ALIS Executive Suite Q&A: Matthew Hostetler, Chief Development Officer, Red Roof

As part of the Americas Lodging Investment Summit’s Patron sponsorship program, ALIS organizers asked Red Roof’s Matthew Hostetler eight timely questions as we prepare for the 22^nd 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?

 

HOSTETLER: Due to a constellation of factors – “post-pandemic economics” (labor crunch, rise of inflation, global instability), shifting and accelerated consumer demands and expectations for the lodging experience across all segments – owners and operators are being challenged and tested as never before.

Inflationary pressures are real, consumers have begun tightening their belts. People are being more careful about how they spend their money and that is impacting hotel performance.

A slowdown in rate must ultimately translate into a slowdown in franchising activity. Many developers are adopting a wait and see attitude.

At the same time, for the long term, the economics of the hotel industry remain strong. Consumers want to travel - and the long-term fundamentals of the hotel industry remain intact.

There is never a “perfect” time to build. For many, now is as good a time as any. The savviest developers are finding unique pockets of opportunity.

ALIS: 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 Red Roof’s pipeline?

 

HOSTETLER: Red Roof remains a leader in our segment. Our numbers were strong coming out of the pandemic and remain in line with the rest of the industry. Our pipeline is growing as we pursue opportunities across the board. We see especially tremendous potential for growth in the extended stay segment with our HomeTowne Studios brand as the portfolio continues to grow with new builds, conversions, and dual branding.

ALIS: What’s the message to hotel owners, investors, and developers from the lending community in general as 2023 approaches?

 

HOSTETLER: As the economic picture tightens, the debt markets become tougher to navigate. We believe Lenders need to be clear on their parameters and requirements for hoteliers. It’s important to remember that the economic fundamentals of the industry remain strong and will only get stronger as the economy recovers and travel continues, inevitably, to recover and increase over time. It’s a good time to remember the adage that fortune favors the bold.

ALIS: How have guest expectations evolved over the past year, and how do you expect them to change going forward?

HOSTETLER: Guest expectations are changing and, coming out of the pandemic, they are changing faster than ever. Enhanced technology, seamless communication and knowing the guest are prerequisites. At the end of the day, guests want what they have always wanted - quality, a safe stay and good value. At Red Roof, we’ll continue to create the pull with our loyal guests and offer value, great experiences, and uncompromising service.  

ALIS: Based on your portfolio and what you’re seeing throughout the industry, how has the economy segment weathered the storm, and what does 2023 look like?

 

HOSTETLER: One thing we’ve seen, even through COVID, is that even amidst uncertainty, the hotel industry is tremendously resilient – people want to travel, and they will continue to travel. The economy lodging segment has proven to be the most resilient of all – offering accommodations adaptable to the new generation of traveler, and economics favorable for franchisees. We need to leverage that inherent resilience, continue to stay flexible and adaptable – and build on the inherent strength of our offering.

 

ALIS: How has Red Roof helped owners process through the labor crunch? Is it something that the industry will deal with going forward?

 

HOTSTETLER: Labor is a critical issue confronting franchisees. In line with our motto, “Genuine Relationships, Real Results,” we are working to help our hotels become more efficient operationally. Our Quality and Training departments continue to try to help hotels find the help they need – and we make cross training available to our owners, so they can do more with less. Our goal is to help all Red Roof employees work as efficiently as possible.

ALIS: What’s the most under-estimated challenge the hotel industry faces, and why?

 

HOTSTETLER: It’s all about the pace of change. Things will never be “slow” again. Guest demands and preferences are increasing at an accelerated rate and so are market conditions for owners, lenders, and brands. Innovation is key – as are flexibility, adaptability, and the ability to move quickly.

ALIS: What’s the most under-estimated opportunity for the hotel industry, and why?

 

HOSTETLER: If the pace of change is the most salient challenge facing the industry, the most under-estimated opportunity is harnessing the power of change, combined with adherence to time tested principles.  At Red Roof, we are focused on continuing to execute the basics, brilliantly. For our franchisees and our brand, we must protect profitability, embrace uncharted challenges, pivot focus, streamline and deliver.