LOS ANGELES—Best Western Hotels & Resorts has enjoyed the payoff from a tiered descriptor program instituted in 2011 and is looking for bigger dividends before the current economic cycle plays out. According to David Kong, president and CEO of the Phoenix-based membership organization, the time is right to aggressively pursue those rewards.
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David Kong |
“We have a shrinking window—it’s definitely getting to the end of the cycle,” Kong said during a break at January’s Americas Lodging Investment Summit. “We need to penetrate the markets we are targeting.”
Ron Pohl, the company’s SVP of brand management, echoed Kong.
“Any hotel developer looking to build should be looking to put those in the ground now,” he said. “If you don’t get them into the ground in 2016 it might be a few years before you can.”
With 205 properties under construction, Best Western and its developers favor an efficient application and approval process, according to Pohl.
“Knowing that the window is getting shorter, we’re doing about 62%, 63% new construction now,” Pohl said. “(We) want to get them through so a big group isn’t sitting and waiting when the downturn comes.”
Michael Morton, VP of owner relations, said one of the keys to Best Western’s pipeline success is ensuring projects are fast-tracked as much as possible.
“If we can get them from (application) to activation quickly, we’re doing ourselves a favor, because who are owners going to come back to when they do another property?” he said.
The privately held company has a global network of more than 4,100 hotels. Three of its brands were the result of the 2011 launch of the descriptor program: Best
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Ron Pohl |
Western, Best Western Plus and Best Western Premier. Four other brands have been launched in the ensuing years: Best Western Plus Executive Residency, Vib, BW Premier Collection and Glo.
The portfolio has an array of projects under construction, which is important as it celebrates its 70th anniversary during 2016, executives said.
A Vib property is under construction near Midway Airport in Chicago, according to Morton. Glo, which was launched in the fourth quarter of 2015, has its first property approved for Goshen, Indiana. It is owned by an existing Best Western member who will remove an existing hotel and build a Glo in its place.
BW Plus has primarily become a new-construction brand, while about half of Premier’s growth has come via new builds, according to Pohl.
“We want new construction in 80% to 90% of the locations for Plus,” Pohl said. “We’re trying to change the playing field in terms of developers and showing them it’s not a conversion brand anymore.”
Big move, big performance
The descriptor system is a big reason for the pipeline surge because it has led to strong company-wide performance metrics, Kong said. The core Best Western brand’s 120 revenue per available room index during 2015 is a prime example of the success. The RevPAR dollar difference for the core Best Western brand is about $25 since the switch to the descriptor program.
In addition, Best Western Plus and Best Western Premier each posted RevPAR indexes of nearly 100 in 2015 while competing against “tough comp sets.”
“There’s been a halo effect,” Kong said. “Our core customers grew up with Best Western and are experiencing it with all the offerings now.”
The company has had an average RevPAR index of 110 over the past four years, according to Kong. Additionally, the brand continues to reach other milestones including: generating revenue of $4 billion in North America, realizing $1.4 billion in revenue from its central reservation system and the brand’s loyalty program—Best Western Rewards—drove $1.5 billion to North American hotels.
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Michael Morton |
Soft branding pays off, too
The Best Western Premier Collection has had a growing influence on the rest of the company, the executives said.
“The real win for us is the soft brand,” Morton said. “We’ve been able to meet with independent hotels and let them understand that our soft brand lets them keep the individuality of their property and what we bring to them is the model.”
The company signed a deal for a Premier Collection property in San Diego and is working on deals in Manhattan, New York; Orlando, Florida; New Orleans and others, according to Morton.
“We’re working get a bigger presence in markets where we have been under represented as a brand,” he said. “Soft branding allows a hotel to tap into our (reservations) system without fully complying with all brand requirements.”
Adding the soft brand concept dramatically shaves the time needed to penetrate a market, Pohl said.
“We know we can fill more rooms in primary downtown markets,” he said. “To build a property in those markets could take years, so providing a soft brand to existing independent hotels is a good strategy to add inventory in these key markets.”
New direction and accolades
The company changed its name to Best Western Hotels & Resorts in 2015 and is in the process of having its signage replaced across the board. Kong said approximately 1,000 new signs will be installed at U.S. properties by May. The program is scheduled to be completed by the end of 2017. Best Western set aside $60 million to help owners finance the signage change, Kong said.
“I hope these new signs will help change people’s perception of Best Western because they will position us as a contemporary, relevant brand,” Kong said.
That relevancy was displayed earlier this month as the company was awarded a record 50 Adrian Awards from the Hospitality Sales and Marketing Association International. The HSMAI Adrian Awards are given for best practices in hospitality marketing, advertising and public relations. Of the 50 awards, Best Western earned one coveted platinum award, 25 golds, 14 silvers and 10 bronzes.
“A lot of it is the team being able to think outside of the box, execute well and work together collectively,” Kong said. “Our members have also bought into the direction.”