp and chief development officer for the Americas, in helping to move the needle on franchise sales and development for all seven of the company’s brands.
“He’s brought to the table some owners and investor/developers he had relationships with in the past that we’re being introduced to, in some instances, for the first time, which has been incredibly productive and fruitful,” Anhut said.
During his first few months with IHG, Abrahamson said he’s been “very actively involved with our ownership group through all of our franchise sales opportunities and meeting with our development team and engaging on any project work where I can add value, and also with our existing franchisees. The majority of our new deals come from our existing ownership base. It’s been certainly a big part of my job and responsibility.”
Anhut noted IHG’s CEO, Andrew Cosslett, also practices what he preaches. “He didn’t just say that on stage. That guy is engaged. If I need him on a sales call, he’ll be there,” Anhut said. “Or if he can’t be there, he’ll pick up the phone or write a note. He’s very accessible.”
Another top executive that’s very accessible is Wyndham Worldwide’s Eric Danziger, who took over as president and CEO of the company and its 11 brands in December. At Parsippany, NJ-based Wyndham Worldwide and specifically its Wyndham Hotel Group, there’s been a tremendous shake-up in its management team and, consequently, its franchise sales strategy in recent months following Danziger’s arrival.
Since the appointment of Danziger, many other executives were brought into the management fold to bolster Wyndham. However, among those Wyndham veterans retained for their unique talents was Keith Pierce, who was recently appointed to the role of president of brand operations for the Americas. With his unique perspective, having served under the previous group regime, the enhancements at Wyndham—both for the company and its franchisees—have been rather evident to Pierce under Danziger’s leadership.
“A lot has occurred over the past six months that Eric has been on board,” Pierce explained. “He comes to the organization with obviously many years of hospitality experience. And one of the things he’s done is really focus on strengthening our overall value proposition, meaning specifically such things as customer service, training, revenue management, our quality assurance approach—all the components that make up the strength of a brand. It’s been refreshing to work with him on this improvement process. And he’s been pretty focused on what he wants and he moves quickly. It’s been good for all of us—the brands and our licensees.”
Pierce further noted that this new business philosophy was in many ways already in the process of formulation prior to Danziger’s arrival, as the company was trying to enhance its value proposition and be an easier hotel company to work with. For example, Pierce said, Wyndham had been attempting to reduce the organizational touch points for franchisees. “As senior brand leaders, we were moving in that new direction, but Eric’s arrival has taken us to that higher level,” Pierce said.
Along those same lines, since Danziger’s appointment, Pierce said there have been a number of franchisee-focused initiatives, such as the establishment of a new group called the “operating service desk,” as well as enhanced revenue management capabilities.
Pierce noted that it also doesn’t hurt that a true “hotel guy,” like Danziger, is now leading the company. “Eric clearly has the reputation of a guy that has success no matter where he’s stopped along the way in the hotel industry,” he said. “And I can tell you, having the opportunity to work with him, his actions reflect his reputation. Plus, I’m a hotel guy and when you have a hotel guy like him come in and say it’s going to be all about service to licensees and customer service, that philosophy and vision really makes it easier to operate day in and day out. We all have the support from the top.”
The team approach to franchise sales is a necessity when discussing a company the size of Beverly Hills, CA-based Hilton Hotels Corp., with some 10 brands and designs on increasing its distribution throughout the world. Hilton has set up a regional system with development executives in place for Europe and Africa and Asia Pacific and the Middle East in addition to the Americas. “They oversee their regions, all brands, both franchise and management,” said Hilton’s president of global development and real estate, Steve Goldman.
The group of regional executives meets with Goldman weekly to review various deals. These reviews are especially important now, given the economic downturn, where there may be delays because of difficulties in developers obtaining financing.
The regional heads also prepare weekly reports, which enable Goldman and other company senior executives, including CEO Christopher Nassetta, to keep abreast of key deals with that kind of frequency. “Basically, the regional heads have been given the authority to manage their own businesses,” Goldman noted.
