Patel: We’re focused on our franchisees and will continue to embrace our owner-first approach to franchising. We know that we’re most successful when our franchisees are successful. Growth of our 24 brands and continuing to expand our global development pipeline will continue to be top priorities. We also see significant opportunity around the investments happening with infrastructure here in the U.S. and are taking steps to make sure we’re well-positioned to take full advantage of what we believe can be a significant tailwind for our business
Hotel brands rode the wave that was the hotel industry in 2022 with a great deal of success, while also facing continued challenges. Hotel Business spoke with industry leaders, Larry Cuculic, president/CEO, BWH Hotel Group; George Limbert, president, Red Roof; John Murray, president/CEO, Sonesta Hotels International Corporation; and Shilpan Patel, EVP, North America franchise operations, Wyndham Hotels & Resorts, for their thoughts on the year and what is ahead for 2023.
Coming into 2022, there were a lot of questions as to how it would go. When you look back on the year, what are your thoughts both for the industry as a whole and your company?
Cuculic: This year has been tremendously successful for BWH Hotel Group. We are proud to have achieved the strongest revenue year in our company’s history. Additionally, we were thoughtful regarding expenses and stayed within the boundaries of our budget. As a result, we were able to return $15 million of fees to our members. So, yes, I feel proud when reflecting on all of our accomplishments in 2022—it was a great year.
Limbert: 2022 was a challenging and unpredictable year. We planned carefully for our franchisees and our business. We worked hard to stay ahead of the prevailing trends to maintain strong performance and position the brand for future success. It has paid off. Our systemwide total revenues, ADR and RevPAR broke records in 2021 and 2022, and we continue to grow across demand channels. The economy segment continues to lead the recovery, and we continue to lead the economy segment.
George Limbert Red Roof
Murray: It’s been quite a year. I started the year as CEO of lodging REIT SVC and moved to Sonesta as CEO on April 1. At Sonesta, we’re ending the year well ahead of budget on both the top and bottom line despite a slow start because of the Omicron variant. We also had significant positive net unit growth on the franchise side of our business as the franchisee community has been attracted to the fact that we are owners, too. I think the whole industry has seen steady improvement throughout 2022, with stronger weekends and bleisure leading the way, whereas midweek business travel still has room to improve. We are optimistic about 2023 because group pace continues to improve and business travel also seems to be recovering. As businesspeople begin traveling and get back to in-person meetings, we are seeing them have “aha” moments, where they realize connecting by video is not a replacement for direct human interaction.
Patel: This year has been tremendous, not just for Wyndham, but more importantly for our franchisees. Select-service hotels were among the first to see their businesses recover from COVID-19 and what we’re hearing from many of our select-service franchisees is that, while 2021 was their best year ever financially, 2022 is looking even stronger from a revenue and margins standpoint, despite the macroeconomic climate. Add to that Wyndham’s global net room growth in excess of 4%, a record development pipeline (212,000 rooms across 1,600 hotels), the addition of two new brands and the rollout of numerous owner-centric strategic technology initiatives, and it’s easy to see why hotel owners and developers are looking to Wyndham and its brands more than ever before.
Extended-stay continues to be a strong category. How has your company tried to capitalize on this?
Cuculic: As announced during our annual convention, we have launched HOME by BWH, a new midscale extended-stay offering. We conducted thoughtful research with developers to create an innovative extended-stay product. HOME by BWH will provide guests a sleek and modern environment with many of the comforts of home—a kitchen, on-site guest laundry, a pool, fitness club and other amenities.
What is very different about this new brand is that we are letting developers decide the public space amenities that they believe are important in their specific market. From a developer perspective, we are giving more flexibility than ever before, providing options rather than mandates. It is a product developers will want to build and a hotel at which guests will want to stay.
Limbert: Last year, we announced a new HomeTowne Studios prototype designed to reduce the cost of building and operating extended-stay hotels. This year, we announced a new dual-branded hotel prototype. This prototype presents an opportunity for Red Roof franchisees to combine our Red Roof and HomeTowne Studios brands and provides streamlined back-of-house efficiencies for operators. Reception from the franchise community to both new products has been strong.
Murray: We’ve doubled down on extended-stay at Sonesta—with the introduction of a second extended-stay brand, Sonesta Simply Suites, which joined our upscale extended-stay brand Sonesta ES Suites at the end of 2020. These hotels carried us during the pandemic and have remained steady performers. I think we are one of the largest operators and franchisors of upscale and midpriced extended-stay hotels. They generate strong, steady cash flow. The franchise community has embraced all three of our extended-stay brands (GuestHouse Extended Stay was repositioned as a non-suite option in this space in 2019), and I think in 2023, you will see us enter several large multi-unit, multi-year development transactions that help us grow quickly in the extended-stay space. The fact that we are flexible, make decisions quickly and think like owners has really helped us grow our franchising platform for extended-stay hotels.
