• Franchisors join conversion trend 

Best Western Hotels & Resorts and Choice Hotels International have both launched new brands, expanding deeper into the midscale and boutique segments.

The pair have joined a growing trend in the US, as operators have turned increasingly to conversions as their construction and other costs grow.

At Best Western, the company unveiled two boutique conversion brands: Sadie Hotel, which will compete in the upscale segments, and Aiden Hotel will compete in the upper midscale segment.

David Kong, president & CEO, Best Western Hotels & Resorts, said: “Both Sadie Hotel and Aiden Hotel present the opportunity for independent hoteliers or developers with branded hotels to reposition their property in a unique way, taking advantage of our cost-effective, turnkey and customised design and renovation program. A dedicated onboarding team will ensure these repositioned hotels are quickly integrated with Best Western’s powerful revenue engines intended to drive a fast ramp up in business. A marketing and PR playbook for each hotel will drive social media visibility and buzz.”

The launch took Best Western to a portfolio of 13 brands. The announcement came as the company opened its first ever property under the boutique GLō brand, in Texas.

As Best Western was looking to the boutique sector, Choice Hotels International unveiled Clarion Pointe, a midscale select-service brand extension of Clarion. The company said that the flag would meet hotel owners’ strong demand for a new select-service opportunity “that is a differentiator in the popular midscale segment”.

The company said that it had more than 50 Clarion Pointe franchise agreements in the development pipeline, in the US.

“When developers expressed a need for a premium midscale conversion brand to maximise revpar, we listened,” said Tom Nee, VP, franchise development, Choice Hotels. “Clarion Pointe fits perfectly into our well-segmented family of brands and is ideal for owners who want to reposition their limited service property into a select service opportunity from a company that’s proven itself in this space.”

Choice International Hotels used its second-quarter results to comment that it was leaning on domestic growth. Pat Pacious, president & CEO, told analysts that in the US “Unemployment remained low at 3.9% in July, consumer spending is up, consumer confidence remains high, and interest rates are holding. Additionally, tax reform is creating the expectation for a favourable business climate for the foreseeable future.

“This is particularly evident for the hotel sector. Furthermore, we believe the promise of tax reform has yet to be fully realised across the industry. If that occurs, we expect an ongoing positive impact on leisure travel in 2019 and beyond.”

The total domestic pipeline of executed franchise agreements increased to 950 hotels, up 32% on the year, driven by new construction domestic franchise agreements, which increased 36% for the second quarter and 51% for the first half over the comparable period of prior year. The company said that half of the new franchise agreements were with existing or returning owners and the conversion pipeline at midyear was 26% higher than the same time period last year.

The company has been looking in particular to its conversion pipeline, which, at midyear, was 26% higher than the same time period of the prior year, with the group expecting those conversion hotels to open within the next three to six months.

The group was not alone in looking to conversions, at its last results announcement Hilton Worldwide said that it would be looking to growth in conversions to drive expansion as development activity slowed in the group’s domestic market.

President & CEO Chris Nassetta said: “Conversions are a big focus in a tightening lending environment. Year-to-date construction costs have gone up 7% or 8%, so, you have cost going up in an environment where lending standards have tightened, and while revpar is growing, it’s not growing enough to keep up with that.

“The whole market’s going to go down in terms of signings, so we’re going to be relatively flat in the US. I think this year will be the peak in supply in the US, so we’re benefiting from the laws of economics when demand is growing better than supply. I think that’s going to continue for a period of time. How long? We don’t know, but certainly we feel confident about this year. And honestly, we feel confident about the setup going into next year.”

HA Perspective [by Katherine Doggrell]: Depending where you stand on the political spectrum, slapping tariffs on a shopping list of products is either sending a strong signal to the rest of the world about fairness and leadership, or an inability to grasp the reality of modern trade. But if you’re going to raise the drawbridge, you need to build it first and either way you slice it, that drawbridge is more expensive to build than it was before Donald Trump came to power. As pressure rises in the US, operators will need conversions to maintain pipeline.

That caution was still trickling down, with Lodging Econometrics reporting that the US remained at the top of the global hotel pipeline with 5,312 projects containing 634,501 rooms, or 41% of projects globally. The total global pipeline was 12,839 projects and of these, the global operators dominated, with Marriott International accounting for 2,324 projects and Hilton Worldwide 2,202 projects, followed by InterContinental Hotels Group with 1,653 projects.

For those wishing to compete, the cheaper franchised conversion brands are a convincing route to market, as the likes of Choice Hotels International and Wyndham have proven over the years. But with Marriott International pushing 30 brands, you’re nobody unless you have a brand for every shade of Trump’s skin.

In the meantime, Best Western will be hoping that, as The Beatles would have it, “Sadie, how did you know/The world was waiting just for you”.

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