T
here’s only a handful of lodging CEOs who hold sway over thousands of hotels across the globe and at least an equal number of employees.
And Stephen P. Joyce just happens to be one of them. If truth be told, though, happenstance never had anything to do with it.
“I always wanted to be a CEO,” Joyce told an interested observer, a statement not so far afield for a man who has spent the bulk of his life climbing the corporate lodging ladder; however, the pronouncement was uttered decades ago when eight-year-old Stevie J. was asked what he wanted to be when he grew up.
While at the time he may not have had hotels in mind as his executive bailiwick, he just knew a C-suite somewhere, someday, would fit his professional purpose perfectly.
And so it does.
Having just completed his fifth year as chief executive officer for publicly traded Choice Hotels International, Joyce exudes a distinct—some would say almost cocky—level of confidence in the franchise organization he helms.
Gone are the statements of assurance to franchisees about no longer being a “Marriott guy” that seemed de rigueur when he came to Choice after 26 years with “that” global chain. Now, there is no question that Joyce IS Choice when he struts on stage at the group’s annual convention and tells more than 5,300 attendees his move stemmed from knowing “It was the right time. The right brands. The right team. And most importantly, the right franchisees.”
Knowing internally what’s right for himself and figuring out what’s right for the entity he’s been entrusted with have gone hand-in-glove for Joyce.
So it’s no surprise that he’s been dancing to his own drummer—although shareholders help keep the beat—when it comes to expanding the chain outside of the U.S.
While others chains methodically mouth China/India, India/China when asked where’s the next expansion push, Joyce and his team come like a breath of fresh air and say distinctly: Europe.
Choice is no stranger to the Continent, where it has close to 420 hotels (43,936 rooms) represented predominantly by its Clarion, Comfort and Quality brands, and Joyce sees room for more, much more.
“Depending on how you look at Europe, it’s one of the largest hotel markets in the world and it is a conversion game; there will be no new builds in Europe for years and years,” said Joyce. “Europe is largely unbranded and wants to be branded.”
Toward that, the CEO noted “It’s also a set of properties not easily branded into brands that have to have strong product consistency. So the bigger brands struggle with the conversion business over there because a lot of the properties are smaller than 50 to 60 rooms and a lot of them have four different room types, which drives a lot of the brands crazy.”
Sounding almost gleeful in the next breath, however, Joyce said of such a skewed scenario: “That’s our specialty.”
The CEO is quick to back up the touted expertise. “In the last 18 months we’ve already done 55 hotels and we’ve introduced our technology platform for the first time into Europe. So our value proposition has gone from being pretty average to what we think is going to be pretty compelling. Our CRS contribution this year alone is up 14 percent and properties as they switch to our choiceADVANTAGE (CA) platform are seeing, on average, sort of a 50 percent in central reservations contribution, and in some cases, as much as double.”
ChoiceADVANTAGE is the company’s proprietary cloud-based property management system.
“It’s not to say that China and India are not vibrant, important markets to us; we’ve got strategies there as well that will see us continue to develop,” said Mark Pearce, SVP/International Division. Choice currently has 28 hotels in India and three in China, where it recently inked a deal to develop Clarions. “What a lot of people don’t know is that if you look at markets like Scandinavia, Australia, Japan, Canada, even Brazil, these are markets internationally where Choice actually is the leader in terms of number of hotels,” said Pearce.
Choice operates via two business models internationally: either through wholly owned subsidiaries using direct franchising or, as in Scandinavia and Ireland, through a master franchise agreement. “These are really well-established hoteliers. They own, they operate, they’re a management company, they’ve got years and years of experience and they take lead positions in their markets,” said Pearce.
As it looks to Europe Choice also is looking to some of the dynamics it has going in the U.S. For example, the company is in discussions for a number of portfolios that are looking to create more value within themselves, either because a financial institution took them over or because there’s a new owner. “There are a number of such deals we’re looking at in the States and we’re starting to see the beginning of that in Europe, as well,” said Joyce.
The financial crisis in Europe also is abetting Choice’s plans.
“When you think about an individual hotelier in Europe trying to compete in an economic downturn in things like e-commerce, social media and all the things a brand company brings to the table, that’s often when hoteliers look for brand affiliation because they’re finding it more and more challenging to break through and be noticed by a customer
base,” said Pearce. “In good times they’re riding the wave; in bad times they’ve got to create demand and take share. We often find independent hoteliers look to branding and we capitalize on that.”
Joyce agreed: “For the conversion business typically a downturn and then recovery is good for that business…we actually think the financial crisis and everything that’s been going on there in the long run will actually benefit our conversion activity,” said Joyce.
Pearce sees the eclectic Ascend Hotel Collection as the next good fit in Europe, due, in part, to the unique characteristics that apply to most Ascend properties and which would play well against conversions of independent properties.
While ambitious, Joyce also is realistic about short-term goals in the European market.
“If you look at what we do in the States in a typical year, we might do 600, 700 deals [Choice recently opened its 5,000th hotel in the U.S.]. I don’t’ know that we’ll get to that level in Europe, but it’s the same size market and it’s heavily conversions. We view Europe as our next biggest growth opportunity and I think we could easily see within the next couple of years going from 55 every 18 months to doing 75 to 100 a year,” he said.