John Murray Sonesta Hotels International
Patel: Earlier in the year, we rolled out our 24th brand, ECHO Suites Extended Stay by Wyndham, which in short order has become our fastest growing brand in our development pipeline. Extended-stay has been an industry leader for growth and recovery in recent years with no signs of slowing down. With 120 hotels already in the pipeline as of the end of the third quarter, ECHO Suites continues to exceed our original expectations with strong interest from developers. Our strategy is focused on seasoned multi-unit owners with experience in extended-stay—allowing us to ensure brand integrity while quickly building a robust multi-year pipeline, targeting 300 hotels in the U.S. over the next 10 years, with plans for additional international expansion.
Some experts are forecasting that the year ahead will be a difficult one. What do you think?
Cuculic: I am a glass three-quarters full person. I am an optimist—but also a realist. I recognize that there are pressures that may impact travel, and the economy in general, but what we have learned after several challenging years is that people love to travel. The result, I am cautiously optimistic that we will have a strong 2023.
Limbert: We believe it will be another unpredictable year. At Red Roof, we are doubling down on our vision to provide the best experience and value in the lodging industry for our guests, owners, team members, partners and communities. We do this by listening intensively to all our customers and shaping our offerings to anticipate and respond to their needs. While it’s impossible to say how economic, social and political factors will evolve in 2023 to impact guest spending, development trends and the overall industry performance, we are confident that Red Roof will continue to lead the economy segment and provide superior experiences and value.
Murray: While we are facing some challenges on the economic front with inflation, rising interest rates and possible recession, I am a “glass-half-full” person. Even with uncertain economic conditions, hotels tend to perform well in inflationary periods as rates tend to increase more quickly than operating expenses. I think we’ll experience the same this time, and there is still pent-up demand for travel. We may see shorter stays, leisure stays tacked on to business trips or a shift within the brands to hotels with lower rates—but guests still want to travel. We’ll stay strong and look to continue to see some rate gains in the new year.
Patel: There’s no doubt that the hospitality industry is impacted by economic cycles, but due to an increased preference for experience, we’ve yet to see any signs of a slowdown in the intent to travel or willingness to spend from our guests, which are generally middle-class, despite broader economic concerns. Our industry has shown on so many different occasions how resilient we are, and Wyndham’s business model has proven to be especially resilient. I’m confident in the stability of our franchise business model as well as our ability to deliver outstanding value to our franchisees, our guests and our stakeholders in any environment.
Shilpan Patel Wyndham Hotels & Resorts
How are you preparing your company for 2023?
Cuculic: It is critical that as an organization we are working towards a common goal. As such, we created new vision and mission statements. Our vision has us focused on “Inspiring travel through unique experiences.” And, our mission statement has us focused on “Delivering trusted guest experiences, driving hotel success and fostering a caring inclusive culture that respects the environment.”
Importantly, we are embracing our global reach and relevance. Recognizing we are a global powerhouse, we collaborated with our board of directors, international partners and leadership team to establish a Global Business Plan with defined key results areas—through these thoughtful discussions we are aligned globally for a successful 2023.
Limbert: Uncertainty remains the order of the day. We are staying ahead by adopting a strategic planning framework developed by the Army War College to train officers: VUCA (Volatility, Uncertainty, Complexity and Ambiguity). At Red Roof, being “VUCA-ready” means listening closely to our franchisees, remaining flexible in our decision-making and reacting quickly to marketplace changes and volatility. We are shifting the paradigm from Volatility to Vision, from Uncertainty to Understanding, from Complexity to Clarity, and from Ambiguity to Agility. Doing so, we continually reinforce genuine relationships with our customers and deliver the basics brilliantly to further solidify our leadership in the economy segment.
Murray: I’d say we’re optimistic but with our eyes wide open. We’ll be looking at business levels and changes in the marketplace. We have a number of initiatives underway to help continue to grow revenues and improve segmentation away from OTAs to brand.com. We’re continuing to focus on filling open roles and identifying processes and procedures that keep our growing team aligned around our growth goals by department and as an organization. We’re investing in new technologies that will help balance new projects with productivity against existing needs. We’re looking to introduce at least two additional brands based on the needs of both our franchisees and guests, and we’re enhancing our guest loyalty program. These initiatives will keep us busy in the first quarter as we continue to build on our growth momentum in 2023.
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