|Steve Joyce, president and CEO of Choice Hotels, is in good spirits. The company is coming off a strong 2012 performance and it recently announced two deals in the upscale and international markets. The first, a marketing partnership with Bluegreen Vacations, adds 21 new resorts to Choice's upscale Ascend Collection. The second, a deal with U.K. hotel operator Akkeron Hotels, converts nine English properties to Quality and Clarion hotels. Here’s what Joyce had to say to Lodging about these deals and about the company’s priorities for the upcoming year.
Lodging: How do things look at Choice now that you’ve wrapped up 2012?
Joyce: For us, 2012 was a great year, any way you look at it. We had improved guest scores, improved market share, and improved performance of the hotels. We were way ahead of the plan all year long development-wise. And a lot of the things we were working on came together at the tail end of the year. The deal for the 46 Jamesons, which was announced Jan. 14, was the single largest group of hotels that Choice has ever done. We think we can help these properties and when Colony sells them, we’re going to make some money together.
The big thing for us is our movement into upscale. We’re known for being the place that you stay on your way someplace. We do a lot of highway locations and cater to people going to parks or visiting relatives. They tend to stay with us. But we haven’t necessarily been the place that people end up. The announcements you’ve seen are a big movement for the company to also be a destination. So along with the Cambria Suites deals in NYC, we also have hotels coming to Plano and Desert Ridge and we’re partnering with O’Reilly Investments on both projects. O’Reilly is a well-capitalized group that’s getting into the hotel business in a big way.
On top of that we have the deal with Bluegreen that adds 21 Ascend properties, putting us at 95 total. We started Ascend a couple of years ago with 17 hotels, so this is one of the fastest growing collections out there. Adding these resorts will not only help Ascend but will help the company because our 16.5 million Choice Preferred members want more resorts and this will give them some different options. And these Choice Preferred members will give Bluegreen a boost when it comes to selling timeshares. This deal gets us into the timeshare business from a licensing and distribution technology standpoint, but not from an ownership standpoint.
Our international expansion deal with Akkeron adds more three- and four-star properties to our U.K. inventory. This helps us increase our presence in Europe, which is a major target for us. Akkeron Hotels has 34 properties and we’re taking nine of them. We are expecting to do more together—something bigger. So when you look at all that, it’s hard not to be excited about the way this year is starting out.
Lodging: What’s your outlook for the upcoming year?
Joyce: Not only should 2013 be a strong year but it should also carry into 2014 and 2015, because there won’t be much supply addition coming online until 2015. But who knows what you’re going to get at that point. From a supply standpoint, growth is going to be moderate. Because business has been gradually improving and because we didn’t come out of the recession in leaps and bounds like a normal recovery, I think this period of steady growth is going to last for a few years. The industry forecast for 2013 is a 5 to 6 percent growth and we think that makes a lot of sense.
We’ve got two guys on our board that really help me get an understanding of the current economy; one of them is Gordon Smith, the number two guy at JP Morgan; the other is Bill Jews, the chair of Ryland Homes. They’re both a great assets for me because Gordon knows what the retail guys are doing and Bill knows homebuilding. They’re both pretty bullish, which says a lot about current consumer behavior. And the thing is, the housing market is going to have a really good year.
Last year, our new-build projects were up sharply from a very low base. We saw nice growth from both Comfort and Sleep, which we’ve redesigned the prototypes for. Cambria we also had a pretty strong year with, and Ascend as well. Most of this growth came from conversions, but the new builds were especially encouraging because we weren’t expecting much from them going into the year. It means that some of the small lenders are back in the market. So it’s a little better.
Lodging: Will Choice continue to make capital investments in its own development projects?
Joyce: We’ll probably end up with capital in all three of the NYC Cambria Suites development deals. We have capital in the Washington deal. In some of them, [our contribution] has come down because our partners need a little less from us. But it’s been our willingness to invest in sliver equity, Mezz pieces, or something else that helps these developers fill that cap stack, because they weren’t going to get it done otherwise. Lenders are lending, gradually, and the terms are getting a little better and the leverage levels, but it’s still tough to get new construction deals done. The urban deals with good sponsorship are getting done, some of the regional ones from strong players are getting done, and some of the smaller guys with local lenders are getting done, but the bulk of our growth is still conversions.
Lodging: Does it help attract developers for Choice to have its own skin in the game?
Joyce: A lot of the developers doing these projects are looking for the person that’s getting involved with them from the brand to feel that they have a stake in the project. What I’ve found over the years is that our willingness to make the commitment is less important than the commitment itself. I think it’s important for a new brand like Cambria, for the company to demonstrate support for it and the fact that we’ve allocated $250 million for Cambria has helped it get noticed by the development community.
Lodging: Do you find it difficult to treat each of Choice’s hotel brands equally?
Joyce: The easiest thing is to say we support all our brands in different fashions. Our money is going into the new brands, like Cambria, that are growing. For urban deals involving Comfort, we’ll put money in. But in the bulk of our deals that are conversions for our core brands, there isn’t a requirement of any capital. People don’t expect it and it isn’t necessary for those deals to get done. They tend not to get the capital attention. And we’re trying to drive a higher level of consistency with the brands, since this had gotten a little more spread out than we preferred. For the power brands like Sleep Inn and Comfort Inn, we’re pushing our improvements through incentives because we want to get them done quickly. On the other brands, we’ll be taking an approach that’s more of a, “Hey, we love you, but if you don’t invest in your property we’re going to find someone else.” We’re trying to blend out where it makes sense to commit the capital. It makes sense to put it into Comfort, which is the engine of the company and it will be for quite some time. It’s about making sure our brands are consistent as can be and that customers like them.
Lodging: Do you find that many of your development partners have been returning to do more business with you?
Joyce: For Cambria it is. Look, the bulk of our business is in $3 to $5 million hotels. Cambrias are $20 million, which means a different franchisee. If you have $20 million to put into a hotel you’re probably already in the business and you have a development company and an operating company. I did a lot of business with these folks when I was at Marriott [as EVP of global development from 2005 to 2008]. So that crowd is starting to pay attention and starting to filter over. I think they like what they’re hearing. And these guys don’t just do one hotel—they do 10.
We know we have a great product. The numbers are coming up on all of them. We’re sticking to urban where we know we have a tremendous amount of demand and I think you’re going to see 15 new Cambrias by the end of the year. If you have real believers in the product then they’re going to stick with you for a while.
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Thursday, February 21, 2013 by reddy
thank you mr. steve joyce, i have spent lot hard earning money, just lost franchise after 5 years. all the i never made money, but i payed your bills. if we are not doing well you have send your people and help us train us on the property and make it success. you don't do this just sit on the chair give interviews with channels or magzines. i have seen in under cover boss, u did so many thing to the visited hotels, u can see thousands of hotels like you never helped them. if your a good man my property tx507 which is terminated pl. reinstate and send your crew and make it success.
Thursday, February 21, 2013 by reddy
steve joyce is nonsense, he just worried about money nothing else, he never concentrete on properties not doing well, he just remove from franchise instead of healing it. he lied in undercover boss. magazine also goes him to show him, to get some money for advt. i have spent lot of money to build comfort suites when i am doing good business, these people never disturbed me and i am bad he terminated my franchise showing different reason instead of correcting. i don't trust choice hotels at all. if you enquiry all the franchise you get same answer, they are still struck because of the agreement they signed for 20 yrs. may be 15% happy with them i think.