ORLANDO, FL—After a year that saw a number of changes at La Quinta Inns & Suites, not the least of which was becoming a public company, some 1,500 attendees at the lodging chain’s annual conference here at the Hilton Orlando were presented a positive performance picture by executives who expect the momentum to continue, driving franchise deals and greater expansion into next year.
Trading for almost a year on the New York Stock Exchange as La Quinta Holdings, Inc., the company showed an 8% increase in system-wide RevPAR, a 4.4% jump in ADR and occupancy hitting 66.8%.
The 47-year-old company also increased its franchised hotels by 8%, opening 45 properties last year (approximately 3,900 rooms), including its 500th franchised property in Ocean City, MD, giving the brand 867 hotels—a mix of corporate-owned and franchised—in the chain, representing some 86,000 rooms.
President and CEO Wayne Goldberg said “2014 was a very strong year for La Quinta across the board” for the select-service brand, which is positioned primarily in the midscale to upper-midscale segments.
The expansion on the franchise side will continue this year. The company has inked agreements for 207 hotels representing some 17,000 rooms—an 11% increase—including in international markets such as Canada, Colombia, Guatemala, Honduras, Mexico and Nicaragua.
“We continue to focus our growth in Latin American markets,” said Rajiv Trivedi, EVP and chief development officer. “We opened a new location in Mexico and have two new properties under construction. We added locations in two new countries, Nicaragua and Honduras, to our pipeline.”
Noting investing in the company meant more than buying shares in La Quinta stock, Goldberg said some 50% of franchise agreements signed over the past two years came from existing franchise partners. “You have confidence in La Quinta,” he told the audience of owners, general managers and corporate staff, adding the culture at La Quinta is as much a driver of positive results as anything else.
“A strong, positive culture translates directly to the bottom line,” said the CEO, noting the company remains focused on its core values: people, passion, integrity, excellence and unique.
COO Angelo Lombardi said the company also “invested significantly” in efforts launched last year to make guests feel “assured, settled in and optimistic,” expanding staff training programs to create better understanding and communication between guests and employees.
Brand differentiation remains a key focus. Last year, La Quinta developed and launched Ready for You (RFY), a mobile app that alerts guests when their rooms are ready. Guests booking on www.LQ.com may select the RFY feature and receive either a text or email alert. According to CMO Julie Cary, more than a third (35%) of the bookings on LQ.com are selecting the feature. “That’s a good number, but there are a number of ways we can make it great,” said Cary. “For instance, 77% of the time, guests are receiving notifications when they use Ready for You, which means we’re missing the mark about 23% of the time. Nearly one out of four guests who’s asked for Ready for You [isn’t] getting it.” The CMO suggested additional training could get the notifications up.
Additionally, last year, revenue from bookings made on the La Quinta website increased 8% over the previous year, and total electronic distribution revenues increased 16%, according to Cary. And, the more than 10 million La Quinta Returns loyalty members contributed more than 48% of room revenues system-wide.
Cary indicated La Quinta would look to further increase Returns members, while at the same time working to capture online bookings from OTAs. “Our strategy is to leverage the value of the OTAs for new guest acquisition. We’ll welcome these new customers by taking them through the third-party booking process. From there—and this is imperative—we must get those customer emails and sign them up for La Quinta Returns and put them in our program. And, we can give them special incentives to get them back in our hotels…then they’ll continue to book through our proprietary channels, driving loyalty.”
La Quinta also has been researching guest types who use select-service hotels and has zeroed in on three specific types that account for approximately 74% of nights booked at select-service hotels: the career commuter; the ‘bleisure-bound traveler’ (business into leisure); and the traditional tourist.
“We categorized the traveler segments with the greatest revenue potential so we could better tailor our messaging directly to them,” said Cary.
This year, technology is expected to differentiate the company even more, including internally. La Quinta franchisee Pradip Mulji, who owns a La Quinta Inn & Suites in Cedar Hill, TX, developed a proprietary mobile operations platform or, as it’s been aptly nicknamed, MOP.
The platform is geared toward housekeeping and front-desk staff, who, via a digital chart on a WiFi-enabled phone, are alerted in real time when a room is ready to be cleaned, when a guest has extended his/her stay and when a room is ready. Mulji added more capabilities, such as maintenance requests/responses; special guest requests, e.g., a crib; lost and found tracking; and the ability to record room inspections, among other functions.
The MOP has been adopted by La Quinta, which is rolling it out system-wide.
Also focused on being operationally efficient is La Quinta’s Del Sol prototype, a scalable model introduced last June. The first one is slated to open shortly in College Station, TX, coming out of the ground from A & M Developers, LLC, led by Principal Mukesh Patel and Managing Member Ajay Patel.
“We currently have another 45 Del Sol franchise hotels under construction or in the planning phase,” said Goldberg.
The CEO indicated there is no current intention to expand La Quinta into other tiers or extensions.
“I have people say to me, ‘Aren’t you at a disadvantage because you really are just a single brand vs. your competitors who have multiple brands?’ And, you know what I say to them? Show me. Show me one example where that is proven to be a disadvantage to us. They can’t because being a standalone brand isn’t a disadvantage. We’re focused on growing one, good-quality standalone brand,” said Goldberg.
And, the executive stressed there’s definitely room to grow. “Even with 867 hotels, we’re still half the size of our biggest competitors. They’re already in 93% of Smith Travel Research’s [STR] market tracts; we’re only in 65%. That leaves us a lot of room to continue to grow and we are growing,” said Goldberg, including Hampton, Holiday Inn Express, Fairfield Inn & Suites and Comfort Inn & Suites in the comp set.
During the general session, STR SVP Bobby Bowers presented an update on the U.S. lodging industry, indicating fundamentals remain strong, with overall occupancy at 64.6%, ADR at $115 and RevPAR at $74 [as of January]. Commenting on the La Quinta brand footprint, he noted it is “well positioned for growth,” adding it gained distribution in 10 new market tracts last year, and the company’s current pipeline will give it another 29 new market tracts.
Bowers noted five states showed the greatest RevPAR increases for La Quinta. These included Colorado (12.4%), Georgia (12%), Florida (10.7%), California (10.6%), and Texas (8.7%).
Goldberg said factors such as an economy that continues to improve, rising consumer confidence, a positive outlook for domestic and international travel, demand still outpacing supply, and having pricing power back in the industry’s hands all bode well for the brand. “The momentum we experienced last year has continued. The solid lodging environment is providing a nice tailwind to our operating performance and growth initiatives.”
“We are on a path to prove our brand is a force to reckoned with,” said Trivedi.
The company anticipates RevPAR on a system-wide, comparable hotel basis to increase between 5.5% and 7% for 2015 compared to last year, with 50 to 55 new franchise openings. HB