Executives at Red Roof Inns share plans for the company’s two newest brands: The Red Collection soft brand, which is debuting in Chicago with the St. Clair Hotel; and the HomeTowne Studios by Red Roof extended-stay brand, which opened 20 properties in its first month of existence.
CHICAGO—New Albany, Ohio-based Red Roof Inns is using the launch of a soft brand and the addition of an extended-stay brand to close in on a portfolio milestone of 600 hotels.
The company’s first hotel in its Red Collection soft brand, the St. Clair Hotel in Chicago, is in the midst of a soft opening. It’s HomeTowne Studios by Red Roof Inn extended-stay brand was launched in August and has 20 properties open. Combined with the core Red Roof Inn and Red Roof Plus brands, the company has 585 properties open comprising more than 50,000 rooms.
“We’re busy—we’re launching two brands within 60 days of each other,” said Red Roof President Andrew Alexander, during an interview in the St. Clair Hotel lobby. “We think of Red Roof as an umbrella brand. Filling in under that is important for the company’s growth.”
With The Red Collection, choosing the right segment for expansion wasn’t difficult, he said.
“There’s no shortage of soft brands out there, and it’s growing like weeds,” Alexander said. “For brands that are saturated in a city, the soft brands gave them a way to grow beyond their core brands. It’s different for us—we didn’t have that dilemma. …
“Customers told us they want a soft brand in the upper midscale segment. They couldn’t find it anywhere else, so we’re filling that gap.”
Westmont Hospitality Group is the linchpin of the expansion effort of the two newest brands in Red Roof’s portfolio. The St. Clair Hotel was previously a Red Roof Inn owned through a partnership between Westmont and a private equity group. Westmont bought out the other partners to fulfill its vision for the flagship Red Collection property, which Red Roof will manage, executives said.
Westmont and an institutional investor in 2015 acquired a portfolio of Crossland Studios properties. Following a $50-million renovation program, 30 of those hotels are joining Red Roof as HomeTowne Studios by Red Roof properties.
The Red Collection is Red Roof Inns’ play to have an offering in the upper-midscale segment.
The St. Clair Hotel, a circa 1926 building that opened as the Eastland Hotel, is one block from Michigan Avenue in downtown Chicago. It was a Red Roof Inn prior to closing 18 months ago for its transformation into a property that fits The Red Collection’s profile. The renovated hotel has 208 guestrooms—up from 195 when it was a Red Roof Inn.
“Chicago is the No. 1 market this customer wanted. … Before New York, they wanted to be in Chicago,” said Marina MacDonald, Red Roof’s chief marketing officer.
Alexander added: “We asked customers how they want to interact with Red Roof in a city environment—in the heart of the cities you like to visit. Most Red roofs are highway, university, roadside, secondary and tertiary markets—those types of properties don’t necessarily play well in this type of environment.”
What they wanted was a property with hyper-local experiences and a uniqueness to it, he said.
“The only thing they don’t want, which was a surprise to us, is they don’t want things that are hip and trendy,” MacDonald said. “To our customer, that means ‘overpriced.’ They want modern, they want accessible, they want affordable and they want it to be a hyper-local experience and a unique design.”
The hotel expects an ADR north of $150 in the first year, Alexander said.
“In Chicago, that’s a real affordable price point,” he said.
Value-oriented customers would rather have more money in their pocket to do the things they like, such as going to restaurants, to the theater and shopping, according to the CMO.
Based on consumer research, the company is having conversations with potential owners in New York, Atlanta, Charlotte, Austin and on the West Coast to grow The Red Collection’s footprint, MacDonald said. Many of those owners are waiting for the flagship St. Clair Hotel to open before making any decisions.
Alexander said the company has attainable goals for the expansion of The Red Collection.
“When we launched Plus, we said it would be between 10% and 15% of the portfolio—it’s just over 10% now,” he said. “I would see this eventually getting there, but over a longer timeframe. These are just substantial assets to add to the portfolio … 10% of the portfolio would seem to be a comfortable place to be.”
Every Red Collection hotel will have its own name and its own design. The second property in The Red Collection will be the State House Inn in Springfield, Illinois. The property is slated to open later this year.
Opportunities for franchising
The Red Collection creates two opportunities in the franchise community, Alexander said.
The first is that it allows current franchisees to elevate their current property or add another property to the mix that fits The Red Collection’s parameters.
“We encourage our franchisees to move up—you come in and you want to improve your hotel, we’re happy to move you up to a Plus,” Alexander said. “That’s the same case with The Red Collection. … It allows franchisees in our system to aspire for more.”
The second opportunity is to attract owners who might not have previously looked at Red Roof as an option because they didn’t want to be in the economy segment. The Red Collection will open doors because it’s geared toward being in the upper-midscale segment while not requiring substantial property-improvement plan costs, Alexander said.
“There’s also a whole group—especially independent hoteliers—who have not considered being with any brand,” he said. “Those type of properties exist. … This is going to be a situation where we can work with them because of our affordable price point, to give guests what they’re looking for but allow them to be profitable given their prospective ADR in the upper-midscale (segment).”
Hotels will have their own name and add the “member of The Red Collection” tagline.
Alexander said The Red Collection is going against the grain in that it doesn’t have a lengthy set of standards that owners and franchisees have to integrate into the property.
“We are a brand, like most brands, that is built on a history of brand standard controls. We all look at all of our properties and say ‘you must meet these standards, perform these tasks, have this product,’” he said. “This is the exact opposite of that—we’re saying ‘be unique, but meet the customers’ expectations.’ It’s been a challenge for our product team, for our franchise operations team. Everybody has to look at this and say ‘the point is if our guest is happy, we’re happy.’ That’s a little different than saying ‘if the brand is happy, we’re happy.’ This is all about the guest experience.”
Success will be measured through customer surveys, TripAdvisor reviews and other online travel reviews, the executives said.
“That’s how we’ll know whether you’re doing the right things—not because your couch is blue, red or green, but because the customer is responding favorably to it,” Alexander said.
The plan to be in the upper-midscale segment comes with more amenities and services than Red Roof’s other brands require, he added.
“It’s definitely an elevated service level from the typical economy platform; there’s no doubt about that,” Alexander said. “But … the goal is to exceed expectations where the customer wants their expectations to be exceeded.”
Each property will have amenities that make sense for it. For example, the St. Clair Hotel will offer valet service.
“We have to elevate the service level at the front desk and have a website that’s answering the questions a guest may have. But we are focusing on what customers really want because what they want is affordability,” MacDonald said.
HomeTowne Studios gains momentum
Meanwhile, the HomeTowne Studios by Red Roof brand has formed a solid foundation since its 15 August introduction, Alexander said.
“We have 20 open and another 15 that are coming in the next 45 days,” he said.
The brand will be comprised primarily of conversion properties, he added.
There are “at least another dozen that are looking to be in that pipeline once they complete their renovations,” Alexander said. “We’re not moving anyone into the HomeTowne platform until they complete their renovation—all rooms need to be renovated.”
The addition of an extended-stay brand gives the company momentum because it provides cross-selling opportunities for its sales-and-marketing teams, according to Alexander.
Twenty-five percent of Red Roof’s business is extended stay (5+ nights), he said. That provides opportunities for HomeTowne Studios right out of the gate—even though that brand describes extended-stay business as 30 nights or more.
“It’s a definitional difference, but there’s definitely some opportunity for some of the business to move back and forth,” Alexander said.
Some HomeTowne properties are located in areas where Red Roof is trying to develop a footprint, so there are crossover opportunities there for franchising as well as consumer sales, he said.