Best Western joins franchising fray with SureStay
 
Best Western joins franchising fray with SureStay
27 SEPTEMBER 2016 8:38 AM

Best Western’s new white label offering will include three brands aimed at hotels in the economy and premium economy segments. The initiative will officially launch 1 December.

PHOENIX—After 70 years of focusing on being a membership organization that promotes annual agreements with the hotels in its system, Best Western Hotels & Resorts is preparing to launch a franchising initiative that will feature three brands, 15-year agreements that adhere to AAHOA’s fair franchising principles and a strong tie to consumer ratings on TripAdvisor.

The SureStay initiative unveiled by President & CEO David Kong at the company’s Phoenix headquarters will officially launch 1 December. The primary advantage of the new platform will be to provide a migration path for Best Western members with properties that no longer qualify for the organization’s quality and design standards.

Expanding Best Western’s industry presence without buying another company during a time of robust industry consolidation is another motivator, Kong said.

“To open this new revenue stream, it’s going to allow us to do a lot more,” Kong said, adding the ability to invest in technology would be the primary beneficiary of the additional revenue.

The clearest distinction between the SureStay and Best Western platforms is the former’s franchising model. It was important for the initiative to be markedly different from the 70-year-old legacy platform, according to Kong.

“One of the main reasons is we want a distinction between the two—we don’t want SureStay franchisees to think they can vote on Best Western matters,” Kong said.

Kong stressed the “white label” nature of SureStay during his remarks to media, developers and various industry leaders prior to the start of The Lodging Conference at the nearby Arizona Biltmore. Kong said consumers likely won’t know “this white label brand is powered by Best Western.”

The CEO likened the brand to popular consumer brands such as Starbucks Corporation and Del Monte Foods, which often provide white label offerings for other outlets without consumers making the connection.

“There are tremendous advantages to white labelling,” Kong said during his presentation. “(Companies can) reach down to other customers without compromising their (core) labelling. They can tap into a different segment of customers at a very advantageous cost basis.”

Dorothy Dowling, Best Western’s chief marketing officer and SVP, said the unique structure provides the company with a distinct proposition.

“This is a disruptive approach to the business—the whole concept of it being a white label,” Dowling said.

Three SureStay brands will compete in a crowded hotel industry landscape as evidenced by this slide shown during the introduction to the concept Monday. (Photo: Jeff Higley)

Three brands, two segments
SureStay will operate as a subsidiary to Best Western and will feature three brands:

  • SureStay Hotel, which will compete in the premium economy hotel class and fetch average daily rates between $45 and $70;
  • SureStay Plus Hotel, which will compete in the lower midscale segment and strive for ADRs in the $65 to $100 range; and
  • SureStay Signature Collection, which will be a midscale soft brand that will also strive for ADRs in the $65 to $100 range.

While the goal is to convert hotels as the brand ramps up, Kong didn’t rule out adding a new-build extended-stay brand to the mix down the road because of the success of similar brands.

Best Western’s brands currently compete across the upscale, upper midscale and midscale chain-scale segments. Tapping into other segments was a key component to the new program, Kong said.

Best Western had had 1,200 properties exit its system during the past decade—many of those moving to franchising companies, according to Kong. SureStay will provide a path for those owners to remain with a company they’ve grown accustomed to but don’t want to shell out money to meet design or other brand standards.

“We did some analysis of hotels leaving Best Western … (and) found they have pretty high (quality assurance) scores, high TripAdvisor scores,” Kong said. “They were leaving because they don’t see (the return on investment) in the market in renovation work. They are still pretty good hotels, provide good customer experience. The TripAdvisor score requirement is going to be a good one to make sure we stand up to the brand promise.”

“Our members clearly want a migration path,” Dowling said. “They want to remain with the structure of this portfolio company.”

The other chief growth target for SureStay will be hotel owners who are no longer content with their current franchisor, Kong said.

Many of those owners are AAHOA members, which is a key demographic for Best Western. AAHOA’s points of fair franchising include things such as no liquidated damages levied for leaving a contract early, impact/encroachment/cross brand protection and vendor exclusivity.

To become a SureStay franchise, hotels need at least 3.5 stars or above on TripAdvisor for at least a year; must display a service guarantee plaque at the front desk; meet relevant brand standards such as televisions, high-speed internet access and breakfast; welcome annual unannounced quality-assurance assessments; and maintain a digital operating platform to ensure ease of booking.

As long as the hotels meet those requirements, they will never require a property-improvement plan, Kong said.

“Keep in mind we intend to differentiate not based on product experience but on superior customer care—(with) 3.5 stars, they must be doing a pretty good job,” Kong said. “That requirement will police the standard of the hotels.”

SureStay will have its own reservation system that includes its unique guest database and booking platforms—so it can be segregated from Best Western’s systems. The two brand platforms will have separate GDS codes, Dowling said.

The company has 20 signed letters of intent and 150 other leaders to begin with, Kong said. Its goal is to have 150 hotels within three years and 800 hotels within 10 years.

The first 100 hotels to join SureStay will receive an array of incentives, including waived royalty fees for 5 years, a regional manager to kick-start their sales and marketing efforts, and hotel-level training support. Additionally, 100% of the marketing and technology fee will be reinvested to help hotels succeed.

“The development community will know it is powered by Best Western, that there are Best Western resources behind this,” Kong said.

Kong said the idea for such an initiative was hatched two years ago. The SureStay platform was introduced to the brand’s board of governors in February, when it received an 83% approval rating in polls. In subsequent district meetings, the idea garnered a 78% approval rating.

“SureStay is absolutely for profit,” Kong said, adding that the parent company remains a not-for-profit organization, which by law can possess internal profit-generating holdings.

SureStay will begin its existence with an instant-rewards guest-loyalty program, but could migrate into a points-based system—which Best Western has—down the road, Dowling said.

“This is a value-oriented customer, so the instant reward is the right fit now,’ Dowling said.

Reporter Bryan Wroten contributed to this article.

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