WHEN RAJ JAISWAL of California got into the hotel business in 1995 he learned the hard way that not every brand is recession resistant.
Jaiswal’s business has gone through a few ups and downs in the U.S. economy, including the recession of the late 1990s; the aftermath of the terrorist attacks on Sept. 11, 2001; and the Great Recession.
Two years ago, he did extensive research to find a brand that would weather any downturn. He discovered Comfort Inn, the upper midscale brand by Choice Hotels International.
“It is the most defensive strategy of my business model,” said Jaiswal who owns two Comfort Inn hotels – one in San Diego, California, and the other in Dallas, Texas. Other brands, such as Hampton Inn and Holiday Inn Express, “are the first to get hit” in an economic downturn, said Jaiswal, who has franchised other brands. Comfort Inn is the most resilient brand, he said, because although it’s an upper midscale brand, it can also operate and make money at midscale prices.
John Wang, a Comfort Inn & Suites owner in Murietta, California, said the brand’s model is “lean and mean” and enables him to make money at a midscale to upper midscale ADR.
As Hilton, InterContinental Hotels Group and Marriott International grab the spotlight with new midscale and upper midscale brand rollouts, Choice Hotels is banking on its 32-year-old flagship Comfort to clear the channel to sustained growth. To achieve that, Choice Hotels has launched two improvement programs over the past five years, challenging owners to step up with new designs, FF&E and technology or leave the system before they sink the whole ship.
Wang’s family was the first to open a Comfort Inn in California and the second of the brand’s franchisees in the whole U.S.
When Comfort Inn first launched, he said, many travelers were not familiar with the limited-service hotel concept. It was tough to attract new business. “We had our fair share of struggle for identity,” he said.
Today, the Comfort brand is ubiquitous in the U.S. despite losing more than 300 hotels over the past few years. The brand has undergone a revival through extensive redesigns in 2012 and in 2016 that have repositioned the brand firmly in the upper midscale segment.
Wang was among the estimated 300 owners who took part in the brand-wide renovation project that began in 2012. As the U.S. economy was in the trough of the Great Recession, Choice Hotels ponied up $40 million in incentive money, which led franchisees to invest an overall $250 million in renovations by the end of 2014.
Franchisees who could not or would not upgrade to the new standards left the system or reflagged at a lower-tiered brand within Choice Hotels. From 2011 through 2016, 245 Comfort Inn hotels (more than 23,000 rooms) and 51 Comfort Suites (more than 4,100 rooms) exited the Choice Hotels system.
The renovations at Wang’s Comfort Inn & Suites Near Temecula Wine Country repositioned the business to earn significantly more than before. “We finished our renovation in 2014, and from that year to 2017 we saw a huge RevPAR jump of 30 percent,” he said. “We looked at it from the financial side, but we heard about it from the guests who were happy with the changes. They reflected their appreciation in their comments at the hotel and in their reviews online.”
New Brand Image
He said he was somewhat dismayed when he learned he faced a huge PIP after acquiring the 92-room San Diego hotel. He is referring to Choice Hotels’ “Move to Modern” upgrade program for Comfort launched in 2016. The PIP calls for upgrades to the hotels’ guest rooms and lobby as well as technology.
But the repositioning gave his midscale hotel an upscale atmosphere, and guests are happy with the perceived value. “Comfort Inn has come a long way,” he said. “When you compare the old Comfort Inn to the new image, it’s a completely new brand and people recognize it.”
“I accomplished 80 to 90 percent of the PIP last year, and it’s made a huge impact on my business,” said Jaiswal, who also is the hotel’s general manager. “I worked very aggressively on a very fast track; I did not waste time. I knew I needed to make money.”
Jaiswal credits Mark Bajakian, area director of franchise services at Choice Hotels, for his success. They worked hard and fast to keep the business operating at an optimum level while amid renovations. Jaiswal said he closely adhered to Bajakian’s guidance, and Bajakian backed him up when negotiating what was truly necessary to complete the PIP.
The teamwork paid off. Occupancy at the San Diego hotel in 2017 was up 15.4 percent over 2016. Two neighboring upper midscale hotels – a Best Western and a Holiday Inn Express – each recorded occupancy increases of 5 percent, according to STR data. At the end of the year, the hotel’s occupancy index for a trailing 12 months was 107.4, “meaning I was stealing 7.4 percent of the business from the Holiday Inn Express next door, and this was while renovation was going on and I had some of my rooms closed,” Jaiswal said.
RevPAR was $70.17, which was 15.9 percent more than the Comfort Inn’s comp set. Its RevPAR index was 109.3. “I was stealing 9.3 percent RevPAR from my competitors,” Jaiswal said. “You have to know your competition.”
Jaiswal said he paid $1.9 million for the hotel and spent $1.3 million on the renovation. Last year, the hotel did about $2.4 million in business and Jaiswal expects to increase revenue by at least $300,000 this year.
For the Long Haul
Patrick Pacious, CEO of Choice Hotels International, said the comeback of the Comfort brand is “a reaffirmation that [upper midscale] is a great space to be in. I think we are the best operator in the midscale segment; we’ve been in it the longest, we know our franchisees the best and our consumers know the product.”
Choice Hotels views the industry in 20-year increments, said Pacious. “We looked at the Comfort brand and said, ‘It won’t be around in 20 years unless we do something.’” In the midst of brand proliferation in the U.S., Pacious sees many brands that are not growing, but Comfort has bucked that trend.
Two-thirds of its 300-hotel pipeline is new construction. “It’s the largest pipeline in Choice Hotels’ history,” Pacious said. “It’s because owners make money off their Comfort hotels.”
Last year, Choice Hotels opened 58 new Comfort Inn or Comfort Suites hotels and signed 150 licensing agreements.
“I’m an old Navy guy, and you can only have one flagship,” said the CEO. “Comfort is our flagship. This is the new Comfort, and we see owners getting on board.”