Duncan Berry is chief executive, UK, for Choice Hotels Europe. He tells Janet Harmer how reducing the group's number of hotels was necessary to improve the quality offered to guests across its portfolio
Choice Hotels in the UK is a subsidiary of Choice Hotels International (CHI), one of the largest hotel franchisors in the world, with more than 6,000 properties. How many hotels are you responsible for in the UK?
There are currently 39 franchised hotels in the UK, operating under four brands - there is one Clarion (four-star), two Clarion Collection (soft branding for more unique hotels), 16 Quality (three-star) and 20 Comfort (budget). Across Europe, there are about 500 hotels.
What are the advantages of belonging to such a large organisation?
It is the ability to be able to tap into central systems such as Choice Advantage, the purpose built Property Management System (PMS) for the company, which has been operating in the United States for seven to eight years.
It operates online, out of the company's headquarters in Phoenix, Arizona, and is very cost effective. There are four hotels now using it in the UK, with another five properties signed up to adopt it soon, and in time it will become mandatory for all hotels to take it on board.
General managers tell us they like the ability to access it remotely so they know exactly what's going on at their hotel at all times.
Since you joined the company in August 2008, the number of Choice Hotels has dropped from 68 to 39. What happened?
Before I came on board, the Real Hotel Group (RHG) operated a master franchise agreement with CHI in parts of Europe, including the UK. This came to an end in 2006 in France and Germany and in January 2008 in the UK. It was at this point that CHI decided to set up a UK head office and I was brought on board.
Unfortunately, RHG, which had remained the largest franchisee of Choice properties in the UK with 22 hotels, went into administration in January 2009, largely as a result of being the victim of high levels of debts combined with the economic downturn. We immediately took the decision to withdraw the Choice Hotels' brands from the former RHG properties, although two - in Sunderland and Hagley Road, Birmingham - were later sold and retained the Quality brand.
What happened to the other properties that were dropped?
During 2010, we also took the decision to recommend to the head office in the US to terminate franchise agreements with several other owners. Some weren't paying the franchise fees, others weren't investing in the maintenance of the brand at a time when new standards were being introduced across Europe.
I wouldn't have wanted to take you around some of these hotels and keeping them within Choice was damaging to the rest of the portfolio and could potentially have prevented other hotels from joining us.
Although the fall in the number of hotels here did not look good, in the long-term it was the right thing to do and our existing franchisees were heartened that we were willing to make these tough decisions for the good of the brands.
How do you ensure that quality standards are met and maintained across the different brands?
It is certainly true that some of the hotels had become disillusioned with the brands which was why it was important that it was part of my role to establish a franchise support team which would support hotels and enable us to introduce the updated brand standards in July 2009, with specific time frames.
The Quality Assurance (QA) review was also tightened up as, quite frankly, with hotels scoring 1,000 out of a 1,000, they were not worth the paper they were written on.
Now, for instance, the cleanliness element of the QA review has assumed such importance that if a hotel does not meet the required standards, it will fail the assessment overall.
It is necessary to take a much firmer stance in order to increase standards across the group as well as encourage new hotels to join us. While we have our eye on the fact that trading conditions have not been straightforward, it is also true that expectations of guests are growing all the time and if standards are not kept up, rates will not be maintained.
What are your plans now for growing the company in the UK?
After going through a period of consolidation, we are ready to expand. We are currently in serious negotiations with six potential franchisees, but it is a lengthy process. What is good news is that we are now getting referrals from existing franchisees which speaks volumes about where we've come from within the past two to three years.
How do you expect to achieve this growth?
It will largely come about through the conversion from existing independent hotels or competitor brands. While funding for the development of new hotels is still very difficult, we are currently in discussion with the owners of some new builds.
Choice Hotels International has helped to finance prospective franchisees in the purchase or conversion of hotels in the United States, but this is not something that has happened so far in the UK.
What attracts potential franchisees to Choice Hotels?
First and foremost we offer a franchising blueprint which has worked successfully since Choice was created in 1941. We provide support with sales, marketing and revenue management, all which help to drive up room rates and occupancies. And we can help arrange more competitive fees with the online agents, which helps with the bottom line, although it is our aim to encourage more bookings through our own website.
While our franchise fees are reasonable and competitive when compared to some of the major players such as Hilton, IHG, Accor and Marriott, our delivery - in terms of increased corporate and leisure business - is on par with these big brands. Choice, therefore, offers tremendous value.
The fees paid by the franchisees vary according to the investment they put into a property in order to reach our brand standards and are ramped up over a period of three years. On average, the fee equates to 4% of room sales, with the marketing fee set at 2% of room sales.
How can becoming a member of the Choice franchise family improve the bottom line?
The Comfort Inn Hyde Park is a good example. Situated close to Queensway and Bayswater tube stations, the hotel rebranded in April 2011 after the owners - the SME Group - reached a franchise agreement with Choice. Following a refurbishment of its 29 bedrooms, all of which now have flat screen LCD televisions and free Wi-Fi, the hotel began to see an improvement in room rates and revenues.
From June to September there was an increase of 65% in total revenue, 80% in average daily rate, and nearly 10% in occupancy.
What are the key factors in the establishment of a successful franchise relationship?
Primarily franchisees need to understand that this is a two-way relationship. They can't think that once they have the brand name over the door people will just come. We can provide the tools, but they also have to use their own initiative to boost business, especially on a local level.
You joined Choice with franchise, but no hotel, experience. How has that helped you in your current role?
My franchise background with Cartridge World stood me in good stead and gave me the confidence to deal with the difficulties of the Real Hotel Group. But I recognise my short-comings and lack of experience in hotels. So I have a team of people who speak the same language as hoteliers and provide support for the franchisees regarding the commercial realities of running their businesses.
The head office is composed of 14 staff in the franchise support team and 30 in the European reservations team. It is my role to instil the franchise side of the operation into those within the company with a hotel background, as well as look at the bigger picture and drive Choice forward in the UK from a strategic point of view.
What are the key issues facing the UK franchisees of Choice Hotels during 2012?
We want to ensure a fair market share of business for our hotels. It is important the franchisees understand the market they are in - in terms of the mix of business, the location and the season - so that they can adjust their staff levels and costs according to the levels of business. They need to maintain the standard of their properties and use the central resource of Choice Hotels as much as possible, as well as market towards specific events locally.
duncan berry: background
Prior to joining Choice Hotels in 2008, Duncan Berry had six years' experience heading the retail franchise group, Cartridge World. He was initially UK general manager before being promoted to director of European franchising.
During his time with the group, Berry was responsible for expanding the brand from 30 stores to nearly 300 in the UK in a three-year period, cementing Cartridge World's position as the market leader in it sector.
He also had responsibility for nine master franchisees across Europe and brought the European market together to operate as one brand.