Archive for February, 2012

La Quinta Bets Big on Mobile Distribution

Everyone knows business travelers are tethered to their smartphones. They use them to make calls, send texts and e-mail messages and access news and information. And while part of their search activity includes a lot of travel info, they don’t generally use their iPhones, BlackBerrys or Androids to actually book travel—until now, at least that’s what La Quinta believes. At its annual conference this week in New Orleans, the fast-growing and innovative chain of 828 hotels introduced LQ Instant Hold, an enhancement to its mobile website that should enable travelers to quickly and easily book rooms at La Quinta properties.

IIt may be a significant game changer in the world of hotel distribution. As La Quinta’s Chief Marketing Officer Julie Cary pointed out in a presentation yesterday, while more than half of business travelers use smartphones to access travel information, very few use them to actually book hotel rooms, mostly because it’s so cumbersome (and potentially risky) to enter a 16-digit credit card number on a smartphone screen. The brand’s proprietary LQ Instant Hold enables smartphone-equipped travelers to find a La Quinta property and hold a reservation for up to four hours simply by entering their phone number into the system.

The feature will be available on the mobile version of LQ.com by the end of the week, and apps for the iPhone and Android will launch at the end of March. The brand is also upgrading its website with the addition of Trip Advisor reviews for hotels in the system. Cary says La Quinta is the first chain in the mid-scale hotel space to take this confident (some would say courageous) step.

But La Quinta has been on a roll, adding more than 500 hotels to its system in the past 10 years and planning to open 40 additional hotels this year. It’s kicking butt on the performance side of the business, too. Fueled by an 8% increase in RevPAR, systemwide revenue jumped 10% last year to $1.3 billion. Its LQ.com bookings were up 6% and revenues from all electronic distribution soared 11%.

Backed by the power and deep pockets of its owner, The Blackstone Group, and headed by the passionate leadership of Wayne Goldberg and Raj Trivedi, La Quinta seems poised to become the number-one brand in its midscale competitive set.

Something Brewing at Extended Stay Hotels

Extended Stay Hotels has flown under the radar as a hotel company the past five years, only making news when the Lightstone Group bought the 683-property company for $8 billion in 2007, and the ensuing aftermath with the not-so-surprising bankruptcy two years later. The price of the hedge fund’s leveraged buyout, even at the peak of the market, caught many industry observers by surprise.

Centerbridge Partners, Paulson & Co. and Blackstone Group (the company that sold Extended Stay to Lightstone in the first place) bought the company at a bankruptcy auction in 2010 for almost $4 billion.

Through it all, veteran Gary DeLapp has led the company as CEO, until news broke yesterday evening that former Starbucks CEO Jim Donald was immediately replacing DeLapp as CEO.

Board chairman Doug Geoga, formerly of Hyatt, thanked DeLapp for his service in a statement and said the board was “delighted” to welcome Donald to the company as “we focus on successfully implementing our strategic initiatives and taking advantage of the market opportunities ahead.”

Donald steps into the spot with plenty of experience leading various types of companies, but none anywhere near the hotel industry. He started with Starbucks in 2002 and served as a president and CEO, and most recently was president and CEO of Haggen, Inc., an independent grocer in the Pacific Northwest. Prior to Starbucks, he helped lead Wal-Mart into the grocery business with its SuperCenters, and before that he spent 15 years with grocer Albertson.

Certainly Donald has plenty of experience leading some big-name companies, to say the least, but how that translates to the hotel industry remains to be seen. It seems unlikely this move was made if Extended Stay Hotels was going to remain under the radar, so expect to hear some news sooner rather than later about the brand getting back into growth mode. On its website, the company still says it owns and operates “nearly 700 hotels across the U.S. and Canada” across brands Extended Stay Deluxe, Extended Stay America, Homestead Studio Suites, Crossland Economy Studios and Studio Plus Deluxe Studios.

The Wall St. Journal suggests the company could consolidate its five brands and debut a new name and logo later this year. Bringing in a big-name leader from outside the industry makes sense if that is the plan. Cleaning up the current stable of brands and properties has to be the first step before growth can happen.

I’d guess shifting to a franchise model like most if its lodging competition isn’t likely anytime soon, otherwise why hire the former leader of one of the biggest companies known for not franchising?

