Upscale by Choice platform gains momentum

Editor’s note: This recent roundtable in New York City about Choice Hotels’ plans for further upscale development was sponsored by Choice Hotels International. Choice also participated in the curation of panelists but had no influence on the final editorial content.

NEW YORK CITY - When Choice Hotels International acquired Radisson Hotel Group Americas for approximately $675 million two years ago, it gave strength and further trajectory to its play in a segment that had been represented solely by its 17-year-old Cambria brand. Since then, Radisson and Radisson Blu have relaunched and Cambria has experienced continued growth, pushing the need for a defined platform.

“These last couple of years have been a big step for the company. We've grown roughly from 200 to about 400 hotels [in the upscale space],” said Indy Adenaw, senior vice president and general manager, upscale. "So, the size component of competing in upscale is already there… We feel pretty good about actually approaching this from the mindset of being a challenger and an aggressor to the sector.”

New-look Radisson Blu guest room

Earlier this year, Choice set plans in motion to reimagine five of its eight brands that occupy the upscale and upper-upscale segments and create Upscale by Choice. These include Ascend Hotel Collection, Cambria Hotels, Radisson, Radisson Blu and Radisson Individuals.

“We think [this is] actually a really attractive space for Choice… This is a journey where the parts are coming together and the future is getting bright,” Adenaw said.

As a publicly traded hotel company, Choice is well aware Wall Street expects growth every year, indicated Mark Shalala, Choice Hotels senior vice president/development-Upscale Brands and Real Estate. “These upscale brands, the acquisition of the Radisson Hotel Group Americas portfolio, really creates two or three new whitespace growth channels for us, both upscale full-service with Radisson, upper-upscale with Radisson Blu, and then a new entrant… An upper-upscale soft brand, with a reimagining of the Radisson Individuals brand. So, it’s really the natural progression of where we want to go,” he said.

Shalala pointed out many of Choice’s competitors have become extremely keen on expanding in the midscale segment where the franchisor has been “a powerhouse player” for more than 80 years. “It's just only natural now to start punching up [into] the upscale space,” he said.

“Our aim is not to replicate what others are doing, but to try and figure out our own unique approach to each one of these brands, whether it be Ascend, Individuals, Cambria or Radisson,” Adenaw added.

Working with owners

The move toward the Upscale by Choice platform was not done in a corporate vacuum; it decidedly involved owner input, according to Alexandra Coleman, vice president of upscale brand management. “For each of our brands, we have owner councils in charge of providing feedback to us in addition to taking what we’re doing and disseminating it to the rest of the owners,” Coleman said. “We’re deeply committed to making sure our owners are with us on this journey… It’s very important to us that our owners have a stake in how we’re shifting and changing these brands. There are two customers at the end of the day: the consumer staying in the hotel, and the owner/franchisee. Both of them are equally important.”

Indy Adenaw, senior vice president, GM, Upscale, with Alexandra Coleman, vice president, Upscale Brand Management

Philipp Mirow, director, upscale brands and brand leader for Radisson, Radisson Blu, said one area Choice worked on with its owners centered on F&B. “For many hotels it’s a challenge to deliver: from a financial perspective, from a staffing perspective, from a great quality perspective,” he said. “What we really tried to ensure as we’ve been evolving our brands is to develop new concepts that still deliver on the key guest needs of being able to grab a great breakfast, have a great lunch, have a great dinner service with all of the food and beverage expectations that come with that while being more operationally friendly, easier to convert, easier to deliver, lower staffing models, etc. And so, we’ve really been partnering together and working through how we can ensure that we deliver that without compromising the guest experience.”

Toward this, Adenaw stressed, “If somebody has an issue with either their operating model, with a business plan that they want to execute, they have an opportunity within our system and business to actually not only be heard, but to help us build ideas in ways that they can’t in other environments. That process of building together is intrinsic in who we are and how we compete.”

Shalala echoed his colleague, noting, “Our owners are the core of everything we do. They’re the ones that are taking the risk. They’re the ones that are securing the debt and raising the equity and really putting their necks on the line. Yes, their using our marks and there’s a partnership, but if they’re not profitable, we’re not profitable. We want to build long-term, 20- to 30-year relationships. So, this needs to work. It’s a marriage. We do hear an overwhelming amount of frustration from owners with some of our competitors where maybe they’ve just lost touch. They’re just so focused on the brand initiatives, rather than looking at the property-level profitability of that particular owner. And that’s what this group is going to be laser focused on.”

Flexible, distinctive

The platform is expected to be a flexible one, noted Marissa Ballan, head of development, Radisson Blu, so owners can feel confident in having a business model that works. “Obviously, there are certain key-count thresholds and amenity thresholds that we have to ensure that we’re delivering on that brand promise, but when it comes to meeting space, we’re not going to say you have to have 10,000 square feet of meeting space,” she said. “Maybe that doesn’t work in certain markets. Or that you have to have a certain level of restaurant or F&B or a spa. So, we’re trying to go market by market and embed enough flexibility in each of these brands so that they deliver on an investment that ultimately works for the owners.”

