Brian Garvan, director of sales, UK at Choice Hotels, talks to ABTN about how the hotel group has fared in the recession, and what 2011 has in store.
Choice Hotels has a global network of more than 6,000 hotels with over 800 hotels under construction, awaiting conversion or approved for development, including 40 in Europe. During 2010 more than thirty new hotels opened in Europe.
Tell us about Choice Hotels...
We are one of the biggest hotel franchising companies in the world. We have more than 6,000 properties globally, of which around 4,500 are in the US and we are very much an American company in origin. The Quality brand goes back to the 1930s. Internationally we have 11 brands in the family, from the well known Comfort Inns down to Quality Inns and some brands introduced recently such as the Ascend Collection, which are boutique or historic hotels, solely in the US at the moment – in Manhattan. We also have Cambria Suites which is an all-suite concept. Something of a crossover between a long stay product and a standard hotel room. You have a four-star standard of accommodation and a separate living and sleeping area, but they have gyms and restaurants so they are more fully featured than some of the economy brands we have.
In Europe, we have three principle brands that we operate. Comfort Inn is a two- or three-star limited service offering. They have city centre locations, and a hotel product orientated around the rooms, not necessarily with gyms or restaurants, although breakfast is included at all locations. Quality Hotels are three or four star.
Why the difference in brands?
Well, a four star product works better in certain locations such as London. It is a more fully featured product. They mostly have restaurants, meeting rooms, gym facilities or swimming pools in a lot of locations outside London.
Then you move up to Clarion which is present in a lot of the larger cities around continental Europe. And that is a four-star plus full featured product, much larger in scale. Examples are the Clarion Hotel Stockholm, a 550 room hotel that opened two and a half years ago, and the Clarion Congress Hotel Prague – we have the second largest conferencing hotel in the city, with 580 rooms. It's a different scale of product.
How many hotels do you have in the UK and Ireland?
Forty properties in the UK, and eight in Ireland. In the UK we have about 22 Comfort Inns, 17 Quality and one Clarion in Northern Ireland.
The ownership structure varies from country to country. We broadly operate through two methods globally. One is through master franchises where we operate through a management company in a particular country and they own the rights to the brands in that market. And then we operate direct franchising in other markets. Europe is entirely direct franchising with the exception of the Republic of Ireland and the Scandinavian region, and that’s because of legacy relationships that go back a long time and those companies have been very successful in those markets.
More recently with some of the challenges in raising debt for projects, franchising has become a very popular model for all the major hotel brands, and Choice Hotels has moved away from master franchise agreements in Europe, starting in Germany back in 2006, France the following year, the UK moved to direct franchising in 2008 and then last year [2010] they bought out their partner in India, so India is now 100% direct franchising. It is a strategy moving forward.
And the future?
We are bringing on more hotels, and we are hiring a new SVP in franchise development, responsible for signing new products across Europe, so that will have a positive impact in the growth of the portfolio of the hotels, but I don’t want to give a target. When you look at how the company has grown in the US, where there has been a focus on growth, now a lot of the intention of the senior management in the US is looking at new markets and new opportunities, because to some degree opportunities for future growth are exhausted when you have 4,500 hotels across the country. They are looking at Europe for new opportunities to push the franchise model across the continent.
What are your strengths compared to the competition in the UK?
We have that family of brands. The Comfort aligns with the Premier Inn and Travelodge type of product. We have a product which sits in the middle, the Quality, and we have the more fully featured Clarion product. We have those options, and you can collect points across that range of hotels. If you are travelling for business in Comfort Inns, you can take the points you earn through the Choice Privileges programme and use them to stay in a four star plus hotel in another country in another profile brand. It marks us as distinct from some of the more economy orientated operations.
We also offer consistent brand standards compared with independent hotels. We have sought to upgrade those over the last 18 months and we’ve had a programme to introduce new brand standards engaging in everything from the bedding, free breakfasts, free internet, and technology at the front desks to improve the customer experience. That’s security in the mind of a traveller, because they know when they travel to a Comfort Inn in Scandinavia or the Czech Republic they can have standards set to some degree centrally and they know what type of product they are going to get when they get there. Above and beyond that they’ve got access to our frequent traveller programme so they can collect points across 11 brands globally.
You have 11 million members worldwide in the Choice Privileges programme?
Yes, we’ve been pushing it in the UK. We see it as a key way of driving interest and driving loyalty and we’ve been trying to Europeanise the programme. We have just signed Air Berlin as a partner. People with Air Berlin Top Bonus cards can exchange cards with our Choice Privileges programme, so that adds to the value and increases our online distribution. We now have about 80,000 members in Europe, for a programme that’s been running for about two years, so we’ve not done badly signing up. We have an exchange programme with Summit and Preferred Hotels so points can be exchanged there.
The UK website seems to need some development.
This year we will be migrating the local websites for UK, France, and Germany onto the Choicehotels.com platform which is one of the most popular websites in the world. Some of the messaging on there can be US-centric at the moment, but there is development work going on so it can recognise where the user is logging in from, for instance.
Are you more business or leisure in terms of customer base?
In the UK it’s probably a split of fifty fifty, but it depends on the location of the property. In London, as you’d expect, there’s a corporate bias, whereas in other locations it’s more leisure.
Do you deal with corporate accounts?
We do, yes. We are very active and work with the major travel management companies (TMCs). We have preferred agreements in place with American Express, Carlson Wagonlit and BCD. They are global agreement so ensure benefits for the clients of those organisations as well as our franchises. It brings engagement with their consulting arms and with their clients we have negotiated rates in place with clients who use the major TMCs. We also work directly with the smaller companies with a part client or even with a specific hotel, we can negotiate a rate depending on the procurement requirements to organise a fixed rate or whatever is required.
Has the downturn been good in that people focus on affordability?
It has, but then equally we haven’t got as much space to reduce rates as much as our upscale competitors. That said, we’ve seen growth in room rates and average daily rate in recent years. We’ve not really experienced any recession to be honest. It’s partly our insistence on value proposition. Going back, we didn’t offer free internet and we didn’t have our brand standards defined in the way we do today. Now we hit home to corporate clients that we are a very nice option if you’re looking for affordable prices, an inclusive package, perhaps. Providing the breakfast and the internet, we come in very competitively. Often you are looking at other chains or independent hotels, by the time you’ve taken the room rates and added breakfast and 24 hour wifi internet connection, you can be looking at double digit percentage rises in the actual spend so we try and avoid that. We are conscious that people are looking at the total cost of travel, so try and fold in as much benefit as we can.
And what will 2011 hold for you?
It’s very difficult to tell. We’ve been very strong through what has been for the industry a period of weak trading. We’ve benefited particularly in London – 17 of our hotels are in and around the M25, so that’s a London bias which means we’ve been able to take advantage of leisure travel from the continent which has buoyed the dips we’ve seen in some of the corporate segments. Public sector stayed very strong through 2009-2010 and that’s unlikely to maintain any strength in 2011. What will happen to the pound? It has been weak which has encouraged tourism from the continent and the US, but if the pound increases that might be affected. And domestically what will the VAT rise have on people’s sentiments on leisure travel? So, I’m hoping we’re going to see gentle growth but all sorts of things could happen that push it up and down.