Could $5-a-Gallon Gasoline Cripple Tourism?

Many hotel industry pundits, me included, have discussed the things that could stall or even reverse the industry’s steady march back to prosperity. The list includes the U.S. economy, the world economy, CMBS debt coming due, even terrorism. One thing left off the list that could be a real problem for the entire travel business is an old favorite, gas prices. When you last stopped to fill up your SUV, you probably noticed that prices at the pump have been on a steady climb for weeks. The national average, as of yesterday, was $3.57 per gallon, up 60 cents over a year ago.

But it could get a lot worse: John Hofmeister, the former CEO of Shell’s operations in America and now an energy industry lobbyist, says pump prices could top $5 a gallon sometime this year, eclipsing the all-time national high of $4.11a gallon set in July 2008. Of course, gas prices vary wildly by region. In Los Angeles, prices have already topped $4, but they’re only $3.05 in Wyoming.

It’s the usual bugaboos that are causing the rise in prices. Global demand, especially from Asia, continues to increase. Geopolitics, highlighted by a looming showdown with oil-rich Iran over its nuclear ambitions, is another factor. Another problem is the stagnation in exploration and refinery capacity and the political debate surrounding the issue. And the improving U.S. economy, while a good thing, means more travel but additional strain on energy supplies.

Of course, your question is what does this mean for me and my business? An analysis last year by PKF Hospitality Research and Moody’s concluded the economy, and the travel business, could weather a rise in oil prices to $125 a barrel (the price is about $105 now), but a $150-a-barrel scenario could trigger a mild recession, probably reversing the hotel industry’s strong gains in performance over the past 12 to 14 months.

I doubt if it’s time to panic yet, as I seem to recall forecasts for $5 gasoline back in the middle of the last decade. That never materialized, unfortunately mostly due to the fact we tumbled into a recession instead. Nonetheless, it’s important for hotel owners and operators to begin to devise contingency plans if they see rising gas prices hurting their business.

Rising gas prices could also affect the political discourse in the U.S., especially as we approach the teeth of the presidential election campaign. As commentator Mike Barnicle noted yesterday on MSNBC’s “Morning Joe” program, “Do you think we’ll be sitting here talking about abortion and contraception rights if gas prices go up to $5 a gallon?”

Global Growth More Than Just Talk for Carlson Rezidor

All the major hotel companies talk about global growth, but I don’t think any of them say it with such an array of foreign accents like the executive team from Carlson Rezidor Hotel Group.

On Thursday morning in the Bahamas, sitting side by side on a panel at a press briefing were, from left, Gordon McKinnon, Carlson Rezidor’s chief branding officer; Kurt Ritter, Rezidor’s CEO; Hubert Joly, Carlson’s CEO; Thorsten Kirschke, Carlson’s chief operating officer; and Iype Abraham, the commercial development director for the Edwardian Group converting its portfolio of 13 Radissons in the London area to Blus.

The accents ranged from Scottish (McKinnon) to Swiss-German (Ritter) to German (Kirschke) to French (Joly) to British (Abraham). And what they were discussing was more than just talk. Carlson Rezidor may be based in Minnesota, but the company’s focus is far more broad.

Of the company’s portfolio of 165,802 rooms in operation, almost 60% reside outside North America. The company has always been focused on global growth, but that was accelerated with Joly’s appointment as CEO in 2008 and even more now with the shift to Carlson Rezidor and the focus on growing Radisson Blu as part of its Ambition 2015 plan. Carlson Rezidor expects to open 37 hotels in the Americas this year, 37 more in Europe, the Middle East and Africa (EMEA) and another 16 in the Asia Pacific region. Seventy-six Radisson Blus are currently in some stage of development, 40 more than the Radissons in the pipeline and 30 more than Country Inn & Suites.

Despite that, Carlson Rezidor can’t forget its small-town roots. Of the more than 1,300 attendees at this week’s global business conference at Atlantis in the Bahamas, I would guess close to half represented Country Inn & Suites and Radisson franchisees in the U.S. With all the talk centered on global growth and Blu — “We’re painting the world Blu,” Kirschke says — I wonder what the Country Inn & Suites owner in small-town Ohio thinks, or a non-Blu Radisson owner in the Dakotas.

