While many U.S. hotel companies go after what industry analysts say will be a continued rebound in luxury-lodging spending, Choice Hotels International CEO Stephen Joyce is confident that his company will get its fair share of travel dollars in the economy and midscale markets. Joyce, whose company franchises brands such as Econo Lodge and Rodeway Inn, says Choice will benefit from shrinking supply in those sectors. Meanwhile, Choice is instituting upgrades across its flagship Comfort Inn and Comfort Suites brands. Joyce spoke with hotels editor Danny King at the Americas Lodging Investment Summit in Los Angeles.
Q: Why is Choice deciding to institute upgrades to the Comfort brands now?
A: It was time. We took advantage of the downturn and hired [New York-based architecture firm] Gensler; the only time I worked with them before was with Ritz-Carlton. We want to have Comfort be one of the brands to be reckoned with once again and be first in mind with developers.
Q: What kind of upgrades will there be, and how much will the improvements cost franchisees?
A: We'll bring in LCD TVs, very attractive use of millwork, and we'll use regional art that will give the hotels a sense of place. The rooms will have a much richer feel, and the redesign will transport an existing Comfort Inn room that hasn't been redone for a couple of years into one that feels upscale. For a complete renovation of a 70- to 80-room hotel, you're probably talking about a couple hundred thousand dollars. We could easily see a $5 to $10 movement in rate.
Q: A couple of years ago, the most buzzed-about sector was boutique. Now, it appears to be select-service. Is this move a response to that trend?
A: The biggest activity for development is going to be that upper-moderate tier. But then, the interesting space is the space below those hotels, where you're seeing a fair amount of expansion with [Holiday Inn] Express and Fairfield, and our system. There's a relative sweet spot of large consumer demand in that segment, because consumers ... do want access to food, and they do want an upscale feel and touch, but they want it at a price point that's more value-oriented.
Q: Wells Fargo chief economist John Sylvia spoke at the conference of a two-tiered U.S. economy that implied that luxury spending would grow while brands serving the economy sector would suffer. Is that a point of concern for you?
A: No. What he's failing to recognize is that the moderate tier and below is a shrinking-supply equation. Nobody's building product, and you've got relatively strong demand growth -- not as strong as luxury, but you also have excess capacity in luxury that you're beginning to see utilized. ...Normally in this cycle of recovery, we would be way behind. It's usually urban first, then dense suburban, then tertiary, then the rest of it -- which is our footprint because we're heavily highway -- but our gains [in revenue per available room] are at the same or better than the other categories out there.
Q: Choice is one of the six founding companies of RoomKey.com. Why do you think Room Key may pull consumers away from the online travel agencies to which they've become accustomed?
A: Those sites aren't necessarily the best option for the consumer because they don't end up with necessarily the lowest rate, and they don't have the points or the loyalty programs. The other piece of it is that there's no reason why airlines and car rental companies won't eventually end up on the site, and I hope that's where we get to rapidly, because that will really give the consumers the opportunities they want.
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