Choice Hotels: The Three Pillars Driving Business Growth

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Newly appointed president and CEO of Choice Hotel International, Pat Pacious, has revealed he wants his company - known as one of the largest and most successful lodging companies in the world -  to explore the business opportunities that lie beyond the world of hospitality. He explained where he thinks his company lies within the hotel sector, and believes it’s located at the intersection of hospitality, franchising and technology. He also said he wants to grow in each of these sectors independently and aggressively.

Choice Hotel International’s numbers are incredibly impressive. The company’s domestic systemwide revenue per available room was up 2.1% year-over-year, and their average daily rate was up 1.2%. For Q4 2017, Choice is predicting an ADR increase of between 1% and 3% vs. the same period year-over-year, with a full-year increase of 2%-3% over 2016. The company also managed to secure a 2.3% increase in international rooms growth year-over-year through Sept. 30, 2017, and for the year to date the company has successfully opened 6,000 rooms internationally with an additional 6,300 in its international pipeline.

Choice Hotel International has an expanding pipeline, consisting of more than 100 Cambria hotels open or under development in the U.S. The Cambria brand opened two properties last quarter, which included a brand new hotel in New Orleans and a further second property located in Chicago. Most of the development taking place at Choice was in the Quality Inn brand. The company has recently opened its 1,500th hotel worldwide, helping the brand’s portfolio increase by a whopping 7% domestically since September 2016. Now having 120 hotels in their pipeline, The Sleep Inn brand has seen a growth of 22% in domestic franchise agreements year-to-date. 

Four million new users have been added to Choice Privileges - Choice’s loyalty programme - so far this year. There are now a total of 33 million Choice Privileges members across the world today. Choice are also trying to drive more bookings through their “Badda Book. Badda Boom.” ad campaign. Pacious said that this campaign has helped the company obtain nearly twice as many direct bookings than its chain scale competitors.  

When it comes to franchising, Choice is as equally impressive. Choice managed to sign 133 new domestic franchising agreements during the third quarter, whilst the company’s SmartBriefs revenue management tool is used by an estimated 4,000 hotels.  

Pacious believes that Choice are able to deliver over 60% of overall revenue to franchisees through primary channels - such as Choicehotels.com - because they have been pushing the use of their direct-booking system. 

Choice have managed to sign 415 new franchise agreements within the first nine months of 2017, which is a 10% increase from 2016. CFO at Choice Hotels, Dominic Dragisich, said: “Franchise profitability is a fundamental part of our business. We expect the growth of our full-year franchise agreements will certainly exceed those posted in 2016.”

Technology, has become Choice’s largest long-term investment. At this moment in time, the company are currently investing in a new global reservations system which will be used by its operators. This is set to come out in 2018. It’s a cloud-based system and will be specifically designed so it can adapt to future artificial intelligence and voice advancements, protecting Choice from any future technology innovations.   

Pacious said: “Our future depends on how well we can adapt to the digital age. Choice now handles over $7 billion just in transactions, therefore we needed to make advancements in cloud computing, data analytics and mobile”. 

Whilst the hotel sector continues to favour unique independent hotels, and soft brands’ standing is constantly increasing among travelers and investors, Choice’s Ascend Collection still hold a strong position within this ever-expanding industry. 40 Ascend hotels will be opened this year, with even more expected to open next year. 

On this topic, Pacious commented: “Choice were the first ever company to launch a soft brand, and to this day we are still the largest around. Other companies that have followed suit by launching soft brands have done little to impact our collections. Ascend continues to be a great value proposition for many developers, and it’s domestic and international growth continues to increase year-on-year.”