Mark Shalala, senior vice president development, Upscale Brands & Real Estate

Adenaw said there would be principles that stretch across all the brands, but the objective is to make each brand distinct from the other. For example, Coleman said with Radisson Blu considered the largest upscale brand in Europe, there is “huge opportunity” in bringing it to the United States. To set it apart, she said Choice is “leaning really strongly into [the brand’s] Scandinavian roots, focusing on being a warm, inviting experience that’s elevated, really leaning into art and inspiration.”

Toward this, the guestroom prototype has been redesigned to focus on what’s being called “the get-ready moment,” and features a dry vanity, full wardrobe and a place for luggage. “We think it’s differentiating. There’s a lot of design hotels out there that feel cold and sterile and we’re really leaning into creating an experience that’s warm and inviting,” Coleman said.

Choice plans to tap into the core Radisson brand’s 115-year history, incorporating a contemporary look and feel with touches of nostalgia, with an eye toward reinvigorating a classic hotel brand. Its enhanced guestroom design will include what Mirow dubbed a “cozy nook” and described as “a unique piece that blends a functional workspace and a soft-seating area for our guests that enables them to get the most out of the guestroom and the footprint.”

As for Cambria, Coleman said the brand is and always has been about warmth and approachability. “It’s something that’s been working for the brand for a long time and [we’re] definitely not walking away from it; instead, we’re going to enhance it more.”

As to the nitty-gritty of setting ADR for the Upscale by Choice brands, Shalala said there would be clear delineation and “a significant amount of daylight” between each brand.

“A Radisson Blu is not going to compete at all—completely different guests—with a full-service Radisson. And a Radisson being a full-service, upscale box is not going to compete with Cambria, and Ascend is completely different from that,” Shalala said. “Yes, in some markets, there might be some ADR closeness, but the experience and the booking decision is going to be driven by a different guest or stay experience.”

Similarly, RevPAR goals will be toggled to target locations, such as the top 25 to 50 markets across the country. “One of the things that we know drives RevPAR is a great guest experience and that’s why we’re so focused on repositioning and relaunching these brands, because we want to make sure that great customer experience helps drive rate for those owners,” Coleman explained. “So, RevPAR is both an exercise of looking at the markets you want to be in [and] about how are you delivering something that’s more elevated and more exciting than what is happening in the competition?”

Philipp Mirow, director, Upscale Brands

Both Mirow and Shalala stressed the importance of having “skin in the game” as the brands segue to the new platform. “With Radisson Blu, we have both owned and managed hotels within the organization, including Radisson Blu Mall of America, where we’re just starting a $50 million renovation of that particular property,” Mirow said. “And so, we’ve been working very closely with those hotels to be able to pilot and test some things to understand what’s really working.”

“We believe you need to be in it with your owners,” Shalala added. “You can’t just launch a brand off the backs of your franchisees; you really need to kind of have some skin in the game.”

He also noted Choice has continued to support the Cambria brand. “For the right locations and the right develop sponsorship groups and strategically where we want to place the brand, we will lean heavy and invest into the deal with different types of incentives or capital support.”

And while Choice is primarily an asset-light model, Shalala indicated it’s building a handful of Cambrias on its own balance sheet. “That allows the brand folks to kind of ‘test kitchen’ different concepts,” he said. “We don’t want to ask a developer to do anything we wouldn’t do ourselves for our own properties. And the idea is once we get them ramped or stabilized to eventually find a buyer and get into a long-term franchise agreement and recycle that capital into another deal.”

All about relationships

A focus on solidifying both longtime and new owner/developer relationships as the Upscale by Choice platform builds also is key for the brand team.

Marissa Ballan, head of development, Radisson Blu

“I think the warmth and friendliness of those relationships we have with owners translates to guests,” Ballan said. “When consumers find Cambria [for example], they feel that warmth and they feel that connection that is passed through the relationship Choice has with those owners into the guest experience.”

“It’s all about relationships. This is what the hospitality industry is,” said Shalala, noting when Radisson came under Choice two years ago, “initiative number one was go out, meet with these owners and ask, ‘Are you okay with this? I know this is a lot of change for you.’”

Shalala added that Choice welcomed the owners into their annual conference, making them feel part of the Choice family. “Each property has [its] own wins and losses and areas of opportunity,” he said. “[We’ve been] going in and trying to diagnose those one by one. This doesn’t happen overnight, but again, the effort and consistency in doing that [has us] winning those relationships and building on that going forward.”

As the Upscale by Choice platform advances, expansion for the brands is expected to target a range of markets. According to Ballan, in addition to the top 25 to 50 domestic markets, Radisson Blu is eyeing the Caribbean as well as resort and urban destinations across Latin America. “So, that could be Mexico City. It could be Cancun. Could be Rio or São Paulo, and the list goes on. We’re really looking for those major gateway markets to leverage some of the international nature of what this brand is,” she said. “If [anyone] wants to bring us a deal in Hawaii, like, yes, let’s do it.”

With Cambria at 70-plus hotels, Shalala said there are 20 under active construction and another 65 in the pipeline, 50% of which are waiting to break ground. “So, the pipeline for Cambria is robust. If we get a little break from the capital markets, we’re going to continue to scale this brand in a meaningful way,” he said.

Overall, said Adenaw, there’s just a sense of belief in what Choice is doing with the upscale platform. “I think that probably speaks to our mindset [that] this is the time to step into the wind versus to draw back. So, we think that the coming months will be fruitful for us.”