David KongSome analysts predict that midscale hotels will get squeezed out of the recovery as wealthier travelers return to luxury while everyone else goes budget. Don't tell that to David Kong, CEO of Best Western International, the global chain of more than 4,100 individually owned hotels. Kong says his company's affiliates are getting their fair share of the rebound through a combination of improvements -- about 40% of the chain's North American hotels have been upgraded to the new Best Western Plus brand -- and long-standing partnerships with groups such as AAA. Since becoming CEO in 2004, Kong has also expanded the chain to more than 100 countries from about 80. He recently spoke with hotels editor Danny King about the company's plans.

Q: Last year, you started converting Best Westerns to Best Western Plus and Best Western Premier properties. How has that program been received?

It's been very successful. In less than a year, we have 850 Best Western Plus hotels and almost 20 Best Western Premiers, in addition to the 1,300 other Best Western hotels. They've been very well received. With Plus, the hotels are upper midscale, so they compete with brands like Hampton and Holiday Inn.

The owners didn't have to spend a lot of money, because those hotels were already AAA Three Diamond hotels. We have some brand requirements, things like ... toiletries, towel size and weight, sheets, bed covers. When people walk into a Best Western Plus, people know right away that this hotel offers more than the regular hotels.

Q: Analysts have predicted that the hotel industry will mirror the general economy of "haves" and "have-nots," with both upscale and budget hotels getting the bulk of the spending rebound and the midscale hotels getting squeezed out.

I can understand why people say midscale would perform less, but you need to look at how far they went down in the recession. Luxury hotels went down by 23%, upscale by 17%. Midscale only went down 14% to 15%. And Best Western has been outperforming the industry for a long time. We're seeing double-digit growth.

Q: Since being named CEO in 2004, you've seen two upswings and a big downturn. What have you learned from the experience?

I've actually seen two downturns, since I joined Best Western in 2001. The lesson ... is the importance of relationships. We just won the Lodging Partner of the Year with AAA for the fourth year in a row. The big deal is market share. When AAA's business goes down like everyone's did, our market share actually went up, so we were about even during the downturn, whereas it was a double whammy for others. If we have the kind of relationships that we have with AAA, then we're more shielded from the downturns.

Q: Best Western was the first commercial partner of the Room Key search engine that some major hotel companies launched this year. How has that gone?

We have high hopes, but we're channel-agnostic. Part of our brand strategy is to make it easy for customers, regardless of where those customers book. We have a direct-connect booking engine, where any travel intermediary can come to us and access our inventory and rates. Whether it's Room Key or Expedia, it's all about whomever can drive business to us. ... There's no way a hotel can fill itself with the highest-priced business, but the key is to optimize.

Q: Many hotel companies are concerned that online travel agencies (OTAs) take too large a share of distribution revenue. Do you agree?

Ultimately, it's a zero-sum game. OTAs don't create a lot of increased demand, and the hotels that give big discounts through OTAs are reducing their profitability. You've got to take some of the business for market share, but you've got to watch yourself and not get hooked on it. The discussion is very apropos as the industry recovers, but the situation will probably improve on its own.

Take Google and their maps. Click on the hotels in the maps and it shows their rates, and the hotels have rate-parity agreements, so the OTAs can't undersell us. It corrects the impression that the OTAs' rates are cheaper. What Google is doing will take away a huge advantage these companies have. [OTAs] are selling discounts, but their rates aren't any cheaper, so that takes away their value proposition.

Q: Where is Best Western expanding overseas?

Asia's been a primary focus since I've been CEO. Demand is ever rising, just like demand for raw materials, and there's a shortage of hotel rooms. South America has been a very strong focus for us. We have 20-some hotels under development in the Middle East. North Africa, West Africa and South Africa are all also quite promising for us.

Q: You've worked extensively with the U.S. Department of Commerce on behalf of the tourism industry. What kind of strides has the U.S. government made there?

The visa requirements have been a deterrent for people. It doesn't make sense for people to wait a couple months to get a visa; how will they plan their trip? The Commerce Department has listened, and they've set a goal to reduce wait time, especially from China and Brazil, which are important markets. And Homeland Security is training TSA agents to be more welcoming. It's not easy to come from abroad, not speaking the language, and encountering difficulties with customs and immigration. But Homeland Security is expanding the number of visa-waiver countries. So that's all good news.

For hotel and hospitality news, follow Danny King on Twitter @dktravelweekly.
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