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Interview with David Bayes, Managing Director, Choice Hotels Australasia: “I always like to under promise and over deliver”

Australian native David Bayes has been named managing director of Choice Hotels Australasia in 2005. Prior to joining Choice, Bayes, 58, served as COO for Mortgage Choice, Australia’s leading mortgage broker. Previously, he held the post of CEO and director for Bakers Delight Holdings, a leading franchising organization operating 670 outlets in Australia, New Zealand and Canada; vice president and regional director for the Southern Region of McDonald’s Australia; and a member of the inaugural board of McDonald’s Australia.

HTR Magazine: Almost 12 years after the strategic al­liance between Choice Hotels and Flag International, would you say that the partnership was easily imple­mented? David Bayes:

Franchising is a very different model to the pre­vious Flag membership model and of course it took time for people to adjust, understand and appreciate the nature of hotel franchising and the rights and obligations of each partner. The purchase was ultimately consummated in 2002 and since that time Franchisees have increasingly come to appreciate the opportuni­ties that exist for them when they embrace the partnership and work closely with us to build their business.D.B.:}} When Sydney ramped up for the Olympics there was a pretty substantial growth in inventory. That has taken the industry some time to digest and it has not been helped much by the last eighteen months of very difficult global travel conditions. Australia and New Zealand are places where people say “I really want to go there one day” and the ongoing challenge is to trans­form that wish into action. Things like Olympic Games are great tools for that but you cannot sit back and rely on one-off events. Tourism Australia and the industry have to work the key interna­tional markets relentlessly if we want to continue to get our share of world travellers.HTR: After the acquisition of Flag, is the rebranding of all existing properties into Choice Hotels brands com­pleted? D.B.: The re-branding of properties was completed very quickly after the acquisition in 2002. I wasn’t with the company at the time but I don’t sense there was any great resistance to re-bran­ding, other than the normal physical time and effort required. I’m sure there was the natural emotional reflection on mourning the passing of Flag but we kept the name for several years, using the dual Flag Choice brand until about 2004. The fact that we had three strong International brands (Comfort, Quality and Clarion) to transition to made the change a bit easier.{{HTR: Did you lose a significant number of properties in the process?D.B.: }} I understand that the agreement was that Choice would buy Flag if a certain number of owners agreed to make the move to the Choice Franchise model. While Flag at its zenith had over 400 members I think around 200 signed up in that first tranche and we now have about 280 properties.{{HTR: What is left of Flag in 2010? Is there any marketing or distribution interest in keeping an historic “regional” brand alive?D.B.: }} No, there’s not really - which in a way is a bit of a shame. Flag was an iconic Australian brand but its membership style and the challenges of years to come meant that it needed a significant overhaul. When I joined in 2005 I spoke with a number of the then current Franchisees who were long serving Flag members about whether we should continue to celebrate Flag achievements and heritage, but not much interest was shown. Internally I’ve had quite a bit of Flag memorabilia framed and displayed around the office. Choice has a wonderful rich heritage but Flag should also be remembered and acknowledged in our office.{{HTR: Is there an attitude specific to Choice Hotels in terms of relations between a franchisor and its franchi­sees? Something new for Australian hoteliers?D.B.:}} I’m not sure what you mean by ‘attitude’, but perhaps I could answer by saying that the strength of our relationship (Franchisor to Franchisee) is what makes everything work. It’s a bit like a marriage – both sides have to work at it, and when they do, most times the marriage works very well.We’re totally focused on building our Franchisees top line and in addition our Field people are experienced accommodation opera­tors who can offer valuable advice around RevPAR and more ge­neral hotel operations. Everything we do focuses on attempting to improve our Franchisees’ businesses. I suppose it’s about buil­ding a relationship from which flows trust and confidence, and from that trust flows mutual influence – it’s not rocket science but everything hangs off that trusting relationship.{{HTR: Which Choice Hotels brand was and is the most popular among franchisees in Australia? Is this the same brand that your team would like to develop the most?D.B.:}} We’ve now got 4 brands in the region – Econo Lodge, Comfort, Quality and Clarion. None is more important than the other – they each serve an important market segment for us in the wider mid-market segment. Certainly we have more Comfort and Quality properties than the others – about 180 Comforts and about 80 Quality properties but what we focus on is having an appropriate offering in the right segment in the right location – that’s what drives us.{{HTR: Would you say that the presence of Choice Hotels is well balanced in the nine regions of Australia or do you have to work more efficiently within certain areas?D.B.:}} We’ve got a really good spread across all regions in Australia and a pretty good spread throughout New Zealand. Our Development people constantly analyse the geographic areas where we have unfulfilled demand and seek strong Franchise par­tners to work with. Our current offering is really strong throughout Australia and New Zealand and covers all mid market segments.{{HTR: Are you satisfied with the introduction of the Econo Lodge brand in Australia? How do you judge the response from investors? Is this a brand that was mis­sing to fill a gap in the Australian hospitality market or did you want to add another source of potential revenue for Choice Hotels?D.B.: }} The launch of Econo Lodge in Australia in 2009 has gone really well. I always like to under promise and over deliver so we set our sights on introducing the brand with an expectation of about 6 new properties in the first year. Fifteen months on we’ve got about 12 and we have decided to launch the brand in New Zealand. It has become clear to us that our customers need an offering at the Econo Lodge level and our brand standards give confidence that they won’t be disappointed. As to whether this decision was made to fill a gap or to provide another revenue source for Choice Hotels, clearly the answer is both. We would never launch a brand where we didn’t think we had a market offe­ring that was credible – likewise we would never make a launch decision if we did not think it had long term revenue and profit implications – that’s just good business. {{HTR: Would you consider introducing a Budget brand such as Sleep Inn in Australia?D.B.:}} I never say never but there are no plans at the moment. We’ve got a good opportunity with our existing four brands and as our consumer brand awareness continues to grow the future looks very good.{{HTR: In terms of performance, how has the Australian market gone through the tough period of 2009?D.B.: }} There’s no question that the Great Financial Crisis caused pretty tough operating conditions in 2009. Having said that I think this part of the world was less affected than say Europe or the US. Our collective comparable RevPAR was down about 1% - you never like to be down, but considering the circumstances I was pretty pleased with that result.{{HTR: Is it an overall depressed market or have some areas and some brands better resisted and performed better?D.B.: }} In a big market like ours there are always going to be areas that perform better or worse than others. The areas that serve our mining industries took a small drop but came back strongly. Locations that rely mostly on inbound took a hit as a consequence of the Great Financial Crisis and our strong Australian Dollar.{{HTR: Do you see some effective signs of recovery at the beginning of 2010?D.B.: }} I’m quietly confident about a long slow recovery. I know there will be some shocks but I expect 2010 to show improving trading conditions. Business and consumer confidence is pretty good and improving and unemployment is falling, so they are fun­damental indicators of opportunity for growth.{{HTR: Have you designed an aggressive marketing and sales strategy to boost business, if ever that is possible?D.B.: }} That is a good question. We spent more on sales and mar­keting in 2009 than in 2008 and we’ll do the same in 2010. But there’s no magic bullet – we’re investing strongly in online sales but we have also adopted a focused back to basics approach – working closely with our key industry partners, consortia, travel agents and key corporates to ensure when they begin to travel more that we’ve earned the right to service them.{{HTR: Since the Olympic Games in Sydney in 2000, would you say that Australia is better positioned on the world tourism map or is the post-Games effect long gone?

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