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 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?
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.