As part of the Americas
Lodging Investment Summit’s Patron sponsorship program, ALIS organizers asked
Choice’s David Pepper eight timely questions as we prepare for the 22nd
annual event January 23-25, 2023, at the JW Marriott/Ritz-Carlton Los Angeles
L.A. LIVE. Following are his responses.
ALIS: How has inflation and the threat of a recession affected the U.S. hotel
franchising and development segments?
PEPPER: There is no question
that businesses are facing a combination of supply chain disarray and
disruptions, higher prices for raw materials and commodities, rising labor
costs, increased transportation costs and rising energy costs. Choice’s award-winning
tools, capabilities, and expert advice from revenue management consultants
enable franchise owners to quickly execute the right pricing strategy and
effectively reach their target customers, which is critical in this
Across all segments in which
Choice competes, consumers continue to shift their spend towards travel
experiences—and this is expected to continue. When faced with high airline
ticket prices and flight cancellations, Choice found that a majority of travelers
who responded to our recent survey would rather switch to driving versus
cancelling their vacation plans. This trend is particularly beneficial for
Choice’s portfolio of over 4,000 hotels located within a mile of an interstate
Most forecasts show supply growth checking in at
about 1% each year for the next two or three years. How do you see it playing
out based on Choice’s pipeline?
addition of the Radisson Hotels Americas’ upscale brands increased the size of
Choice’s global footprint in the upscale segment to approximately 80,000
upscale rooms. Through the acquisition, we will expand our regional
representation in the Upper Midwest and West coast of the U.S. We also expect
that this transaction will enable us to further build on our momentum in the
upscale segment, accelerating growth for our Cambria Hotels and Ascend Hotel
Collection brands and at the same time allowing us to expand the Radisson
Additionally, our newest
extended-stay brand, Everhome Suites, is on the cusp of significant growth,
with its first hotel, located in Corona, California, on track to open in
September. Choice secured a commitment with one of the largest extended-stay
investors in the nation to develop more than 20 new Everhome Suites hotels,
bringing the development commitments for this brand to over 50 hotels.
What’s the message to hotel owners, investors, and
developers from the lending community in general as 2023 approaches?
PEPPER: At Choice, we are
committed to helping our franchisees succeed and improving its value
proposition for franchise owners. Owners and developers are choosing our brands
over the competition because they know unlike other franchisors who focus
solely on the topline, franchisee profitability is central to Choice’s value
proposition. We’re continuing to prioritize the success of our franchisees by
developing new tools, programs, and resources to position our seasoned and
emerging franchisees for success. We are also working on new design concepts
aimed at capitalizing on the emerging trends and growth opportunities within
ALIS: Based on your portfolio and what you’re seeing throughout the industry,
what segments are the most sought after for development and franchising
PEPPER: Choice Hotels is
continuing to strengthen its proven brand portfolio through investments that
drive growth across higher value and more revenue-intense segments. Extended-stay
has always been seen as recession proof, but 2020/2021 showed us that it’s also
pandemic proof and the industry is shining a spotlight on extended-stay. For
upper midscale, the Comfort brand is well positioned to capture demand from
home family vacations to quick business trips with more than 1,600 hotels open
coast to coast in the U.S. and more than 2,100 worldwide.
Within the upscale segment, the
Cambria Hotel prototype designed for secondary and leisure markets has been
enthusiastically received by the developer community with 14 new agreements
signed as of the end of Q2. We expect that the recent Radisson Hotels Americas
acquisition will enable further penetration of the upscale market, creating an
additional catalyst for Cambria’s growth.
How has the labor shortage affected the hotel
development process? Is it something that the industry will deal with long
PEPPER: We continue to see a
labor shortage in the hotel sector. We work to provide our hotel owners with
resources that can help them find employees for the open positions in their
hotels, including hiring best practices, staffing and retention strategies and
community workforce recruitment resources. We are working with our industry
associations to ensure that the lodging sector is positioned as a long-term
career opportunity for people who want to work. We support enhanced caps for
H2-B (seasonal non-agricultural) and J-1 (cultural exchange/student) visa categories
and are working with our industry allies to advocate for these changes.
ALIS: What’s the most
under-estimated challenge the hotel
industry faces, and why?
PEPPER: Representation in Operations, Revenue Management, Sales, and
Finance between men and women is roughly on par. This means that women
understand the business just as well as their male counterparts, and that the
root-cause of the discrepancy when it comes to ownership is a cultural problem.
The company recently launched HERtels by Choice Hotels - a dedicated
program created to support, connect and empower women through the lifecycle of
their journey to hotel ownership.
The systematic barriers women
face limits future access to top talent and performance for all of us in the
hospitality industry. Despite this, women represent a market segment that
remains under-targeted by hotel companies for ownership opportunities. HERtels
is Choice’s next step in the company’s mission to fuel a diverse owner base and
small business success.
the most under-estimated opportunity
for the hotel industry, and why?
PEPPER: Industry-wide, we have seen continued
strengthening of business and group segments past the height of the COVID-19
pandemic. Business travel is expected to increase across key industry
verticals, fueled by the additional onshoring of the U.S. supply chain and
investments from the infrastructure bill.