In a video interview with HNN, Choice Hotels International President and CEO Pat Pacious said WoodSpring Suites won’t be the last addition to Choice's brand lineup. Also on tap: A focus on growth for Cambria and additional benefits for franchisees.
LOS ANGELES—Pat Pacious hit the ground running as president and CEO of Choice Hotels International, and he has no plans to slow the pace.
Pacious, who added the CEO role to his title on 12 September 2017, cited the company’s December 2017 acquisition of WoodSpring Suites, its continued dedication to growing the upscale Cambria brand, a longstanding philosophy of listening to its franchisees’ needs, a desire to grow its brand offerings, and its January launch of the ChoiceEdge property-management system as clear indicators that Choice means business.
The $231-million deal for WoodSpring Suites, which closed Thursday, was a no-brainer for Choice, according to Pacious, who joined the company in 2005, was named COO in January 2014 and became president in May 2016.
The extended-stay segment has been a revenue-per-available-room growth leader for several years, Pacious said. Choice was looking to add to its MainStay Suites and Suburban extended-stay hotel offerings. Then the WoodSpring Suites opportunity came along.
“Within that segment, we were looking for a new-construction brand,” Pacious said. “(WoodSpring Suites) figured out how to drive a lot of revenue from the existing prototype, so we like that. They’ve also figured out a way to franchise, which not every extended-stay player knows how to do. They figured out the secret sauce. We wanted to bring that in-house, invest in it and help grow that brand.”
Pacious cited WoodSpring’s 240 open hotels, 24 properties in the pipeline and a 35% growth rate over the last three years as primary reasons Choice showed an interest in it.
“It’s on a nice growth trajectory,” he said. “We see it as a brand of tomorrow, and one that we think putting on our distribution platform—being able to bring the corporate accounts that we can bring—will really help improve the owner return on investment, which is really what we’re all about.”
WoodSpring Suites’ different approach to franchise sales and franchise development was also attractive to Choice, he added.
“We’re not just saying we’re going to take the Choice Hotels business processes and impose them—we want to take what they’re doing well and bring that on board our system and improve our business overall,” Pacious said. “We saw an opportunity in the economy extended-stay segment. … We see opportunity in the upscale extended-stay segment eventually.”
Looking for other growth vehicles
Extended stay is not the only segment in Choice’s sights, Pacious said. The company has launched and acquired brands to fill its needs in the past, and is open to either path for gaining an upper-upscale footprint, he said.
“For the most part, the highest return on investment comes from the ones you launch yourself, but we are always looking at acquisition opportunities,” he said. “You always learn something in the process when you look at how others have approached the business.
“A lot of it is really looking at: Is this the right opportunity to launch a brand, or is this the right opportunity to acquire something that’s really on the growth path?” he added. “We do look at adding new brands in existing white space in our portfolio as the right strategy for us. It keeps our current 11 brands, and soon to be 12 brands, with adequate runway for growth. We don’t want to go acquire brands to sit on top of another one and hinder the growth path of our existing portfolio.”
Pacious said the company will be careful in its growth and add brands that complement the current lineup the way WoodSpring Suites does.
“Our strategy has always been to go to market as a family of brands—we want well-segmented brands by rate tier and by stay occasion,” Pacious said. “We want a nice stratification of our brands. We don’t want them one on top of the other.”
As the company seeks out opportunities, it will continue to focus on growth strategies for its existing brands—most notably the upscale Cambria brand.
“Today, right now, we’re focused on Cambria, getting that brand successfully relaunched in all the right locations,” Pacious said, adding there are 37 Cambria hotels open and 70 in the pipeline. “We see a clear path to getting north of 100 assets, which is really going to grow the brand in a consumer’s mind and also attract more developers.”
Achieving that goal will open other doors, he said.
“We do think once Cambria is successful in the upscale segment—by that, I mean north of 75 (or) 100 hotels open—that (adding a brand in the upper-upscale segment is) the next logical opportunity for us,” he said. “We may take a soft brand up in that direction as well. We’ve been approached in the past around that as well, so there’s opportunity for us to get into it either with a traditional brand or a soft brand. We like our options in the future.”
Listening skills lead to owner options
Choice’s opportunities for the future often derive from communicating with its franchisee base, according to Pacious.
“Listening to owners on a regular basis, that’s something that’s helped us as a company be a better franchisor; it’s helped us be a better innovator,” he said. “We entered the upscale segment because we knew our owners wanted to go and build upscale hotels. So when you listen to your owners, you create new segments. We listened to our owners when they said, ‘Hey, I got this independent, kind of boutique hotel; you guys ever thought about letting me come on your platform?’ That idea created the soft brand.”
Choice was the first hotel company to launch a soft brand when it introduced its Ascend Collection in 2008, Pacious said.
“We’re now the largest soft brand in the world, 250 open and in the pipeline,” he said. “All that came from engaging with our existing owners and listening to them and helping them build their wealth as well as help Choice execute our strategy.”
Improving the company’s property management system is a core part of that strategy, Pacious said. The ChoiceEdge system replaces outdated technology and is cloud-based.
“We saw our own platform as something that was hindering our growth from a capacity perspective,” he said.
He pointed to the growing number of booking transactions—which Choice already processes in the hundreds of billions each year—as a big reason for ChoiceEdge.
“They’re growing because there’s new channels being introduced like every three months, it seems, or some new way to book a hotel,” he said. “Voice-based search is coming our way, artificial intelligence is coming our way, personalization in a real way is coming our way. So we needed a platform that can handle what we expect to be (what) the consumer asks in the future, which is you need to know about me.”
The addition of the platform is cost-neutral for franchisees, Pacious said.