Best Western’s Parent Company Looks to Outflank Its Hotel Peers

I wanted an update on BWH Hotel Group, the parent company of Best Western Hotels & Resorts. So I spoke with Larry Cuculic, president and CEO since late 2021.

Cuculic methodically shared his plans for the Phoenix-based group with 4,700 hotels.

• Cuculic’s approach to strategy may come partly from his legal education and partly from being a graduate of the U.S. Military Academy at West Point and the U.S. Army Command and General Staff College in Fort Leavenworth, Kansas.
• Cuculic talks through his operational decisions and organizational philosophy in a way that sounds like a military tactician — though he prefers the metaphor of an athletic coach.

Strategic thinking requires making trade-offs based on well-defined goals. Leadership requires aligning incentives with those goals and communicating the goals clearly and often. It’s early days to see how the newish BWH CEO will measure up.

• Cuculic plans to fine-tune and expand the Best Western family of brands, the soft-branded WorldHotels (see details, here), and the pragmatic brands of the SureStay Hotel Group.
• Cuculic wants to push the company’s rate and occupancy up. Levers to do that include updating brands and enforcing brand standards to boost guest satisfaction scores and loyalty, making better use of software (like rate-setting tools) and hardware (like holograms), tightening processes, and having more collaboration with owners.

The finances of privately held BWH seem robust.

• “We have the strongest balance sheet in our company’s history,” Cuculic said. “One of the most important strengths of this company is that we have no liability whatsoever. We carry no debt. We’re very strong in terms of the capital we have in the bank.”
• During the pandemic, BWH streamlined its budget to survive and stayed on that budget. Hotel owners continued to pay fees to it. Over a couple of years, it returned more than $65 million to the owners.
• “We don’t have equity partners that take funds away from our bottom line, which makes us relatively unusual among our peers,” Cuculic. “We’re purely hotelier-centric.”

Meeting every brand’s promised level of quality is a key objective for BWH.

• “People say, ‘push rate, push rate,'” Cuculic said. “But guest expectations are elevated as a result of that. If you charge a high rate but compromise on the quality of the stay, goodwill will suffer —and your loyalty program will suffer, too.”
• During the pandemic, upkeep was neglected at many properties across the hotel industry.
• Cuculic has emphasized a “design excellence” program and expanded the number of regional service managers. Every U.S. hotel will get visited at least two times a year. They’ll bring coaching and fresh eyes.
• Best Western amended its “brand standards” to add that the corporate team will measure how well properties are managing the overall experience and hold owners accountable. The corporate office is paying closer attention to Medallia guest feedback surveys, he said.
• “What gets measured gets done,” Cuculic observed.
• Seven years ago, BWH launched a program where every one of its roughly 2,000 hotels in the U.S. would receive a design visit and a property improvement plan every seven years.
• “We estimate our hoteliers spent $2 billion on property improvements in the past seven years,” Cuculic said. “Roughly a million per property.”
• In January, the seven-year cycle started again.
• “If you haven’t been to one of our U.S. Best Westerns lately, you may have missed that the lobbies look different, the rooms look different,” Cuculic said.

In January, Hilton said it would launch its first premium economy brand, Spark, saying it thought it could outcompete the current offerings in the market. BWH has its Sure Stay Group in that premium economy category. Yet Cuculic said he isn’t worried. He said that any new entrant might find the segment harder than it looks.

• It’s a truism that, as you strip out amenities and move down the hotel chain scale toward budget offerings, you generate a smaller margin per room, giving you less room to maneuver. Skillful, consistent execution of a business plan becomes ever more important as you move downscale from the luxury to economy segments.
• On the demand side, some people assume that guests will expect less if you’re not offering luxury. But that’s not necessarily true. Budget travelers’ expectations will differ, but they will still have expectations.
• On the supply side, the margin for error is less. Operational inefficiency will devour your profit.
• “In the premium economy and mid-scale segments, hoteliers need more support,” Cuculic said. It’s not a management company running that. It’s Mr. and Mrs. Smith running that, and they need coaching. We provide small business owners with infrastructure support that’s been fine-tuned and road-tested.”