I spoke with a few who wondered where they stood, and if those brands were still as important to the company. McKinnon said on stage during the opening general session Wednesday that although “it is the year of Blu, that doesn’t mean we value the other brands any less.”

In the press briefing after, he said the executive team was very sensitive to those concerns, but the challenge was giving equal time to all the important topics at a massive event like the global business conference. He said Country Inn & Suites’ time would come later this year, and it would soon get equal priority.

During the session, he offered an early look at “G4,” the brand’s fourth generation now on the drawing boards and set to begin rolling out as soon as the fourth quarter of this year. He called it an “evolution, not a revolution,” and said Country Inn & Suites had the opportunity to become an even stronger player in the mid-market.

For all the brands, including Country Inns & Suites now growing in India, the biggest opportunities are surely outside the U.S., but the core constituency of franchisees still remains here. Balancing those two competing interests is the tightrope Joly and his executive team must walk.

Read this story for a full recap on this year’s event.

New York Hoteliers Wisely Share The Spoils

Are you ready to pay your housekeepers $60,000 a year plus full medical benefits and a generous pension at retirement? Probably not, unless you own or operate a hotel in New York City that was part of a recent landmark settlement with the city’s hotel workers’ union. That agreement, covering 30,000 workers, was consummated with a minimum of fuss and bluster and ensures labor peace for the next six years.

While some might think New York hoteliers have gone loco to be so generous to their workers, in actuality the owners are crazy like foxes. This kind of contract, as costly as it may be for hotel owners, makes perfect sense on a number of levels. First, of course, it nearly guarantees the record of 25 years without a citywide hotel strike remains intact and continues nearly to the start of the next decade. That gives the number crunchers some hard data to factor into their cost and profit calculations for years to come. It’s a lot easier to obtain financing to buy or build a hotel when you can accurately forecast your biggest expense item.

Bill Marriott often likes to credit his father for a simple philosophy of success in the hotel business. To paraphrase, Marriott says if you take care of your associates, they’ll take care of your guests. We all know the hotel business is a simple endeavor that’s proven by this axiom. It’s a safe bet this contract makes a lot of housekeepers in New York happy about their job, which should translate into greater efficiency and improved service to all their customers. It works for Bill Marriott and it will work for the hotels in NYC.

By any measure, the terms of the contract are mindboggling. Housekeepers currently make about $46,000 a year and will receive 4% increases in each of the next six years for a top annual salary of just under $60,000. Benefits are extremely generous, too. The employers’ contributions to pensions will rise, and the hotels covered in the agreement will continue to fully fund medical, dental and vision benefits for workers. Wisely, the hotels are able to hold down medical costs by operating four clinics in association with the unions at which workers and their families can access basic medical, dental and eye care.

Finally, and most importantly, the hotel owners in New York need to be congratulated for doing both the smart thing and the right thing. Tourism and the hotel industry are booming in the city—50 million visitors last year and undoubtedly more this year and beyond—so it’s a very profitable business to be in these days. Union members read the papers and listen to the TV news, so they know the hundred of millions of profits at stake. It’s only right they fully participate in the spoils of this success.

Using Smartphones as TV Remotes a Genius Idea

Technology never ceases to amaze. Or annoy, at least me, since it seems almost daily some slick new mobile application is launched with a description along the lines of “this is the most amazing thing ever!” The exception was the news last week from LodgeNet, about its launch of an app allowing hotel guests to use their smartphones as TV remote controls.

I spoke with Scott Peterson, LodgeNet’s CEO, on Wednesday, and asked how much the company was getting from hotels for this cool new capability. “Nothing,” he said. So then what are consumers paying to download the app? “Nothing.” Wait, so this app, already one of the top 10 downloaded travel-related apps on both Apple and Android markets, is bringing the South Dakota-based interactive media company a grand total of zero dollars in added revenue?

“It’s free to the guest and free to the hotel,” he said again, adding that more than 2,000 properties, with about 500,000 guestrooms, are already offering the technology in the U.S. and Canada. To connect, all a property needs is a recently installed LodgeNet system, sometime after around 2005, he says, and high speed Internet access.

