Skift Take

The key to success in its road ahead lies less in the countries where it will develop its presence but more in the developers it is partnering up with.

The economy hotel sector currently makes up 19 percent of the hospitality industry, and signs point toward its continued growth both at home and abroad.

While several companies have their eyes on China as prime secondary market for economy options, Red Roof Inn is employing a different strategy in its efforts to capitalize on overseas opportunities.

“We have taken a different strategic approach to many of the people who have gone before us, and our approach is to look more to the partner than to the location,” says Red Roof President Andrew Alexander.

Red Roof Inn currently has 430 properties across the U.S. In December 2014, Red Roof announced its first foray into the international scene through a partnership with Brazil-based Nobile Hoteis to develop hotels across the country. In the nine months that followed, Red Roof also unveiled plans to establish a presence in Thailand and Canada after being approached by developers in both countries. Red Roof is working with Paragon Partners in Thailand and developer Glenn Squires in Canada.

Launching simultaneously into three markets wasn’t planned for, Alexander says, but the quality of partnerships proved too good to pass up.

“Moving into your first international location obviously carries with it a lot of time, research, understanding of the marketplace, and moving into three requires virtually three times that amount of research and input,” Alexander says. “Had we gone off on our own and tried to enter into secondary markets or emerging markets without a partner, we would be at a big disadvantage, especially in some of the less developed marketplaces.”

Bringing the brand to Canada was always on Red Roof’s agenda, Alexander says, as the company felt comfortable in the Canadian environment, and the Red Roof name already has some recognition there.

Entering the other two countries called for some more internal conversations around matters like language barriers and currency fluctuation to determine the amount of resources necessary to move into those markets, both of which are underserved given China’s center-stage presence for mid-market lodging.

“If someone from China came to us with the right reputation skills and background to expand in the right way, we would certainly jump on that because opportunities are immense, but for us it is more important to important to focus on the partners,” Alexander says.

The Right Partner

In each of the three countries, the developers’ visions for Red Roof aligned with what the company was looking for: multi-unit development.

“Each of the groups over the next 10 years expects to develop at least 20 and up to 40 units in each of the countries,” Alexander says. “If you want to grow a brand across a country, one-offs or two-offs doesn’t get it done. You have to get a developer who is really looking to spread the brand.”

Alexander points out that rather than follow suit to what many have done in the hotel industry through the last 20 years by entering master development agreements, Red Roof will retain control over the brand, quality and service requirements for the properties in its partnerships forged with Nobile Hoteis, Paragon Partners, and Glenn Squires.

The ability to insert its name in under-crowded markets brings with it plenty of clear advantages, Alexander says.

“In a less crowded market space, there are less people looking for the same number of customers, and maybe more important there are less developers looking for investors to invest into the hotel acquisition, renovation and building side of things,” he adds.

Red Roof Inn has placed itself at the top of the economy lodging segment by presenting itself is an upscale economy product, an area Alexander predicts will continue to see high growth.

As he looks to the future, Alexander sees guaranteed consistency as the sweet spot for economy lodging continued success.

“Where we think the future is is having an economy level that gives the value to the customer yet giving consumers the confidence that the quality and service levels are consistent,” Alexander says.

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Tags: development, hotels, red roof, strategy

Photo credit: A modernized room in the budget chain. Red Roof Inn

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