Red Roof recently announced plans to expand the Red Collection, a portfolio of upper-economy to midscale hotels in city centers that the company launched last year. The company’s first and only soft brand aims to attract cost-conscious travelers who want to be in the thick of the action and have unique, local experiences during their trips. LODGING sat down with Red Roof President Andy Alexander and Chief Development Officer Phil Hugh at AAHOA’s 2018 Annual Convention & Trade Show to talk about developing the Red Collection, how this soft brand fits with Red Roof’s other offerings, and the company’s future plans for growth in the midscale segment.
You recently opened a new headquarters. How does that fit into the expansion of the company and its brands?
Alexander: We’re in downtown Columbus and we’ve just outgrown our space. As the brand grows, our corporate offices grow, and the field offices grow. We’ve had to move from about 28,000 square feet to 43,000 square feet to accommodate everything that’s happening, not just in Columbus, but around the country and internationally. Our marketing and technology teams are growing very quickly to keep up with the demands of everything in the digital space. When I talk to my ownership group about our needs, 90 percent of what I talk to them about is technology-based. While we’re in the hospitality business and hotels are selling rooms, we’re also selling technology and we’re selling access to rooms and distribution points. And so that’s one growth story, and Phil [Hugh] has the other growth story.
Hugh: We announced the Red Collection back in September at the brand conference. We are well underway on the renovation of the property in Chicago, which will open this fall, and we recently announced a second property in Springfield, Illinois.
The brand is perfectly positioned for us to get deeper into the midscale [segment]. The markets that we’ve typically challenges getting into—Manhattan, Downtown Charlotte—are true center-city locations where you walk out and you’re in the heart of the city. Our customers told us what they wanted and we listened, and now we’re delivering.
We just started selling it in January, so we’ve only had 60 days behind it. A lot of people that have those types of properties may not be familiar with Red Roof from a brand perspective. We’re talking about a lot of management companies and companies that have those assets that really haven’t explored and don’t know Red Roof’s economy brands, but know of us. It’s really about building some relationships and trying to get that moving forward.
Alexander: Our Red Roof tradition is to put our money up first. In this case, our ownership group put over $16 million into converting this asset in downtown Chicago to really start the brand off right. Usually what happens in the Red Roof community is if we lead and we show that it works, everyone else quickly follows.
In today’s crowded hospitality space, what opportunities did you see that made you decide to launch this soft brand?
Alexander: Our PR team went out and did extensive, focus-group research with customers to determine, “does anybody want this?” The demand for a value-oriented, center-city soft brand was through the roof. And it really said to us that millennials want this experience, but they don’t have the money to pay for this upscale product. You hear everybody say, “we’re focusing now on midscale.” Welcome to our world. We’re already in the midscale [segment], and we know what midscale is all about. This really gives us an opportunity to go just beyond that into that upper-midscale price range. When we asked customers, they said that’s exactly what they want—something that still works with the central-city theme, but doesn’t take away their ability to experience the city by taking all the money out of their pockets.
Is there any overlap between the soft-brand customers and the guests of Red Roof’s other brands?
Alexander: In rough numbers, about half of our Red Roof Inn and Red Roof Plus customers will use the Red Collection on a business and leisure basis. The exciting thing for the larger community is that the Red Collection is also going to bring in new customers, especially Red Roof Plus customers, who will get familiar with the Red Collection and Red Roof by staying in a downtown environment. And then they will realize that Red Roof Plus is out there and provides them much of the same level of amenities and options, just in a different setting.
What markets are you really looking to go after? Do you have a wish list?
Hugh: I think Chicago is number one on the list—so we’re there. Manhattan is key for us—we could probably do a couple of different properties in Manhattan. I’d like to see Los Angeles, San Diego, and San Francisco to help us get a better presence on the West Coast because if you look at a map of Red Roof, we’ve got our strength in Midwest and Southeast. Texas is also growing rapidly, but we’ve got to do a better job of growing the brand out West to states like Arizona and California. We’ve got a really solid team out there.
Alexander: And those are locations that are in demand from our guest standpoint. It’s important to us, at an event like AAHOA, that we make that clear to potential franchisees because our guests are asking, “can I stay in Denver?” and “can I stay in Seattle?” Those are locations where we really need a downtown presence to meet their needs.
Hugh: We’re not looking to just do deals to do deals. We’re not going to put these in markets that aren’t core to our mission. We’re really going to be protecting the brand. I do foresee us going into some resort locations, maybe some large properties near Disney if they’re centrally located. Can Red Roof really carry a 700-room property? Maybe Red Collection could. So it gives us some markets and some opportunity where we typically wouldn’t be there. It’s going to attract new franchisees who’ll learn the core brand and new customers who’ll learn the core brand.
What have you found to be the biggest challenge in pushing forward with new design, new technology, and trying to change how guests and hoteliers might see the Red Roof brand?
Alexander: The biggest challenge, especially when you move up a segment, is you have to convince potential franchisees that they can get the average daily rate (ADR). That’s really what it’s all about, right? We’re telling them that even though you’re part of Red Roof, you can get an ADR of an upper-midscale-type property. But that’s why it’s so important that we lead, and [with the Red Collection], we led with a premier property in a premier location that we know is going to perform well, and hopefully outperform the competition in the segment. We’re laser-focused on that, and just like with Red Roof, we’re a high-touch organization, so when people come on board—whether its a Red Roof Inn, a Red Roof Plus, or now a Red Collection property—the type of involvement they’ll get from us is way more intense and way more collaborative.
What are your plans for expanding internationally?
Hugh: We still continue to grow in Brazil and we just opened in Rio. We’ve got some conversations going on in Canada and we’re still growing in Japan. We’ve got a lot of conversations taking place, but, for us, it really has to be the right partnership. We’ve got a lot of work to do here at home. That growth will come over time.