When guests use their mobile phones (iPhones, iPads and Androids) to change the TV channel, the cell phone network sends the signal through the Internet to the LodgeNet server, which then tells the server at the hotel to change the channel on the TV in that guest’s room. All in a split second.

The app also offers guests two other sections, My Hotel, which provides basic information about the property, and Local, which offers area information for food & beverage venues, events and other attractions.

The app may not drive revenue directly, but LodgeNet hopes consumers happily download and use the new app to avoid dirty remote controls and to take advantage of the added features, meaning hotels without LodgeNet systems or older ones will have to upgrade to satisfy their customers. Peterson also believes increased guest engagement will drive more pay-per-view buys. Hotels, for a “reasonable fee,” Peterson says, will have the option to customize and brand the app within the My Hotel section, adding more images, promotions, overviews, mobile checkout and even for ordering in-room dining.

Hotels could also drive revenue or barter with local entertainment and f&B venues to promote their offerings. And larger resorts could offer the ability to reserve spa, golf or other on-site amenities.

“This is the first step down a path with years of innovation ahead,” Peterson says.

Have We Reached Hotel Franchising Détente?

They may not yet be ready to exchange gifts on holidays, but it looks as though Choice Hotels and the Asian American Hotel Owners Association have patched up their differences that nearly got the mega-franchisor booted out of the influential 10,000-plus-member hotel owners’ organization. In a letter sent late last month to Choice President & CEO Steve Joyce, AAHOA leadership outlined a list of changes Choice has promised to make that will qualify the company to renew its AAHOA membership.

Most of the items were fairly basic and involve Choice’s impact policy. A few other things on the list, while important, aren’t earthshaking. In one bullet point in the agreement, Choice agreed to commission a study to address the mission and structure of its owners’ council. Part of that discussion will be whether to refocus the council as a completely independent group, similar to the IHG Owners Association.

Last September, the AAHOA board sent a letter to Choice telling the company it needed to change its attitudes and practices toward its franchises or face rejection of its membership renewal for 2012. Those membership privileges include access to the AAHOA annual and regional conventions, events where thousands of current and, more importantly, potential franchisees attend.

The rift between the two groups and its relatively swift (four months to the day) resolution may mean a growing détente between the big franchise companies and their owners. My friend and franchisee advocate Stan Turkel disagreed with me last fall when I commented that the Choice-AAHOA disagreement wouldn’t escalate into full-fledged warfare. I seem to be right this time. AAHOA had a problem with Choice’s conduct, and it made its feelings known in a direct and consequential way. And, by all appearances, the two sides were able to sit down, hammer out their differences and agree on a course of action. For a change, there was no PR campaign in the press or inflammatory remarks made on the stages of various industry conferences to make the situation worse.

I hope I’m right. An adversarial relationship between franchisors and franchisees (and their AAHOA proxies) is a healthy thing. It’s not healthy, however, when either side strays from the key issues and resorts to grandstanding.

I congratulate both Choice and AAHOA for taking the high road to solving their differences this time.

Bratty New Yorkers Want Tourists to Stay Away

I got a big chuckle this week reading an online think piece in Crain’s New York Business. The story, titled “The Trauma of Tourism” and written by Erik Ipsen, recounts the disgust some New York residents have for tourists fouling their otherwise-perfect lives. In particular, people living in SoHo are ticked because so much retail has gone into the neighborhood that sidewalks and cafes are jammed with these out-of-town interlopers. Likewise, the hipsters in the Williamsburg section of Brooklyn don’t like that some of the city’s 50 million annual tourists make their way across the Brooklyn Bridge to drink in the neighborhood’s bars.

Sorry, but I don’t have much empathy for these people. Coming from a city with precious few tourists (save those who come for a ballgame or to visit the Rock and Roll Hall of Fame) and an economy to match, I find it outrageous that people turn up their noses at the rich economic engine that is tourism. Tourists, especially those who visit New York, arrive with lots of cash they’re willing to spend on tiny $300 hotel rooms, $55 steaks and $18 cocktails.

Then, once their wallets are depleted, they get back on a plane or in a car and leave. They don’t send their children to local schools or usually don’t use the city’s healthcare system. They come, they spend and then they leave. I wish we here in Cleveland were so lucky as these brats in New York. They need to wake-up and appreciate what they have: prosperity fueled by tourism.