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Interview with Steve P. Joyce, President & CEO, Choice Hotels International

Prior to joining Choice Hotels in May 2008, as president, chief executive officer, and member of the board of directors of Choice Hotels International, Inc. Stephen P. Joyce served as executive vice president, global development/owner & franchise services for Marriott International, Inc., where he was responsible for the development of Marriott’s lodging brands worldwide. With a career in the lodging industry spanning over three decades, Mr. Joyce has a proven track record of developing and growing some of the best-known hotel brands in markets worldwide. An active member of the lodging industry and business community, Mr. Joyce is the incoming chairman of the International Franchise Association,, effective 2014 and he is the former chairman of the U.S. Travel Association. Mr. Joyce holds a bachelor’s degree in commerce from the University of Virginia and has done graduate work at Cornell University, Wharton Business School, and the Aspen Institute.

When we first met in May 2009, you were confident in giving a real meaning to the adjective “International” added to Choice Hotels. At the time you had 5 000 hotels in your American inventory as opposed to 350 in Europe and less than 400 in Asia-Pacific. How would you judge the achievement during these past four years?

I would say our achievement since then has been quite remarkable. Economies throughout the world are still recovering, but our company’s global growth and worldwide reach continues to advance. Since Q1 of 2009, we’ve opened almost 400 properties outside the United States, with 81 currently under development. Our international system size to date now stands at 1,173 open properties. Choice has been strategic in our development approach. We have brought on high quality properties that meet our brand standards and are committed to providing an exceptional guest experience. In January, we executed a strategic agreement with Akkeron Hotels Group Limited, a well-known regional hotel operator in the United Kingdom. This agreement forms a critical part of Choice Hotels’ growth strategy to offer financial support to boost development in key international markets such as Europe. Five properties are currently flying the Quality and Clarion Collection brand flags. We anticipate another 2 properties coming online this summer. How would you describe the right balance in terms of geographic development?Our strategy is to focus on markets with strong development opportunities and high consumer demand.Will you still maintain some master franchises on historic development areas or will you tend to establish subsidiaries to better control and speed the development, especially on “new territories”?Our current business model leverages a wholly owned and master franchise partner approach. The current model is effective and has allowed us to grow our footprint in key markets. Any future expansion into new markets will depend on market characteristics and dynamics. Our approach will be assessed on a case by case basis.Do you still believe in the potential of Asian countries, Greater China and South-East Asia, to develop a new hotel supply? Is franchising the best economic model to establish a brand in these countries.Choice views Asia as an area of opportunity and we are currently assessing business opportunities in the region. Our office in Melbourne, Australia services the Asia Pacific region and we have representation in China with our Comfort brand. We are actively doing diligence on potential development opportunities to expand our brand presence.You are now the fifth worldwide hotel group since the sale of Motel 6 by Accor, with a gap of over 100 000 rooms with the 4th group, is your ambition to climb a little bit further up the ranking? Is being big and ever bigger a must to measure success?We are always seeking out and exploring new business opportunities. Choice Hotels has an incredibly powerful distribution system delivering record traffic to our hotels; one of the fastest growing loyalty programs in the hotel industry, Choice Privileges; and we are an industry leader with what we are doing in technology – at any given time, Choice Hotels is performing 1,000 transactions per second – that’s shopping, booking, checking in and out – it is imperative we have the technology platforms to support that.How do you judge the scope of your portfolio of brands? Are they all justified?Our brands have always had tremendous appeal to travelers looking for great value, convenience and welcoming accommodations. Travelers count on our hotel brands as a comfortable and dependable place to rest. Now, as we develop into the upscale tier and into new markets, especially with Ascend Hotel Collection, guests are seeking us out for our highly desirable destinations as well.What do you think of the launch of specific brands to accommodate a regional market as hotel groups seems to favor in Asia or America?Choice is open to rolling out additional brands in markets where there is a demonstrated opportunity. For example, the Australasia economy segment was primed for our Econo Lodge brand. We introduced Econo Lodge in 2010 in both Australia and New Zealand and have 30 hotels currently open.Are you satisfied with implementation of your specific PMS, Choice Advantage? Did your franchisees measure the benefit of using it?We are beyond satisfied with our cloud-based property management system, choiceAdvantage, and I feel confident in saying our franchisees would agree. choiceAdvantage offers a key value proposition for franchisees – it’s low-cost, easily maintained and incredibly powerful. It is a transformative time in the lodging industry. Ordinarily the conversation is centered on hotel development. Now, it is also on technology development, most notably, cloud-based systems. And Choice Hotels is leading the way. Earlier this year, we announced the creation of our new business division, SkyTouch Technology. The first product that SkyTouch launched is the SkyTouch Hotel OS which is a version of choiceAdvantage which we have brought to the marketplace because IT vendors, Choice Hotels franchisees who also franchise other brands and even other hotel companies were asking about it.Do you consider hotel distribution as one of the most important challenge for the hotel industry in the coming years? What is the Choice’s response(s) to that challenge?Yes, this is a critical part of the business and Choice Hotels has incredibly powerful distribution capabilities. We are an industry leader in technology because we have an entire campus of very talented people in Phoenix, Arizona devoted to innovation and technology. The result of having such a powerful team in place means we are setting all sorts of company records in distribution through all of our channels. ChoiceHotels.com is one of the most visited websites in the hospitality industry, attracting 100 million visits annually and tracking 15% higher year-over-year. Expansion in our mobile reservation platform is also a key contributor to strengthening Central Reservations System results. Last year, our mobile channel revenue was up nearly 200%.Are you satisfied with your involvement in RoomKey? Would you suggest another step forward?RoomKey is a startup that launched in April 2012. We are now a little more than one year into it and so far we are happy with the results we are seeing. Is signing a worldwide agreement with Booking a gesture of realism or a sign of weakness in front of a gigantic mammoth?On the distribution front, our franchisees have been enthusiastic about our recent agreement with Booking.com. I am pleased to say that we now have an agreement in place but we had to ensure it was an agreement that was great for our hotels and made good financial sense. We needed a global agreement, the commission had to be good for our hotels and our hotels needed to maintain control of their inventory without giving up last room availability -- meaning our hotels can decide where to sell their inventory. We are very excited to have signed a global agreement in March that delivers on all of those requirements.Do you believe in the feasibility of hotel brand marketing? Are the financial requirements accessible to a hotel group?We absolutely believe in marketing our brands and do so through multiple channels – on television, online, in print — in order to reach travelers throughout the world. And this investment of time, money and creativity pays off incredibly well. Choice brands are known globally. In fact, our Comfort brand has 98-percent brand recognition. Further, Choice Privileges is one of the fastest growing loyalty programs in the hospitality industry: guests want to keep returning to our hotels. And, because of how well we market our brands, our distribution is extremely powerful: our Central Reservations System is setting company records. Hoteliers want to franchise with us because our highly visible and appealing brands draw in guests. We are seeing this in the European market in particular, where many unbranded hotels want to convert and be able to fly Choice branded flags.

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