It’s been a busy couple months for Choice Hotels International. In December, the company acquired WoodSpring Suites in a US$231 million deal that adds nearly 240 extended-stay hotels to the company’s portfolio. More recently, the company launched ChoiceEdge, a cloud-based global reservation system and digital analytics program which will ultimately allow the company to offer faster-to-market new products and third-party connectivity.
HOTELS recently caught up with Choice CEO Pat Pacious, who took over that role from Steve Joyce back in July.
HOTELS: Let’s start with ChoiceEdge: what’s this going to do in terms of driving more bookings?
Pat Pacious: You think about what’s happening the digital space and you think about the number of transactions, both shopping and booking transactions: they’re growing exponentially. And you think about the infrastructure that the hotel industry as a whole has, it’s pretty old. Most of it was built in the 1980s and 1990s, so just like the infrastructure in the country, it needs to be updated. A lot of what it’s going to do is help our franchisees deal with the volume of transactions, the velocity of which you have to be able to connect with other third parties. And then the variety of information, so it’s not just is the room available, but what’s it cost, all the content that goes along with it, pictures, descriptions, how close am I to the convention center, the variety of data points that have to be shared with third parties and shared between hotels and the central reservations system just continue to expand.
H: Any learns or tweaks through this process?
PP: Most of it has been surprises on the upside. The ability to ingest huge amounts of third-party data, and I’m talking census data, weather data, whatever it might be that we want to bring onto the platform, we have the capacity to do that. Secondly, because it’s all in the Cloud, you don’t have to run a disaster recovery site, so it’s basically half the cost because you don’t have to have a sort of warm site ready to go in case your main site goes down.
H: What’s the projected ROI on something of this scale?
PP: The last one lasted 30 years, so the ROI is pretty high. When you’re talking tens of millions of dollars, that’s going to support seven billion dollars’ worth of transactions, on an annual basis, the ROI is pretty significant.
H: Can you talk more in depth or are you able to throw out a number?
PP: I can’t throw out a number.
H: Or a percentage?
PP: It’s like the infrastructure in the country: you build a bridge and it lasts for thirty years.
H: Well, sure, but what’s interesting is that not everybody’s building that bridge.
PP: We’re long-term holders, meaning we have a long-term view. The company’s been around 79 years, so we want to be around for another 79, and you periodically have to go back and kind of re-tool the plant. The thing was, the technology was there to do it in a way that we think is going to set us up for the world of personalization, artificial intelligence, data mining, all those things that are coming today.
H: is this an area where the rest of the industry isn’t willing put the big dollars in that kind of tech investment?
PP: I think most of the industry is lagging behind. Most of the industry has outsourced their reservation systems, and we have always been someone that looked at it and said our core business value proposition for our franchisees is our ability to deliver business and a lot of that is digitally enabled today.
H: In terms of the WoodSpring Suites acquisition, you’ve said Extended Stay is definitely a big opportunity for Choice.
PP: Extended Stay was the fastest growing segment from a RevPar perspective last year. WoodSpring, in particular, if you go back and look over the last three years, had 25% net unit growth. We had about 100 Extended Stay hotels before, so we will now triple our number of hotels in our portfolio.
H: You’ve said one of your goals as CEO is to kind of capitalize on the upscale opportunity. Has it been a challenge when Choice is known more for its mid-scale brands?
PP: We don’t look at it as a challenge, we look at it as an opportunity. If you look at our two brands there, we have Cambria, with 37 open hotels. And it’s in top markets like New Orleans, Nashville, we just opened a couple in New York, two in Chicago, one at LAX. So we’re putting the hotels in highly visible locations, which is a great both for the developers and also for brand awareness.
H: You’ve also said come of Choice’s mid-scale brands need a refresh. What will that look like in more concrete terms?
PP: If you look at what we’ve done with Comfort Inn, that was a brand that five years ago, we really took a hard look at and said we need to refresh. Some of that involved investment by our franchisees and by Choice Hotels to improve the core product with significant amount of dollars going into PIPS. A lot of it has gone into new development. About two-thirds of the deals we’re selling today are new construction. And then we did take some of the hotels in the lower end of the portfolio that no longer made sense for the owner to invest and move those to other brands within the Choice Hotel family.
H: What about on the design end?
PP: A lot of it is looking at the prototype and going to more communal tables, soft seating as opposed to what used to look more like cafeteria. Communal tables, lots of chargers, and a breakfast area and lobby that’s has much more of an open feel.
H: How would you say your strategy differs from Steve Joyce’s? And how does it line up??
PP: Steve and I worked together for ten years. He and I were responsible for a lot of the current strategy we’re executing today. The momentum we’ve had in upscale, we’re going to continue to do that. We’re continuing to invest the company’s balance sheet into the right Cambria projects. The Ascend Collection has been another one, a little bit of a surprise to us. We were the first to launch the soft brand, but it’s got over 200 hotels open, another 50 in the pipeline worldwide. It’s the largest soft brand out there and been a huge success for us as a company.
On the digital front, I do come from more of a technology background. When I think about our company, we really sit at this intersection of franchising hospitality and technology. On the technology side of the house, we’re really a platform company. We have seven billion dollars’ worth of transactions every year, two hundred million guests that come onto that platform, and every night we have 500,000 hotel rooms to sell. Technology is really enabling that platform to grow. We just launched a service with Delivery.com. So through our mobile app, as a Choice Privileges member, you can earn points when you order in food or groceries or dry cleaning, all of it delivered to your hotel room. So again, it’s allowing us to use technology in a new way to engage with the end consumer, the guest who’s staying in the hotel, and creating more value for them.
H: And where is Choice at with digital assistants and A.I.?
PP: I think a lot of companies make the mistake of thinking they have to have all the technology in the room. The guests are bringing their own technology. The consumers are bringing their own technology, how they want to interact with media, those types of things, and so we are looking at things that can help our guests connect to that broader world, like Delivery.com.
H: And what about A.I. bookings?
PP: We have looked, we have figured out how to do it in the lab. Now it’s a question of how is that actually going to enter the marketplace. I do think it’ll be another channel, just like call centers are a channel and GDS is a channel. These channels don’t go away. People are always saying, “Oh, the travel agent’s going to go away.” They haven’t gone away. The digital assistants and voice based search is the next new channel to be added. And again, when that happens, you’re going to have to be running off of a state-of-the-art shopping and booking transaction platform like we have.
H: With regard to the #MeToo movement, how is choice from an operational standpoint ensuring that it’s protecting staff?
PP: We’ve had conversations at all levels of our company. We’re just starting to engage with our franchisees on that front as well. When we think about the #MeToo movement, and we think about a “speak up” culture, we want to make sure that Choice Hotels is on the forefront of that. I have a point of view that it’s not just that we have to have a “speak up” culture, we have to have a “listen up” culture, which means leaders need to be listening for people who are feeling disrespected or have had something happen to them. Because they don’t always tell HR or tell their leader, they tell a peer. So that’s how we’ve approached it. It is very high on our agenda.
H: And what are those conversations looking like with franchisees?
PP: A lot of it is training. We’re beginning conversations with our franchisee associations on how we can help them at the sort of local level; bring some of that learning into their hotels if they don’t already have it. It’s much tougher for a single mom and pop type operator of a hotel to afford that content. Choice University, which is our online learning platform, has significant number of modules and it’s not all hospitality based. A lot of it is just, how do you run a small business. So we’re considering looking to third parties who can provide that training around sexual harassment, around disrespect in the work place, and bringing that to hotel owners so they can access it at a much cheaper price because they’re part of the Choice Hotel system.
This interview was edited for space.