Choice Hotels International’s strategic agreement with Spanish firm Sercotel is about distribution, loyalty and management, but also about obtaining cultural, language and relationship leverage in two major Spanish-speaking markets.
REPORT FROM SPAIN—After many months of negotiations, Choice Hotels International finally has the footprint in Spain it’s been looking for with the announcement it has signed a partnership with Spanish operator and franchisor Sercotel Hotels.
The deal gives Choice the platform, marketing and leverage to further develop hotels in Iberia and throughout Europe.
Max Cergneux, senior director of international investment and portfolio management at Choice Hotels International, said another part to the alliance is the development agreement that allows Choice further opportunities to make inroads in Latin America.
“This is not a joint venture; there is no investment in each other, no capital changing hands on either side,” Cergneux said. “It is about technology, marketing, distribution and leverage.”
Cergneux also stressed that the deal does not mean Choice won’t search further for franchisees in Spain.
Sercotel, which divides its midscale to upscale hotels into Deluxe, First Class and Comfort collections—also has a considerable presence in Latin America, notably in Colombia where it has 21 properties. There are also six hotels in Cuba, two in Mexico and one each in Ecuador and Panama.
Choice has 11 brands, including Cambria Hotels, Comfort Inn, Quality and Clarion, but previously has not had a large presence in Spain and has little in the way of footprint in Latin America. With the Sercotel deal, Spain becomes Choice’s 18th country market.
Cergneux said the deal has been a year-and-a-half in the making.
“We started combing the Spanish market to get the right partner 18 months ago,” Cergneux said. “We have been talking to a lot of people, looking for opportunities, but (Sercotel) fits very well with us. It is complementary to us, and they are a big deal in Spain. The deal was signed on (9 April), and now starts the work to integrate Sercotel’s portfolio into our distribution and loyalty systems.”
Cergneux said he is excited about the new alliance between the two companies.
“We will leverage each other’s capabilities,” he said. “They have a very strong management team, and as a franchise group that is something we wanted to be better able to offer. It is also an excellent platform with which to have entry into Spain.”
About a year ago, Choice executives said that the company was very close to finalizing a deal in Spain.
Javier Serrano, market manager for Spain and Portugal at STR, the parent company of Hotel News Now, said he believes the partnership is beneficial for both parties.
“I think it is a win-win situation for both,” he said. “We may see more alliances like this one in the near future. For Choice, this is a strategic move to gain market presence in the Spanish and Latin American countries where they have a lack of presence. Spain and several countries in Latin America, especially Colombia, are hotel investment hot spots nowadays, and having a Spanish partner to enter these markets eases conversations, especially with independent hotels.”
Cergneux added that “Sercotel will be able to offer its owners distribution through Choice and gain access to our loyalty.”
He said Sercotel has three structures—pure management, leases and commercial agreements—but that ultimately the company also acts like a franchise.
There will be no rebranding of Sercotel assets, Cergneux said, but the deal gives those hotels access to a more global platform. It also gives Choice more ability to leverage and grow, as well as to provide Choice guests with options in markets it could not offer before.
Bigger for all
Serrano said it was no coincidence Choice conducted its European franchisee conference last October in the Spanish city of Valencia.
“Its main target was to attract (independent) properties across the country,” he said.
But Serrano said despite the conference, Choice was not fully able to transmit its brand value proposition to this particular market.
“Having Sercotel on their side will help to … open discussions with several properties and reduce barriers of entry, (notably) language and culture,” he said.
Serrano said the agreement will allow Sercotel to gain expertise regarding the operations of a large international hotel management company.
“Hotel companies in Spain have historically focused more on acquiring and managing the asset, rather than only managing it,” Serrano said. “Very few follow the U.S. management and branding model. I believe that for Sercotel, gaining knowhow on asset management and franchising will help the company to reposition itself as a solid hotel brand to work with independent hotels.”
Overall, he added, this should raise Sercotel’s standards to the level of one of the world’s largest and most experienced chains.
“On top of all of the above, they’ll enlarge global distribution … share customers through loyalty programs and secure occupancy and revenues providing larger supply opportunity to demand needs,” Serrano said.
Choice has more than 6,800 franchised hotels with more than 500,000 rooms in approximately 40 countries, while Sercotel has more than 170 hotels with 17,194 rooms in Spain, Andorra, Portugal, Italy and several Latin American countries including Colombia and Panama.
In February, Choice added four hotels in the United Kingdom, all in the county of Yorkshire, with a total of 493 rooms.