Similarly, the CEO said the hotel base in Europe mimics the U.S.: family-owned and –operated, one to two units. “We think in Europe we may see more portfolio activity, but we
also expect to build the business very similar to the way we do it in the States, i.e., organically, a couple of hotels at a time,” he said.
Given the large pool of hotels “that’s another reason why Choice is actively investing in Europe,” said Pearce. “We have been converting hotels one at a time and our value proposition has been building over the past few years. As our CRS delivery is escalating across these models, we’re starting to see more multiple-property owners now.”
While Choice is eager to pick up on discounted properties, Pearce said the deals have to also be a good fit for a particular Choice brand. “If it doesn’t [fit], we will walk from it because we’re very aware that we don’t want to find ourselves in the situation where we’re building brand representation that is so far off the mark,” he said.
One of the strong legs supporting Choice in its European expansion efforts is choiceADVANTAGE, which has been functioning in the U.S. for the past decade and which recently has been introduced in Europe. (The Comfort Hotel De L’Europe, Saint-Nazaire in France was the 5,000th Choice hotel to have it installed.)
In deploying the CA platform, Joyce felt the chain is setting the stage for Choice to be “the easiest conversion brand out there” for European hoteliers. “You don’t have to buy a server, you don’t need to do cabling, you don’t need an air conditioner for the server, you don’t need personnel to oversee the server. If you have access to the Internet, you have access to our platform,” said Joyce, adding the platform will be in place internationally within the next year to 18 months.
The CEO noted getting European hoteliers to embrace the platform being offered has not been overly difficult. “Like anything else, you have early adopters who see the potential. Then when they see what they’re getting in terms of res contribution, then that gets the other owners excited and moves them toward it,” said Joyce. “The story tells itself.”
He noted the only cost, which Choice helps share in a rollout, is training. At the corporate level, Choice has invested approximately $20 million into the CA technology and other distribution channels during the past three to four years at the international level.
The executive stressed Choice is going to be spending “a fair amount of money” to drive awareness, its loyalty program Choice Privileges, and other distribution channels “so that we are considered—like we are in the States—one of the stronger revenue generators in terms of brand companies.”
Technology apparently is serving Choice well, a far cry from what Joyce encountered when he joined the company. “We have gone from a technology infrastructure that was at best case lagging behind the industry to
one that’s probably in the leadership position,” he said.
“Let’s face it,” said Pearce, “Technology is the driver, technology is the enabler. It won’t in itself create bookings, but it facilitates bookings to happen through our distribution channels.”
For example, ChoiceHotels.com generated $1 billion last year and there have been 30 $10 million days so far this year, including eight $11 million dollar days, via the CRS.
Pearce noted the Internet is a developing channel for Choice in Europe. “Later this year we are going to be relaunching the architecture for our international web platform. That will be extremely robust. It’s a growing platform for us: mobile technology, mobile app, iPhone app, etc.”
Even as Europe is in the spotlight, there are other considerations for the company. With nearly a dozen brands, Joyce still sees room for more. “I’d like Choice to have a full-service, value-based brand—we’re going to continue to look for that—and I like the upscale, extended-stay space as well; Residence Inn was probably the best brand I ever worked with. Based on opportunity and focus, we’ll work on those.”
Joyce acknowledged the current stable really doesn’t have a “sexy” brand like many in his comp set have debuted. “We have a mainstream set of brands. We’re the hotel chain of choice for the 99 percent; people are looking for value and a scenario where they’re not paying extra fees, where they know they’re going to get strong value for the dollars paid, that it’s consistently going to be an experience that’s friendly, clean and hospitable. It’s not as interesting but, hey, we led RevPAR for the first quarter. There’s a value focus in the American consumer’s mind that
puts us in a pretty good position even if our brands aren’t the sexiest brands out there.”
In terms of what might be “the next big thing” for the industry, Joyce, who has been involved on many levels in hospitality, including recently serving for two years as national chairman of the 1,500-member U.S. Travel Association, felt the distribution game is going to be the biggest challenge over the next five years, “and will sort of determine winner and losers.” In addition to that, he felt international growth patterns and emerging markets as they develop will be better for Choice. “One of the reasons you don’t see us focused as much on China and India today as we will five or 10 years from now is because right now those aren’t great franchise markets; they’re mostly being entered by people who are managing hotels. That’s why Europe represents the best target for us. Those emerging markets, as they develop more middle class that can pay mid rates, will become more attractive to us.”
Joyce added choiceADVANTAGE “gives us some interesting ideas around exploiting and monetizing that. We think our customer base allows us to expand into some other complementary businesses (such as licensing in timeshare and vacation rentals).”
While the CEO feels he and his teams have accomplished a lot in the past several years, he’s eager to do more, recently re-inking his contract for another five years.
“When I came to Choice I saw the potential of a platform to become truly one of the large global leaders in the industry, and I think we’ve made progress but I think we have a ways to go to stake our claim to be one of the world’s leading hotel companies. That is something that is a huge motivator for me,” said the CEO.