Skift Take

Choice Hotels CEO Stephen P. Joyce knows that future success for his company depends on smart acquisitions and investments in technology, loyalty, and the sharing economy.

Choice Hotels International, a hotel company known for its portfolio of brands that primarily occupy the economy and midscale space, is looking to expand into the full-service space beyond its soft-brand collection, Ascend, and boutique-inspired Cambria hotels & suites brand.

That’s what CEO Stephen P. Joyce said to investors during a third-quarter earnings call when asked about possible future acquisitions.

“… You know I’ve made no secret to the fact that I think, an appropriate upper upscale brand that is relevant for the future is something that we should be looking at, and [we are] looking for opportunities, probably more of a purchase option if something becomes available than a development option because I’m not as young as I used to be,” Joyce said.

What kind of upper upscale brand would this be, and where would it come from? Joyce dropped some hints:

He said, “We’ve talked a lot about Europe, and we’ve looked at several things there. Haven’t landed anything yet, but we could and we would like to have a strong entry into the upper upscale market because I think that really completes our portfolio. I don’t think you’re going to see us in luxury. So, kind of been there and done that. But I do think a full-service upper upscale adapted for what makes sense in today’s environment which is different than a lot of the products that are out there.”

And by today’s environment, Joyce meant, “I think that the 300 room, suburban, 10,000 square-foot ballroom, full-service hotel is a dinosaur.”

What Joyce said also seemed to speak to what Marriott International is currently doing to refresh its flagship, full-service Marriott brand, as its new Marriott M Beta hotel in Charlotte, N.C., demonstrated. Both Joyce’s comments and Marriott’s living hotel laboratory are an acknowledgement that the full-service hotel of yore is no longer competitive.

Future Forward Thinking

In addition to looking for a new upper upscale brand to add to its collection, Choice Hotels’ overall strategy for growth seems rooted in an understanding that the hospitality world is changing rapidly.

Like its peers, Choice is focused on loyalty, direct bookings, technology, and the sharing economy, to an extent.

Having revamped its Choice Privileges loyalty program earlier this year to be simpler and offer more instant rewards and perks, Choice is seeing increased membership numbers. Joyce said the program now has 28 million members, and that the company’s loyalty member rates are driving more direct bookings.

“ continues to grow significantly and generate the largest share revenue of our distribution channels,” Joyce said. “Our direct online channels, and mobile had 17 days with over $6 million in bookings in Q3 2016 compared to 9 million in Q3 2015.”

“Okay, so first answer is we like that model and we’re emulating in a way that we think makes more sense for us. So we actually like the idea of having new product introduced into our system that our customers can use in our points in that’s why we launched the vacation rental business.”

Hospitality and Technology Go Hand in Hand

For Choice, technology investments are crucial for business success, and Joyce touted the importance of the company’s deployment of Smart Rate, an artificial intelligence-driven tool that helps its hotel owners and franchisees employ dynamic pricing at their hotels. Choice Hotels also owns SkyTouch Technology, a company that specializes in cloud-based hospitality management software.

“We view ourselves as a hotel and a technology company and we’re able to provide really valuable tools for our franchisees at relatively inexpensive cost, that significantly increase the performance of their hotels,” Joyce said.

Keeping an Eye on the Sharing Economy

That combination of being both a hospitality and technology company is something we’ve heard before, namely from alternative accommodations provider Airbnb, and Joyce also acknowledged his desire for Choice to become a more active player in the sharing economy as well.

When asked about Airbnb and whether it was having an impact on Choice Hotels’ business, Joyce said, “We like that model and we’re emulating in a way that we think makes more sense for us. So, we actually like the idea of having new product introduced into our system that our customers can use in our points in that’s why we launched the vacation rental business.”

Earlier this year, Choice announced it would work with partner vacation rental companies to offer its loyalty members the ability to redeem their points for use at vacation rental properties.

Mirroring that move, Wyndham Worldwide announced on Oct. 26 that it has opened up its Wyndham Rewards loyalty program to its own vacation rental and timeshare units, too.

“I won’t say, I’m not going to say there’s no impact to us from Airbnb but we can’t detect it and the reason being is, Airbnb focus is on major markets where there’s lots of demand and so the impact, the urban markets, they impact the resort market,” Joyce noted. “We’re not heavily populated there. I don’t want to suggest that we haven’t lost any rooms to Airbnb. Sure we have, but we have detected really no impact in our overall results and I think it’s in part because our inventories differently placed than a lot of the other hotel companies.”

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Tags: airbnb, choice hotels, mergers and acquisitions, tech

Photo credit: A rendering of guest room at the Cambria hotels & suites Chicago - Magnificent Mile. Choice Hotels CEO Stephen P. Joyce said he would like to add an upper upscale brand to Choice's portfolio that complements Cambria. Choice Hotels International / Choice Hotels International

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