ROCKVILLE, Maryland—Growth is constantly on the mind of Steve P. Joyce, president and CEO of Choice Hotels International. For Joyce and the 11-brand hotel company, growth centers on its fledgling Cambria Suites and Ascend Hotel Collection brands, as well as its mostly conversion legacy flags.
But in an interview recently in Phoenix during the 19th annual Lodging Conference, Joyce said the company is also looking to expand through the acquisition of one or more hotel companies, launching a new brand or expanding into areas related to its core businesses.
In looking for hotel company acquisition opportunities, Joyce said the company has changed its scope.
“Our strong preference has been to find something in the full-service space that would fit in our company; something value-based, not a luxury brand,” he said. “We’ve been relatively unsuccessful, and the likelihood of finding something that fits that bill is probably not great.”
As a result, he said, the company is looking more at international opportunities. “I wouldn’t be surprised if one of our first transactions turns out to be a smaller chain that’s based in Europe,” he said.
Like “a lot of other people,” Joyce said the company may look at an opportunity to buy La Quinta Inns & Suites, which owner Blackstone Group LP said it plans to sell or spin-off in an initial public offering.
Upscale extended stay is a segment in which Joyce would consider launching a new brand or purchasing an existing one.
“Residence Inn was the best brand I ever worked with, so I have a real desire for that space,” he said. “That’s the most likely scenario you could see us move toward, not anytime soon, but over time.”
Opportunities not in the hotel industry mainstream, such as vacation ownership, also intrigue Joyce. Earlier this year, Choice made a deal with timeshare operator Bluegreen Vacations and Bluegreen Resorts Management in which 21 of its properties became part of Choice’s Ascend Collection.
“I like the vacation business, and that’s why we started our relationship with Bluegreen,” Joyce said. “The deal was an opportunity for us to get into the timeshare piece and get our feet wet. You could see us looking at some of those avenues but within the asset-light model, probably more on the distribution and electronic side than necessarily managing.”
And finally, Joyce said, the company is working aggressively to expand SkyTouch Technology, a company it launched earlier this year to market its cloud-based property management system to hotels outside the Choice family. Joyce said there are “thousands of hotels” interested in the system, and “there is also the opportunity to look for other cloud-based tools that could help hotels in a low-cost environment.”
Internal growth
While acquisitions or brand start-ups are on the mind of Joyce, he’s especially focused on growing the company’s two upscale brands, Cambria Suites and Ascend.
The timing of the recession dealt a blow to growth of Cambria. The brand launched in 2005, and Joyce said in July 2008 it signed a deal with a developer that was going to build 40 hotels.
“But by October (2008), we were underwriting zero Cambrias,” he said.
Since the end of the economic downturn, the brand has been growing slowly but steadily, with 18 hotels open. Joyce said 30 will be open or under construction by the end of the year.
During The Lodging Conference, O’Reilly Hospitality Management LLC held a groundbreaking ceremony for its second Cambria Suites, a 121-room property in Phoenix’s Desert Ridge neighborhood. O’Reilly also has a Cambria under construction in the Dallas suburb of Plano, Texas.
After initially opening properties in secondary markets such as Appleton and Green Bay, Wisconsin; Boise, Idaho; and Akron, Ohio, the chain’s growth is focused on gateway and first-tier markets.
“The brand is really starting to take off for us,” Joyce said. “We have three (under development) in New York, (one) in Washington. Miami opens soon, and White Plains (New York) opens toward the end of the year. We have one in (Los Angeles) we’re going to announce soon.”
Based on reservations requests Choice can’t fill in some major markets, Joyce is very optimistic about the performance potential of the new Cambrias that will open in gateway cities.
“I’m pretty confident in these urban markets—where we’re doing these projects—are going to fill up quickly and will be pretty profitable,” he said. “In Washington, we have 1.3 million non-price (reservation) turndowns, so when we open up on O Street, we’ll run a 130% (RevPAR) premium. Same thing in New York.”
Joyce is equally enthusiastic about Ascend, Choice’s upscale quasi-brand offering with 108 hotels. It recently signed two global properties, one in Ireland and one in Australia.
“(Ascend) was 18 hotels three years ago, and we were thinking if we could get to 50 or 75 that would be great,” he said. “But I think we could easily get to 300.”
Legacy brands
Joyce said the company is also committed to improving and growing its legacy brands, especially Comfort Inn and Comfort Suites. Earlier this year, the company announced a $40-million incentive package to help Comfort owners complete property improvement plans. Joyce said more than 800 franchisees have applied for the incentive.
“Between that and taking out (underperforming hotels) at the bottom end, we’ll see a real difference with that brand,” he said. “In two years, the brand will have a very different look and feel, which for a 1,900-hotel brand is about eight years quicker than most (companies) could do it.”