ESA’s new CEO looks to accelerate franchising, growth
 
ESA’s new CEO looks to accelerate franchising, growth
21 DECEMBER 2017 9:34 AM

Jonathan Halkyard will transition from his role as Extended Stay America’s CFO to president and CEO at the start of 2018, and said he will continue the company’s plan for brand development and growth.

CHARLOTTE, North Carolina—Extended Stay America’s incoming President and CEO Jonathan Halkyard said he intends to push the brand further on its current path toward additional growth and franchising opportunities.

Halkyard, who joined the company in September 2013 as COO and became CFO in January 2015, will succeed Gerry Lopez as ESA’s top executive beginning 1 January, according to a news release issued Monday. Lopez will stay on with the company as a senior advisor through March 2018.

“While it was never assured that we would do this transition or the timing and so on, I think along the way, we’ve been talking about succession and transition, so in that sense, this transition was really not a big surprise,” Halkyard said in an interview with Hotel News Now. “In terms of timing, on a micro basis, this time of year really makes sense; it’s when we’re really refining our plans for the coming year in operating expenses and in capital investment. We’re planning our initiatives that are important for the company next year.”

As Extended Stay America also looks to grow in different directions, Halkyard said, a change in leadership can be a good thing.

“The company is in a bit of transition right now as we are really moving from improving the performance and investing in the existing estate toward really ramping up our growth trajectory,” he said. “There’s never, I guess, a great time to have a CEO transition, but given broadly what we are doing right now, I think it’s a pretty good time. I don’t want to speak for Gerry, but I think that was part of his thinking, that having done a lot of the work associated with optimizing the existing portfolio and setting the stage, that it was probably as good a time as any for him to step away.”

CEOs change; vision and goals remain
The overarching strategy for Extended Stay America won’t change, according to Halkyard. The franchising model the company outlined in 2016 will drive the company’s growth aspirations in a segment Halkyard said is ripe for new development.

“We have the dominant brand in mid-priced, extended-stay hotels, and yet we believe there’s the opportunity to add another 200 to 300 extended-stay hotels in the U.S. alone. … We’re going to go after that with our own balance sheet as well as through other developers and franchisees,” he said. “We have the financial capacity to do it, we understand the business model and, of course, it’s a proven concept with our 625 hotels. Protecting and improving that core business as it exists right now, and then growing units and picking up the pace of that growth of units, those are really my two main priorities.”

In what Halkyard views as both a challenge and opportunity, ESA executives have a goal to continue to increase consumer recognition and become the “go-to brand” for extended-stay corporate travel: business guests who stay at a property for work for a week or more.

“The biggest challenge for us as a national brand is becoming their first choice for those kinds of uses for their people,” he said. “It’s a huge opportunity because we know of the number of hotel stays that are extended stay or are greater than a week, the extended-stay hotel industry captures a relatively small percentage of those stays—the rest going to more traditional hotels—and we, of course, capture a percentage of that percentage. So the market opportunity is huge for us, and all it takes is consistent execution of our value proposition.”

Halkyard’s experience with ESA coupled with his fresh perspective has kept those goals in focus, but he said his decisions as CEO will prioritize shareholder value and customer value equally.

“I think I do bring a bit of a different perspective to it, having formerly been the chief financial officer, and in operations before that,” he said. “By that, I don’t mean taking it as just a numbers guy; that’s what a lot of people kind of think and joke, including my wife, about me being a financial guy, that I’m going to approach everything from the perspective of dollars and cents and profit and loss. That’s not really true.

“What I mean is I approach it from a perspective of value …. It really informs the way I view this business in terms of the investments we’re going to make, that we’re expecting our franchisees to make and what we expect out of those investments, and making that very clear to our shareholders as we move through this strategy. I think that is probably going to become more evident as we proceed, where folks internally and externally will always hear me talking about the value we’re providing to our customers and the value we’re providing to our investors and why what we’re doing helps both of those groups.”

Industry outlook and expectations
The same week Extended Stay America announced Halkyard as its next CEO, Choice Hotels International unveiled a deal to acquire competitor WoodSpring Suites for $231 million. Halkyard said that deal is evidence of the strength of the extended-stay segment.

“I saw the deal, and Choice is a great company, and WoodSpring is a good competitor, in many ways not a direct competitor of ours, but I thought it was an important endorsement of our segment for a company like Choice to make that investment,” he said.

Would that sort of acquisition interest Extended Stay America now or in the future?

“We think that we’re in a good spot right now owning our brand and controlling our hotels to not only operate them effectively, but grow the brand,” Halkyard said. “Anything beyond that will ultimately be up to the board. We think being in control of our destiny with both the brand and the assets is the right strategy for us and that we can really grow value for shareholders that way.”

The strength of the U.S. economy—especially given the potential impact of the Republican tax overhaul—helps to calm concerns about supply overtaking demand in the near future, at least among extended-stay hotels, Halkyard said.

“We certainly remain subject to external shocks, and no one can predict those, but at current course and speed, I feel very good about the economy in the U.S. as well, and that really is ultimately what drives the demand backdrop for us,” he said. “On the supply side, we do see entrants in many of our markets, but they are typically select-service hotels at price points that are much higher than ours.”

He said Extended Stay America leadership also hopes its investments in technology will pay off in the coming years, including innovations that improve check-in and broaden in-room entertainment to allow guests to connect their accounts to streaming services.

“We do have the opportunity to continue to innovate here at this company in ways that I think will be both visible to our guests as well as making our associates’ jobs easier,” Halkyard said. “… In the rooms, allowing our customers to cast from their devices onto our televisions (is) something other hotels have invested in, and we’re certainly doing the same, because our customers come to us and stay with us for several weeks and a lot of them are much more interested in casting their subscribed video services than they are in what’s coming through our systems.

“We’re making those investments, we think that’s going to really speak to our business customers.”

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