Thomas Heath
Thomas Heath
Columnist

Value Added: Choice Hotels chief bets future on technology and one heck of a waffle

Steve Joyce, 52, chief executive of Silver Spring-based Choice Hotels International, likes the Redskins, the Orioles and heart-stopping rib-eye steaks from Del Frisco’s. He can name a long-ago starting lineup for the Washington Senators (and he did), he lives in Herndon and vacations — when not in a Choice Hotel — at his place in Ocean City.

I first interviewed him three Fourths of July ago, still in the wake of the Great Recession. Joyce had been on the job for a little more than a year after he moved across town from his previous post at Marriott International.

(Courtesy of Choice Hotels International, Inc) - Steve Joyce, CEO of Choice Hotels.

At the time, Choice’s stock was wheezing. Three years later, it’s up 55 percent and management is preparing to propose a $10 per share dividend to the board of directors.

He runs a big business. Choice Hotels International franchises more than 6,100 hotels, representing more than 495,000 rooms, in the United States and more than 30 other countries and territories. The company’s brands include Comfort Inn, Comfort Suites, Quality, Sleep Inn, Clarion, Cambria Suites and Econo Lodge.

Choice, which is 51 percent owned by the Bainum family of Montgomery County, has a unique business model. Rather than owning or running hotels, it collects a flat royalty from its franchisees, which averages 4.2 percent of gross room revenue but can vary widely based on negotiations with individual franchisees. Choice gets an additional 3.8 percent of gross room revenue to fund its worldwide marketing and reservation system.

Joyce, a New Carrollton native, went to Largo Senior High School and graduated from the University of Virginia’s McIntire School of Commerce.

How did you get the stock price from $25.65 when we talked three years ago to over $39 today?

In fairness, the stock had dipped when we talked [in 2009]. When I came in, in May of 2008, it was $35. We had just started to slow down.

One of the advantages I had is this company has [plenty of room] on the balance sheet. We had the opportunity to invest $50 million in infrastructure. We went from a competent technology position to an industry leader.

We were first with the iPhone app and very quickly followed that with the Droid app. Our mobile bookings are up approximately 250 percent year-over-year. We are convinced people are going to go mobile. . . . Most likely it’s going to be a personal device like a pad. You can see it coming.

Speaking of predictions, what’s the summer travel season look like?

Americans are ready to take their vacations, and nothing is going to stop them. We did a survey and nine out of 10 said that I’m taking the same amount of vacation or more.

What about unemployment?

The people with jobs, because the companies are doing so well, they feel stable.

Everything’s been stress-tested and they’re still traveling. They worked their way through high gas prices, which have come down. They worked their way through the histrionics over Europe, and that hasn’t slowed them down.

It’s not getting better in a hurry, but as long as it’s not deteriorating . . . people feel very good about that.

What is going to be the biggest change in the hotel industry in the next five years?

The distribution game. Web sites are going to come and go. Social-media booking methods are going to be constantly in a state of flux. I’m bullish on social media. Over the next three to five years, it’s going to be huge in influencing booking. The hotel companies need to be sure they are keeping up with the consumers.

Today, there is transparency with customers in pricing and the condition of a hotel. Five years from now, there will be perfect information around pricing, service, ratings from friends, ratings from observers, and you’ll be able to view online in a very detailed fashion what you are buying.

I’m very bullish. No one has been building new hotels for a couple of years. The supply- demand balance is as favorable as it gets in this business. There are 55,000 hotels in this country, and in 2011, where we play, inventory actually shrank. We think 300 to 400 hotels came out of the inventory. By definition, it means business will get better because demand is going to grow. The hotel business is going to do better almost regardless of the economy.

What advice do you have for travelers?They should be looking at what they are getting and make sure they are looking at all incremental fees and other charges and make sure their room rate covers what they want.

What’s going on with Choice in the Washington area?

We are building a new headquarters in Rockville Town Center and will move in during April or May of next year. We are leasing 137,000 square feet in a 231,000-square-foot building. Our current set of buildings [in Silver Spring] aren’t conducive to the kind of collaboration and creativity we will get out of the new place.

Biggest mistake?

I waited too long to make some tough decisions, like where we should be investing our dollars. I should have moved more quickly and aggressively into investing in the technology piece, and moving more assets and resources and people into the distribution business and away from traditional marketing and advertising.

And . . .?

We learned from the retailers, by watching Amazon.com, how quickly people were moving online. We watched the cost of not moving — the carnage of the retail business.

What’s your favorite Choice Hotel?

The one in the Bahamas, next to the Atlantis. I stay in Choices a lot. I travel about 100 days a year. My New York favorite is the Distrikt Hotel on West 40th. I like the Comfort Inn on 46th Street. It is walking distance to Del Frisco’s, which is my favorite steakhouse. I like their bone-in rib-eye.

What customers do you chase?

The 99 percent. We are the value-priced alternative. For $80 to $90 a night, you get free breakfast, free Internet, free parking and one [heck] of a waffle.

For previous Value Added columns, go to postbusiness.com.

 
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