Sharing The Pain
By Dennis Nessler | October 29, 2020
A comprehensive plan to provide relief for its members, a reduction in hotels leaving the system, and the continued growth of new brands, particularly its economy Sure Stay chain, were among the key points of emphasis from Best Western Hotels & Resorts CEO David Kong as he opened the company’s virtual convention earlier this week.
Kong also provided a snapshot of where the Phoenix-based membership organization—which now includes some 18 brands and more than 4,700 properties globally—is from a financial standpoint during a difficult 2020 impacted greatly by the pandemic.
“I’m glad we’ve always been fiscally conservative and we entered this year with the strongest balance sheet in the company’s history. At this time we still have a respectable reserve and we will continue to find ways to help our members through this crisis,” he said.
Kong elaborated on some of that financial relief, which the company has estimated will come at a cost of some $30 million dollars.
“From the onset our goal was to share the pain and help our members survive. I’m proud of the relief that we provided to our members March through May. We reduced our fees in multiple ways and suspended our brand requirements…In order to fund this swift and comprehensive membership relief we implemented an unprecedented austerity plan, which included company-wide pay reductions, separating from a significant number of our associates and dramatically slashing expenses. These decisions were painful and regrettable but were needed to ensure the ongoing viability of our company,” he said.
Acknowledging the winter months may be particularly challenging for its members, Kong noted the company’s board and executive team “put together a plan to provide further relief.” He noted that Best Western is extending the time period for payments for its members and reducing the service fee for payments to as low as 3 percent, depending on the payment schedule. In addition, the company is increasing Best Rewards free night compensation by 33 percent as well as reducing monthly fees based on a property’s revenue declines year to date. Finally, the company is rebating the marketing technology assessment increase scheduled for December 1.
Kong added, “To fund the current round of member relief and to address the challenge of dramatically reduced revenue we’re continuing our austerity plan and also looking for new ways to reduce expenses.”
In terms of performance, Kong noted the company’s RevPAR index remains strong, coming in at 111.5 year to date in 2002, not far off the 112.2 level it reached in 2019. Meanwhile, he noted the company has been steadily rebuilding its scale as well pointing to an “encouraging upward trend.” For example, the Best Western system has some 2,095 hotels in North America year to date, up from 2,057 in 2019. Those numbers have been rising steadily since 2017 when there were 2,009 properties.
Furthermore, he added the number of hotels leaving the system is also going in the right direction following a few challenging years. In 2019, the company saw 48 properties exit and that number is just 15 thus far in 2020.
“We did lose a fair number of hotels the past few years because we were cleaning up our brand, and also as a result of the much-needed design excellence program that has elevated and helped our hotels. I hope you also recognize these difficult decisions were necessary, our brand is much stronger now, and we have more favorable traction with travelers and clients than ever before,” Kong told members, adding that he does expect this year’s number to grow a bit as a result of the pandemic.
The CEO also touted the “growth of new brands” noting that they make up some 40 percent of the company’s pipeline. “This really speaks to why we launched these brands. Aside from contemporizing and elevating the image of Best Western they’re helping us build up our scale,” he said.
He noted the SureStay brand, in particular, has been a major contributor.
“SureStay has really helped us gain scale,” he said. The economy brand has now reached 200 properties in North America and 150 internationally. The company expects the brand to reach 360 hotels by the of the year.
Kong also pointed out the brand ranked highest in guest satisfaction in the economy segment, according to JD Powers. “When we launched SureStay we set out to be the leader in the economy segment…This is an incredible achievement,” he said.