In addition, the company maintains a highly detailed database that tracks every franchise and management agreement once it enters the pipeline from the time it’s an application to the time it comes out of the system. “Included is all the owner information plus the history of the project. Again, the idea is to enable brand vps and other executives to call up information on any particular deal in any region in the world and find out the latest status,” explained Hilton’s senior vp of development for the Americas, William Fortier.
For a more singularly focused company like Dallas-based La Quinta Corp., which boasts better than 700 hotels and more than 74,000 rooms, a team approach and accessibility is nothing new. Company President and CEO Wayne Goldberg and Executive VP of Franchising and Chief Development Officer Raj Trivedi, in fact, have been quite effective in helping gain distribution and moving the company forward, regardless of economic conditions.
“We haven’t changed the way we operate or the way we think because of the environment,” Goldberg said. “What we say around here is that our executive team, our leadership team, our entire company is an open book. Whether it’s a perspective franchisee, an existing franchisee, I am always available to our owners, our operators. If our franchise sales guys think it might give them an edge to go with them on a call, I’m available to do that. A franchisee can pick up the phone and call me personally. They can walk into my office any time. It’s franchise. It’s operations. It’s sales. I’m as available to my team as they believe I need to be.”
Goldberg and Trivedi, who have worked together for nine years, communicate almost daily and meet on a regular basis to keep current on company developments. Trivedi believes the interplay and dialogue are critical to the company’s progress.
“Without the guidance, without the exchange of ideas between the two of us, our company, particularly the franchise program, would not be as successful as it is. We talk about our strategy, we talk about our franchise development, our approach on franchise servicing, almost on a daily basis,” Trivedi said.
The approach by certain lodging companies that “everyone sells,” from front-desk staff to the CEO, is something the La Quinta executives are in accord with. “Everyone who works for this company in some way, shape or form is representing the company, whether you work the front desk, you’re the general manager or you’re a franchise owner…you’re selling the brand without formally selling, but you’re representing something that someone else might be interested in being a part of,” Goldberg said.
Franchise growth has certainly been a major focus at White Plains, NY-based Starwood Hotels & Resorts, which has strongly supported last year’s launch of its Aloft and Element brands. For example, Aloft has reached the 25-property mark already and shows no signs of slowing down, according to Paul Sacco, the company’s senior vp of North American development.
“Growth is certainly a major initiative. All of my colleagues in our leadership team are all pro smart-growth. We’re looking for the right partners in the right locations. We have the support of the senior leadership team,” Sacco said in reference to Simon Turner, Starwood’s president of global development, and Frits van Paasschen, the company’s president and CEO.
Sacco added the company relies heavily on a combination of loyal franchisees and a little creativity. “The deal opportunities are still out there, but the way we structure them may be a little different,” he said.
But not all brands have been hurt by the current economic conditions, according to Dean Savas, senior vp, of franchise at Carrollton, TX-based Accor North America, which includes the Motel 6 brand. “One fortunate aspect of development in the economy segment is the increased interest during difficult economic times,” he said.
Nevertheless, Savas noted that the team approach has been employed for quite some time and has been effective for Accor. “Bernard Rudler, executive vp of franchise, and I have always taken a hands-on approach by personally attending trade shows, conventions, regional meetings and traveling throughout the country, meeting prospective and existing franchisees. We continuously work with the field development staff to assist in evaluating each and every development opportunity and providing timely feedback,” he said.
Chicago-based Hyatt Hotels Corp., which has reallocated some of its resources to accommodate its full-service properties in addition to its select-service Hyatt Place brand, is also focused on its franchise partners, according to Jim Chu, the senior vp of owner relations and franchise support for Hyatt. “On the Hyatt Regency side, we have slowly entered the franchising market over the last couple of years and for the last six months we have been focusing our efforts on full-service franchising from a resources aspect,” he said. “We have brought on some new specialized people and are concentrating on high-quality assets and high-quality owners and managers because, with the right partners, we feel we can really grow our portfolio through franchising.”
Of course, that’s the goal for all of the aforementioned companies and just how much they can grow in a global recession is up for debate. But there is clearly no question that any slowdown in sales won’t be the result of a lack of commitment.