Choice operators: Risk, opportunity in vacation rentals
Choice operators: Risk, opportunity in vacation rentals
27 FEBRUARY 2016 1:10 PM

Choice franchisees said the company’s impact on its hotels depends on how the platform is marketed and how Choice Privileges rewards are obtained.

BETHESDA, Maryland—Owners and operators of Choice Hotels International properties are in wait-and-see mode with the company’s newly announced vacation rentals platform, Vacation Rentals by Choice Hotels, which CEO Steve Joyce described as a potential competitor to Airbnb.

Charles Oswald, president and COO of HP Hotels, which manages some Comfort Suites properties, said the impact Vacation Rentals by Choice Hotels has on franchisees depends on Choice’s marketing strategy for the platform.

“Will it hurt the business? I think that remains to be seen,” Oswald said. “I think what (Choice) has to be really careful about is how (Vacation Rentals by Choice Hotels) is marketed—how people will search and find these locations to protect (Choice’s) current franchisees from eroding price.”

During last week’s fourth quarter earnings call Joyce described the company’s new vacation rentals venture as a new twist on the sharing economy concept.

“We're working with vacation rental management companies, not with consumers,” Joyce said. “So it’s competitive with Airbnb on some level, but it's also a different take on it. So, and quite frankly, we’ve got the best technology platform in the business for those companies.”

In an earlier interview with HNN’s Jeff Higley at the Americas Lodging Investment Summit, Joyce said the flight to a consumer-to-consumer offering wouldn’t be long after the vacation-rental platform was released.

Choice Hotels came out with a news release on Monday detailing the vacation rentals platform, “Vacation Rentals by Choice Hotels,” which included eight U.S. locations the vacation rental service will be offered in: Orlando, Florida; Aspen, Colorado; Destin, Florida, Panama City Beach, Florida; Williamsburg, Virginia; Shenandoah, Virginia; Phoenix, Arizona; and Big Bear Lake, California.

The company is working with vacation rental management companies to offer vacation units to consumers, and Vacation Rentals by Choice Hotels will be tied in with the Choice Privileges program, which was recently redesigned. Guests staying at vacation rental properties will be able to obtain points through Choice Privileges.

On the earnings call, Joyce said he expected the company to begin profiting from the vacation rentals platform in a year.

“So as we look at that opportunity (in vacation rentals), while we're investing some dollars this year, we would expect that to turn profitable relatively quickly,” Joyce said. “I think in terms of 12 months.”

Choice franchisees’ perspectives
Jimmy Patel, AAHOA chairman and JAM Hospitality president said the vacation rental venture could positively impact Choice properties if guests can build up points for vacation rentals by staying at Choice hotels.

“That’s the whole idea of if (Choice has) a stronger higher-end brand, or even this vacation ownership, people would go stay at the EconoLodge or the Comfort or any of those other brands to build up points to stay at the (vacation rentals) places,” Patel said.

Patel’s company owns two Comfort Suites hotels in North Carolina.

Oswald said the company just has to be careful to not start cannibalizing business from its franchisees.

“The risk is certainly there,” Oswald said. “It has to be managed in the right way.”

Looking at the sharing economy side of Choice’s vacation rentals platform, Oswald said he would rather see “a brand doing it” than Airbnb.

“On that side of it, I guess if somebody is going to do it, if it’s Airbnb or a brand, I’d rather it be one of the brands,” he said. “Whether it’s Choice or IHG or Marriott or whoever.

“And I think Choice is in an interesting position, and all of our brands are, where they’ve got well-known, trusted brand names as well as a loyalty program that can be leveraged to capture that segment of business and prevent it from going outside of those brands.”

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