David Kong
With 4,000 hotels in 80 countries, Best Western International claims to be the "world's largest hotel brand." In recent years, it has strived to attract corporate travelers by guaranteeing certain business traveler-oriented services and amenities at many properties, according to president and CEO David Kong. Best Western also has stepped up sales and marketing efforts, "significantly cleaned up the brand and introduced our first design for quality standards and guest standards," Kong told The Transnationalin a recent discussion covering a range of topics. Excerpts follow.
In which markets have you seen rates softening the most?
The rate is definitely firmer in Asia and also in Europe, but even in the United States the rates are firm in different locations like Washington, D.C.; they are not seeing as big a decline in business. This whole rate-discounting business, if you look at the problem, is really a supply and demand imbalance. You have a lot of hotels being built in the last few years, and the supply of hotel rooms has increased an average of over 2 percent every year for the last 20 years. The demand hasn't nearly kept pace. But in 2008 we started to see a very dramatic slowdown in hotel construction because no one can get financing--it is so tight. Now the supply is coming to a screeching halt, and there is hardly anything coming into the market next year, so that sets up a repeat of what happened in 2004--because of a dramatic stop of supply, demand was able to catch up. 2004 kicked off three or four successful years of double-digit growth in revenue per available room, and I am seeing the same thing happen again. 2010 will be the inflection point, and we should see a big movement upward into 2011.
What about corporate demand?
No doubt everyone is looking for value. It is not only rate, but it is what's included. Is breakfast included? High-speed Internet? Are there flat-screen televisions? Do you have swimming pools? All those things come into play. Being in the midscale segment, it is advantageous for us at this point because you look at the economy and most people are not one of the privileged and are not wanting to appear to be privileged, so they are avoiding some of the big, fancy hotels. Anything with the word 'resort' in their name is not good; they are avoiding some of these upscale hotels. We are at a very sweet spot.
How many contracts does Best Western have worldwide, and how are they handled?
We don't have many global contracts because business is done differently around the world. So, for example, in North America some organizations might want last room availability and for them that is more important than anything else. In other parts of the world, that is not as important, but they want something else instead. And, for example, in North America some corporate travel managers would like to make sure that the hotels are green; in other parts of the world, that might not be as important. We have to respect the fact that business is done differently around the world, and so it's not necessary to have a lot of global contracts. But what we typically end up having is North American contracts, European contracts, Asian contracts and so forth. A lot of the North American companies are primarily focused on North American travel, so we work with them at that level, but then if they are also interested in outbound or regional travel within Europe, we would get the European sales team involved as well.
How are you trying to gain more share in the corporate segment?
We started looking at that marketplace toward the end of 2008. When the stock market started to take several big hits, we thought the economy could be heading south so we devised a plan to basically utilize the downturn to take market share. We recognize that our competitors are primarily public companies and during a downturn they are going to do everything that they can to save money, so they are going to cut their advertising, their marketing and promotions, and also sales offices. If we can dramatically outspend them, we have the ability to take market share. So that is what we did. We looked at how we can organize ourselves, and we made several tough decisions to implement hiring freezes and streamline operations in order to free up additional money for marketing and promotions. We significantly increased it--by 30 percent to 40 percent--and our RevPar performance is significantly better than the industry, and it was a result of us taking market share by stepping up on sales and marketing. We also recognized that we needed to make our hotels more appealing to the corporate travelers, so we put together the Business Plus program. It provides certain guarantees as to what travelers would experience in our hotels, in terms of the amenities and the experience. So when corporate buyers select those Business Plus hotels, it comes with a certain reassurance that business travelers will have a good experience at those hotels.
What are the latest developments in distribution technology?
We all know that the Internet is very quickly changing the way we do business, and most of our travel partners are moving online and they like to be able to connect to a reservation system directly. If they were to work with a global distribution system, they are limited to the limitations of the GDS, and sometimes it is not the most flexible way to work nowadays because there are so many different requirements now and GDSs are hampering that effort. So, we see a lot of travel intermediaries wanting to connect with us directly. We have corporations as well as tour operators and travel intermediaries wanting to link to us directly. A lot of corporations, for the most part, have really outsourced their corporate travel department--they might have some [staff] left to just maintain the relationships--to a travel management company, and they let them worry about [distribution]. So when I talk about connecting to corporations directly, it is really through these intermediaries. We might have a direct connect with Carlson Wagonlit and they, on behalf of whoever they work with, could use their booking engine on top of ours; they would have that variety. If we are [a corporation's] sole [hotel] provider, we can build a reservation system that is Web-based and they can get into our system; it is not an issue. But a lot of times these companies want to work with several hotel companies, so how do you make that presentation? You would have to build a booking engine and the companies don't usually want to do that. They have outsourced it to other companies that do that on their behalf. Every time we have a direct connect, we have a great result. We are seeing the direct-connect revenue go up by twofold or threefold every year. There is a huge appetite for that; people just recognize it as the way to do business in the future. The GDSs can't give you a virtual tour of the hotel, photographs, etc. If you are a travel agent trying to use the GDS, it is hard. GDSs have improved over the years, and they have developed browser technology now, but still it is not easy to navigate that.