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Exclusive Interview with Mark Pearce: Senior Vice President, International Division for Choice Hotels International

7 min reading time

Published on 28/05/12 - Updated on 17/03/22

Mark Pearce joined Choice Hotels in 1993 and has held various senior positions at the company, notably assuring Choice’s international expansion. He is a laureate of the company’s CEO Best of the Best award and is currently ensuring the company’s notoriety in such far-away places as China and India. Mr. Pearce sat down with us to discuss Choice’s positioning in expansion and using online tools to assure success in the future.

How committed is Choice in development, on a concrete financial level?

Obviously we want to be able to maintain and keep our existing portfolio strong, but we’ve also got to look at making investments for the future. In a franchise business, when you’re looking largely at conversions, the ability to grow your system size significantly one-hotel-at-a-time is really a slow process. You’re also going to be in a situation where you’ve got hotels that might not be meeting the brand standards so your net growth might be slow. Choice is not looking to buy the bricks and mortars but seeks to lend assistance through “incentives”, where we would make an investment, possibly through a loan, over a period of time. Obviously the hotel would need to sign a long-term agreement with us, and make sure the product meets our brand standards, so generally that money is used to make the necessary modifications to a hotel. There are other creative ways that we can look at doing that as well: sometimes people need short-term guarantees to get their financing in place. We’re open to how we do that, but it still wouldn’t ever steer from our franchise model of not being in the ownership business.So you’re presenting a financial product. Are you going to have a separate structure for that or will it be part of Choice?No, that will be part of Choice. Generally, you never really look at financing support unless it’s for a multiple property deal. This would be for a multiple property deal where someone’s got eight to ten, or more hotels that are well suited to be converted to one of Choice’s brands. So we’re looking to accelerate growth by providing financial vehicles.How do you plan on meeting your ambitious objective of doubling your portfolio in France in six years?In France, there’s a strong pool of hotels that is prime for conversion. We’ve significantly increased our desirability factor to people considering joining a brand. There is a tremendous amount that we bring to the equation so our development team can go to the street now with a stronger toolbox that attracts hotels to come to the brand. If you start growing through multiple transactions, ten or twenty at a time, it actually really gets the momentum going quite quickly and there is a strong business case, which will give us the ability to go out and acquire new product. With the pool of inventory across Europe, there is no reason why, given the investments we’re making, that we shouldn’t be able to double our portfolio.How do you expand in countries where the culture is very different to the west, like in India and Asia?These countries are totally different, as are government regulations. If you look at India specifically, occupancy permits to open a hotel involve so many government levels that the approval process is extremely difficult. We have infrastructure, but the process is tremendously longer. Because we’ve got less than 30 hotels there the opportunity in India is finding a partner where you could do 100 hotels at once. You would leverage your value proposition, and to a point, your balance sheet to be able to be successful at that.What are the business models you use when expanding overseas?We operate though one of two business models: either through master franchise relationships or through wholly owned subsidiaries. Over the past ten years, we’ve transitioned our business, where we used to operate the majority of our relationships through master franchise. We looked at transitioning to wholly owned subsidiaries in markets where that just didn’t make sense. It’s certainly our preference to have Choice brands represented in markets like Scandinavia, Japan, or Ireland, where we’ve got well-established and reputable business partners.How do you find these partners? What are the selection criteria? We have found that when a partner is an owner and an operator, it seems to work extremely well because they’re bringing their experience to the equation. They can create influence with great impact across their markets because if they get behind a brand and if you own and operate something, you can make that transition very quickly.In MKG Hospitality’s 2012 Worldwide Ranking, Comfort Inns and Suites dropped. Why is this? When you’re in the franchise business, you’re always up against a situation of brand compliance, and when you’ve got the strength to be able to grow your brands at the top of the market by bringing in quality product, it really provides us a time to look at the bottom-end of our brands as well and see where people are neither performing nor meeting guest expectations. We’re monitoring things through what we call GIS, guest insight surveys, so it also means that you need to take that opportunity to look at low-performing properties and move them out of the system.Many of your brands don’t exist in Europe. Why don’t you import these brands to us? Don’t you feel that there’s a need for economy brands in Europe or is brand recognition different?Brands have evolved very differently. In the U.S., overlap is really high. In Europe and globally, that’s not the case. We really do have a space for economy based lodging, and because we are a brand-segmented company, we can really allow our brands to somewhat adapt to the environments that they are operating in. In every case, regardless of where we operate in the world, these brands are domestic brands. Somewhere between 80 and 93 percent of our business is domestic business, so the brands have to respond to the local markets. In some places, you’ll find a Comfort that is different than in another market. This is because it’s appealing to our customer base in that market.We have just recently introduced Econo Lodge in Australia because we felt that there was a need for it and after doing market research, we believed that there was an opportunity. That’s not to say that we wouldn’t consider that in other markets as we start to evolve and reach capacity of one of our brands. We have the ability to do that because Choice owns those brands. We certainly protect the trademarks in global markets for future development, but we don’t feel that deploying our full host of ten brands like we do here in North America is the right approach for the international markets at this point.What is Choice’s positioning for future growth in regards to its web-based PMS and e-marketing?We took a strategic approach to this. We’ve spent a lot of money on investments in technology to address our value proposition and to be in a position to install our PMS, Choice Advantage, in our hotels across Europe and look at our web platform as well as looking at the developing interfaces with the major OTA’s. All of those things are designed to deliver reservations. So once you are delivering reservations, you’ve really got to be able to look at what your return on investment is.Social media and e-commerce are really difficult things for an individual hotel to be successful on their own. Those areas are putting more and more pressure as things become more sophisticated in this space. We’ve got people that work on coming up with strategies in e-commerce and social media on behalf of 6,000 hotels worldwide, so we’re now in a position where we’re hiring people that are not only proficient in North America, but have got global experience as well.Is Choice advantage the same tool internationally or is its positioned differently in each market?One thing that has made us successful in our development effort in international markets is not just to take a cookie-cutter approach and say, well if it works in North America, it’s going to work anywhere in the world, because that clearly doesn’t work. Our approach here was to go out into the market and conduct extensive due diligence on our system and how it needed to be adapted to perform in each of the international markets. We did user interface testing, we held meetings with our franchisees and our development team traveled to Germany, France and the UK to observe the local operational processes. Then we came back and started our development effort to make sure that our system would meet the needs of each one of those markets that we’re looking to expand in. In Germany, we had to reassess our position. There were just some privacy laws that we needed to make sure that we were complying with, so we’ve worked through those now and we’ll launch in Germany this year too. Once you get that momentum and you get those sorts of numbers up and running, they become your live testimonial.

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