Best Western isn’t as popular with younger travelers as with older ones used to the brand.

• “We realize that mature travelers, like myself, are comfortable staying at Best Western, but we also need to attract tomorrow’s travelers,” Cuculic said.
• BWH’s soft and boutique brands — Aiden, Vib, Glo, and Sadie — aim to woo next-generation travelers.
• So perhaps is @Home by Best Western, an extended-stay, midscale brand that just launched. The name reflects responsiveness. BWH debuted the brand to owners at a customer conference in October and, after feedback, Cuculic didn’t hesitate to change the name from Home by BWH to @Home by Best Western.
• In Europe, BWH is testing new concepts. It will open a couple of Vib premium economy brand properties in Germany this year that are reminiscent of the homegrown player Motel One.

Fine-tuning the BWH Group’s loyalty program is another piece of the puzzle.

• For years, many road warriors have earned points on stays at Best Westerns but wanted to redeem those points for reward stays in hotels and resorts that were more aspirational and located in leisure destinations.
• In 2019, BWH acquired the WorldHotels Collection, adding approximately 300 luxury and lifestyle hotels and resorts. The WorldHotels soft brand may meet this need and make the loyalty program more attractive to its more than 50 million members by offering dream-worthy reward redemption spots such as The STRAT Hotel, Casino & SkyPod on the Las Vegas Strip and the Peppermill Resort, Spa & Casino in Reno, Nevada.
• WorldHotels added 10,000 keys last year, including a 30 percent jump in North America. It has just entered Canada through a deal with Prestige Hotels & Resorts.
• Besides the boost from loyalty member redemptions, BWH has boosted the performance of the average WorldHotels property through its bigger onward distribution, its revenue management tools, and its corporate business sales teams, Cuculic said.

BWH sees growth ahead in the U.S. thanks to the federal infrastructure spending and overseas, particularly in high-growth markets in India and Asia Pacific.

• The company has a sales team focused on relationships with companies that frequently need worker housing, such as trucking and construction firms or emergency response crews.
• Asia Pacific properties only contributed 20 percent of the overall revenue last year, with regional properties seeing occupancy rates nearly at 2019 levels. Cuculic sees Asia Pacific as a catalyst for growth.

Cuculic sees new software as a way to help hotel owners keep rates as high as the market will allow.

• In the second half of this year, BWH will launch a new revenue management product to help owners set rates dynamically by incorporating the latest intelligence available on supply signals.
• “It used to be you set a rate, and you’d leave it for a week or month,” Cuculic said. “You can’t leave money on the table like that anymore.”
• Subscribers to Skift Research can get more context in this month’s report: Hotel Tech Benchmark: Task Management, Housekeeping, and Staff Collaboration Tools 2023.

Balancing owner needs and customer expectations is the trick Cuculic’s team is trying to pull off.

• The company’s boutique-like Aiden brand is an example. It’s primarily a conversion brand to meet a need in the market for owners who have a mid-scale or upper-midscale product and want to reposition the property to command higher room rates.
• “We’re being blunt with owners that we only want Aidens built in markets with enough demand that can support it being successful in delivering on the return on investment,” Cuculic said. “If you have a Best Western along a highway, we don’t want you converting to Aiden. If you have a central location in a compression market like Austin or Nashville, then, yes, let’s talk.”
• Aiden is a bet on appealing to an experience-seeking traveler. The brand standards are loose, and the hotel owner is responsible for creating an interior design that helps a property reflect the community’s personality.
• Aiden is set to double in property count this year. It’s about to launch in India. In Scandinavia, 30 new hotels have been added, most with a hologram concierge service (which Skift spotlighted last week).

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