Red Roof eyes midscale soft-brand niche
Red Roof eyes midscale soft-brand niche
23 APRIL 2018 7:44 AM

The economy-segment brand has grown its core Red Roof and Red Roof Plus brands in recent years, and its new soft brand, Red Collection, adds another offering for guests and franchisees. 

WASHINGTON—Red Roof is in growth mode, brand leaders said, with the company’s new soft brand poised to carve out an untapped niche in the midscale segment.

Red Roof recently signed a second property—The State House Inn in Springfield, Illinois—to its Red Collection. The property, franchised by Packard Hospitality Management, will open under Red Roof’s soft brand this fall. The first property signed to the Red Collection, The St. Clair Hotel in downtown Chicago, will open later in 2018.

“There are a lot of soft brands out there, and a lot of brands talk about being in the midscale and upper-midscale segments and I’m not sure they are—they tend to set price points a little higher,” said Red Roof President Andrew Alexander during a break at the recent AAHOA conference. “We’re very comfortable in the midscale and upper-midscale segments. We know how to drive occupancy and rate in that segment. It’s attractive to a lot of franchisees.”

The goal with the collection is not to open on every corner, said Phil Hugh, chief development officer at Red Roof. “We didn’t launch a new brand to have more supply in the marketplace,” he said. “We launched a brand because our consumers told us they wanted us there.”

Being able to offer different options for rewards redemption is a big draw, along with being able to attract different partners and expand to new locations, Alexander said.

“Some of the opportunities we’re seeing (for Red Collection) aren’t solely top 25 markets, but still downtown, central-city locations with walkable amenities,” Alexander said. “Springfield, Illinois, is a perfect example of that—state capitals or university towns that have vibrancy without being Manhattan.”

Hugh added that resort locations would be an option for Red Collection properties, and the new soft-brand offering brings new partnership opportunities.

“Red Collection will open doors to some management companies that are in bigger markets, or to larger franchisees,” he said.

Core brands
The last few years for Red Roof have been great in terms of growth, with no signs of slowing down, the executives said.

“We’ve had really accelerated growth the last two to three years,” Hugh said.

Globally, the company has 544 Red Roofs open that comprise 49,322 guestrooms—484 of those are core Red Roof brand, while 60 are Red Roof Plus. The company has 35 hotels (2,629 guestrooms) in its pipeline.

Alexander said a focus on quality is what drives the brand to continue to expand.

“If you’re going to operate in the economy space, why not operate at the highest level of the economy space?” he said. “That’s our approach to drive the highest (revenue per available room) in the segment.”

Continuing to grow the quality of the brand’s service is a top priority as it grows its footprint, Alexander said.

“Product is sexy, but service is what quality is all about,” he said. “Look at reviews: People never say they had a great hotel stay because the dresser in the room was so cool. No, they talk about having good service.”

To that end, the company has launched a new training program, which replaces the traditional mystery shopper program with in-house, on-property staff training.

“It’s a customized quality inspection, and it’s based on their reviews as well,” Hugh said. “What are the things a guest sees (in the hotel), and how can we address it? If it’s bathroom cleanliness, we focus on that. It’s much more targeted and focused than I’ve seen other brands in this space do.”

What’s next?
While growth has been significant in past years, the company has a lot more opportunities, the executives said.

“We don’t sit around saying we have four properties in Manhattan and we need the fifth,” Alexander said. “We can still talk about green space. There is still such significant room to grow (all) our brands.”

“We can double the size of Red Roof (portfolio) and still have room to grow,” Hugh said, adding that Red Roof Plus will continue to comprise about 10% to 15% of the overall portfolio.

Quality remains a top priority for the company; eliminating low performers, keeping core economy standards consistent and staying on top of property-improvement plans are key, the executives said.

“Our franchisees are becoming very protective of the brand and its quality and also (are) very supportive of growth,” Alexander said. “That’s a good combination to have. It’s not a combination we had 10 years ago coming out of Accor. We built that, and now we have the balance.”

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