BWH Hotels CEO Larry Cuculic talks:
- How interest rates have affected BWH's short-term strategy
- How he assesses corporate demand in light of new forecasts
- Why the RFP process should evolve to a more efficient model
Best Western parent BWH Hotels in recent years has launched several brands, including upscale brand Aiden, extended-stay brand SureStay and soft brands like the BW Signature and Premier Collection. It also acquired WorldHotels in 2019. It's all part of an effort to expand the company's offerings throughout the levels of service tiers as well as throughout the world, CEO Larry Cuculic told BTN managing editor Chris Davis during an interview this month at New York University's annual International Hospitality Industry Investment Conference in New York, but added the development market has pushed the company to focus on its core Best Western brands. Cuculic also talked corporate demand, the inefficiency of the RFP process and staffing strategy. Edited excerpts follow.
BTN: Broadly, what's topping your agenda of BWH priorities? What's your strategy in the short term?
Larry Cuculic: We have a really strong foundation, and that's our 77-year history of Best Western. You can never ignore your foundation. You have to nurture it just like you do anything else. In this market, where new construction funding is still a little tight because of interest rates, it leans into our foundational brands. We welcome conversions, and we see conversions as a great opportunity for us right now, as do our competitors, by the way. It's almost like they finally get what we do. They say plagiarism is the most sincere form of flattery.
Because of tight lending, we'll continue to focus on Best Western, Plus, and Best Western Premier, those three brands, because that's the foundation, the roots and trunk of the tree. Now we can branch out, and we need to because you have to evolve. But we do it really smartly because I believe in thoughtful development, as does my development team. The worst thing you can do is launch a brand and not have it be successful.
We continue to grow Best Westerns and Pluses at a tremendous rate, especially globally. The Best Western brand resonates really well in Europe and Asia. It has long history of goodwill and reputation in those theaters.
BTN: We heard STR's new U.S. hotel forecast, and it seems like there's some conflicting signals in terms of where the market stands. What's your view of the market and of demand?
Cuculic: I'm not sure I conflict with their data, but every brand is performing differently. For us, we're really strong in the midscale and upper-midscale. We're beating their prognosis because we're a strong leisure brand, and leisure is really strong. We see groups coming back, which also leans into us, so we're indexing well above that 100. But I like to win, so I would love for it to be better. But for what's available, and what the trend shows, our hoteliers are pleased with the revenue we're driving to them.
The one comment that was made by the STR representative was, "When you look across all chain scales, growth is not keeping up with inflation." That's the pain point for our hoteliers. We could talk about topline revenue, but when you start talking about cost of breakfast, which I hear a lot, you buy eggs, you buy bacon. Inflation has hit that.
Insurance costs are outrageous. Some insurance carriers are saying, "We're out of that business. We're not going to be in the hotel business." So there's fewer of them, which of course means that they can charge more, because now all they're sudden they're saying, "Well, if they're leaving, the risk must be high." So we could drive revenue, but we also have to help hotels contain cost. We're focused on that at the brand level as well.
BTN: How's corporate demand looking for you?
Cuculic: Corporate is up this year as well. Our business travel is up as well, year over year. Last year was a gangbusters year, so it's hard to compare this year. Once you get to some point, it has to normalize. For us, it's continuing to grow.
Last week, we had our partner forum. I was in Orlando, and we brought in about 120 buyers, corporate and leisure buyers, from all of the very large corporations that have travel budgets. Then we brought in about an equal number of hotels, and they all sit across the tables and they build the relationships with the corporate buyers. So we believe in relationships. As a result of that, we ended up with booking business last week on top of where we're already at.
BTN: In terms of segmenting the market into large managed corporate and small and midsized enterprises that maybe are more unmanaged, do you see a difference in the levels of demand or the levels of interaction?
Cuculic: They're not at 2019 levels. They're not. Let's just say they're single digits below where they were prior to 2019. Is it ever going to come back to that level? I don't know. I think one of the panels [at the NYU conference] hypothesized that it likely never will. You may have more short-term travelers, but you won't have as many long-term. They may come in for a meeting and then leave. But I can't hypothesize as to whether it will ever be as robust as it was prior to that, because travel's evolved. Will it ever go back to what it was? Probably not. I don't know because the workforce has changed.
BTN: Have you seen any difference in how, post-pandemic, corporates are looking to deal with you on the procurement front? Have you seen any interest in evolving the request-for-proposals process on the buyer side?
Cuculic: Well, the RFP process needs to evolve. I was talking to a leader of one of those organizations yesterday, and I said to him that in my opinion, it's inefficient. It's ineffective. We should be able to create a system using the data we have where RFPs should almost be a purely automated system. If a buyer needs Monday through Thursday, and they propose a rate, we [should] have an occupancy displacement tool that our revenue managers use and the hotel should use, that says that's either good base business looking that far out or it's not good base business looking out that far.
If it's good base business, it answers the RFP, and you take it. If it's not good base business, but there's a rate that it should be, it should autofill what that rate should be using the displacement tool, put it in, send it back, answer it. If you can't do Monday through Thursday, but you can do Tuesday through Friday, counter Tuesday through Friday, give them the rate, send it back. I truly think that there can be business rules set up, and it could be a much simpler process than it currently is.
BTN: How about staffing? Several hotel CEOs said they were back to 2019 levels. Is that the same for you?
Cuculic: We have less people today at the company level than we had pre-pandemic. When the pandemic hit, we cut staff because we didn't need everybody. You cut your marketing staff, you cut your sales staff a little bit. You just nibbled around the edges because you didn't know how long it was going to last and what its impact might be. I think during that period, we learned to be more efficient. So we're very cautious with regard to just bringing people back to hit the same numbers we were, because I do think we learned to do more with less.
BTN: Have your member hotels been able to fill the staffing they need, especially housekeeping?
Cuculic: I think hotel staffing has always been a challenge. Pre-pandemic, it was a challenge. It continues to be a challenge. I tell our hoteliers, "It's about retaining talent, not about hiring talent." You have to have a culture in your community that you have a reputation of being a good employer. I think that's part of it, being a good employer. The other part of it is, so many of our hoteliers are small business operators. It's 80 rooms, running at maybe 75 percent to 80 percent occupancy. They can manage their staff well. They roll up their sleeves. The husband may be the GM, the wife may be the front desk manager. That's the DNA of Best Western, by the way.