Reflections on the 2010 Choice Hotel Conference

 

At one of the industry’s most highly attended conferences, Choice laid out plans to expand its portfolio, demand capture, and overall revenues in 2010 and beyond.

By Desiree Flanary and Russ Rivard

Choice Hotels International is one of the largest hotel franchise companies in the world, with 5,897 hotels, inns, all-suite hotels, and resorts open or under development in 48 countries and territories. The company’s brands include the Comfort Inn, Comfort Suites, Quality, Sleep Inn, Clarion, MainStay Suites, Econo Lodge, Cambria Suites, and Rodeway Inn. In addition, Choice’s Ascend Collection consists of “historic, boutique, and unique” hotels across the country.

This past May, more than 5,000 Choice Hotels franchisees and over 350 exhibitors convened in Las Vegas for the 2010 Choice Hotels conference. The annual event gives Choice the opportunity to communicate top business initiatives, offer insights into brand updates and strategies, provide educational and training opportunities, and connect hoteliers to vendors and hotel consultants.

U.S. Hotel Appraisals had the opportunity to exhibit at the conference and meet with a variety of hotel owners, management companies, and vendors. Here are some of our takeaways:

Choice Hotels Performance and Transaction Overview

Choice reportedly has over 750 hotels currently under construction, awaiting conversion, or approved for development. Choice is the second-largest hotel company in the United States, with approximately 9.5% market share. In 2009, the company increased its RevPAR index by 20 basis points to bring the index to its highest level since 2006. The largest Choice brand, Comfort Inn, achieved a RevPAR index gain of 180 basis points, a remarkable accomplishment amidst widespread RevPAR declines over the past year. Much of Comfort Inn’s RevPAR rise can be credited to occupancy gains. Working on tighter budgets, travelers in the economy to mid-scale tiers have become more selective with hotels, and Comfort Inn’s popular brand presence throughout the United States has helped the franchise capture demand. 

Conference Themes

The theme of the conference—“Right Here, Right Now”—reflects on a variety of optimistic initiatives that Choice has introduced over the past year. One of these is the redesign of the Sleep Inn brand and prototype, which will incorporate stone exteriors, “spa-like” guest bathrooms, warm natural finishes in the public areas and guestrooms, flat-screen televisions, and new furniture. In addition, a newly introduced compliance program focuses on consistent maintenance and cleanliness at each hotel property, allowing Choice properties to be more competitive with Hilton and Marriott brands that have had strict compliance programs in place for years. This focus on quality and consistency—two of the pillars of brand identity—should help Choice position rate more aggressively within its markets in the future.

Other highlights included the expansion of Choice Hotels in Canada and overseas, as well as a redesigned, streamlined website experience—essentially a much-improved portal through which guests can find and book rooms, which has the potential to increase reservations. The conference also honored the Choice Inns of the Year, International Hotel of the Year, and various outstanding hoteliers.  Brendan Gilyan, owner of the Comfort Suites in Arlington, Texas, won Developer of the Year.  The 2010 Premier Alliance award winners included Al Patel of Baywood Hotels, Norman Anderson of Dominion Hospitality, and Bharat Patel of Sun Development & Management Corporation.

Near-Term Initiatives

Choice Hotels is firmly committed to growing the Cambria Suites brand and will be unveiling a green prototype aimed at earning LEED Silver status in the 3^rd quarter of 2010. The company also announced interest in either launching or acquiring an upscale brand and is looking into launching a funding program to speed up the development pipeline, which would essentially operate as a private lender to franchisees.

Financing

Visitors to the U.S. Hotel Appraisals booth wanted to discuss a common theme: the desire to obtain financing by whatever means available. There is no question that the lending environment has become a challenging place to navigate as lenders throughout the U.S. have scrutinized and tightened their lending practices. Many owners and investors expressed the desire to “make deals,” if would-be financiers would only come to the table.

Many hotel owners we spoke with expressed urgent interest in appealing tax rates and applying prior to state deadlines, a process on which our tax advisory team regularly advises hoteliers.  Owners and management companies were also curious about the state of cap rates and which lenders are actively making loans on hotel properties.[1] 

Conclusion

Despite the frustrating financial climate, the 2010 Choice Conference was upbeat and confident. At U.S. Hotel Appraisals, we believe that the second-half of 2010 leading into 2011 should prove to be a more robust environment for investing in and selling hotels in the limited- and select-service asset classes, as lenders are better able to account for the value of assets on their books and regain confidence in making loans. This is especially applicable to the economy and the mid-tier hotel brands Choice represents, and we applaud the company’s efforts to revamp existing brands, acquire new ones in the upper tiers, and back new ownership through its own financing arrangements.

Please contact Russ Rivard (rrivard@ushcapp.com, 214-766-5394) with any questions on U.S. Hotel Appraisals perspective on the conference or to learn more about hotel performance trends nationwide.

 

 

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