LODGING recently sat down with Brian Quinn, senior vice president and chief franchise officer for Red Lion Hotels Corporation to talk development fundamentals.
Red Lion Hotels Corporation has five brands that fulfill various price points. Why is it important to build a diverse portfolio? It’s critically important because when you get inside travelers’ heads and see what triggers their reason for traveling, as a company, you can earn their trust and truly recognize your guests. People who travel for business or leisure have different expectations. You want to capture the travelers who start to become loyal to the brand and are used to those common experiences so you can provide them an offering regardless of the stay occasion.
As the strategy evolved for the company, we needed to extend the brands out. But we worked very hard to deliver on some core elements so that every RLHC brand stands for core points, but are also clearly delineated from cost to develop and renovate, and of course grab the customer they’re going after.
It was a bold move to test out the East Coast market—what was behind that decision? It has been an incredible journey for us. I like to say I feel like I’m at a startup that is decades old. The company historically had quite a bit of density on the West Coast and specifically in the Northwest. But if you look a lot of the companies based in the Pacific Northwest, whether it’s a Microsoft, Yahoo, Boeing, Starbucks—a lot of them have matured to a point where they have outbound travel. Wherever you live, you want to see the brands that you get used to where you need to travel to. So I think we’re hitting the market at a very interesting time from more of a macro standpoint. Strategically, we engineered the company and put our revenue and guest acquisition program together that allows us to create demand, and we have the confidence to say we can do that almost anywhere. You can’t get much further from Spokane, Wash., than Baltimore.
There are clearly very mature lodging markets in the East, it’s where our existing customers want to go, and we believe our systems can create a credible opportunity for the development opportunity and we believe that the offering that we’re providing to the guest is right where the traveler is right now.
What research do you suggest owners conduct to ensure they select the perfect site for their hotel? Even when we’re doing our due diligence as a franchise, the top two things are what are the top employers and run a report on the competitive set in the area. Those are the basic things to get a sense of the market. It is important to consider what do demand generators look like, and is there diversity in those demand generators. Next is location, location, location. What kind of access
exists, and where are you physically positioned versus the competitors and the demand generators? Then, you need to consider the diversity of demand drivers. Proximity to government, medical, education—those things are a bit less sensitive to changes in the economy, so those are great demand generators you’d like to have. Finally, you must be mindful of access to talent or the ability to get talent to your location that can take care of the hotel at a price that makes sense.
What construction challenges are most pertinent? Cost is always an issue, because it’s such a big input into the deals. There’s supply and demand out there and all the companies need to contend with that. As it relates to construction, there’s always a set of challenges and some items that are supportive of construction. Oil prices coming down takes some core deliverables in a construction project potentially down in price as well. But where we are in the cycle right now, demand for talent around construction folks and design folks is high. They’re all extremely busy, so they have pricing power. Every time you’re developing, there’s a set of challenges, they’re just always changing. On the flip side, positives would be oil prices and incredible innovation around the materials that we use and sourcing those materials—there’s a potential for savings there.
How do you feel about hotel performance as hospitality nears the peak of the cycle? Demand is continuing, people want to travel, and unemployment is low. All the positive elements we all hope for are in place. But we are in a strange time. Supply additions are starting to come on, demand is slowing, and we’ve got a national election. We’re probably continuing to grow, but at a slower rate because you’ve got a set of factors that are all converging. That said, I think it is always a good idea to go back and make sure that the lessons learned in the past have been burnt in. We learned how to be more efficient after the last two times we had challenges. If we can continue giving the guest a great experience and create some margin for the owner, everybody wins.
