Best Western's Larry Cuculic discusses:
- The possibility and effect of economic recession
- The importance of driving high room rates
- Regional outlooks for business demand
Best Western emerged from the pandemic with announcements of a new extended-stay brand and plans to double upscale brand Aiden’s portfolio. Best Western CEO Larry Cuculic, who took that role in December 2021, said he's focused on positioning the company for global growth in both leisure and business travel. Cuculic spoke with BTN’s Elizabeth West about the company's performance, strategy and the importance of responding to requests for proposals. Edited excerpts follow.
BTN: There's a lot of conversation around labor shortages and a potential recessionary environment. Are those big-picture trends influencing Best Western, and what other trends are driving your strategies in 2023?
Larry Cuculic: Our first strategy is development. We are focused on bringing in hotels that appreciate the value we can add as a brand to their hotels. We now have 19 brands from luxury down to [what we] call premier economy. Development is key, but to develop, especially when there's this uncertainty about the ‘R word,’ you have to be able to show hotels that you can add value and good revenue. So we're focused on brand contribution and loyalty program revenue. … Development has to be a key with regard to our recession. You have to take that potential into your decision making, with regard to marketing dollars, with regard to our hoteliers and the business we can drive to them. Fortunately, we're a very strong leisure brand and we still see that pent-up [demand]. There was that pent-up demand [and] that still remains.
BTN: You don't see a softening in the leisure business at all? That's interesting because I hear a different story from others.
Cuculic: This last week, I just saw the results, they look stronger than ever in terms of occupancy and [average daily rate]. Both have been remarkable. Our December exceeded our expectations, our January is exceeding our expectations. … We do see a lift in leisure and an increase in business travel—some primary market, but a lot of secondary market, and the tertiary markets were very strong. We’re tremendously strong in crew business. That continues to increase.
We're going to see increased business if this infrastructure builds. I'm optimistic because of who we are, what we stand for, and who our guests are, but you always have to be cautious. I am a cautious investor personally and prior to the business itself, so you can't ignore it, but we have not seen its effects yet.
Our sales team is doing a really terrific job bringing business travel back. As of March of last year we exceeded 2019 levels of our sales. And our sales aren’t just business travel, it's business and leisure, because we sell both. We surpassed 2019 levels back in April of last year. And that trend continued.
BTN: Some hotels are really going after group business because, as contracted business, it’s a little more durable than waiting for transient. Is that something that you're looking at?
Cuculic: Absolutely. We were focused on group and crew business. We formed our sales team like 10 years ago to do that. So we didn't see any change in the, I'll call it ‘attack on that market,’ through the pandemic. We remained really strong in that regard because we already had those relationships built. A crew [segment] can be a group that still needs a small meeting space—that business continues to come. Our Best Western Plus hotels are required to have meeting space, so they go after that group business. Our sales team is actually structured to make sure we're going after that business—so we always have it [and] always will. When I look at our sales team, and I look at their scorecards, midweek business is on that scorecard. And a part of that is group business. I know we're going to do awesome Friday and Saturday nights. I want us to do awesome Tuesday, Wednesday and Thursday nights—that’s a focus of that team, so much so that it's on their scorecards. What gets measured gets done, and I want them focused on the elite business.
BTN: Some hotels, in terms of being able to respond to the number of requests for proposals are having trouble meeting the demand for meetings business. Is that something your team is experiencing?
Cuculic: Not at all. We have a section within the sales department that's focused, and their sole responsibility is managing RFPs and communicating with our hotels. The last thing you want is to ignore an RFP. If an RFP says, ‘I'd like some business,’ or ‘I need accommodations in Houston,’ and you don't respond to them … what it could potentially mean to that buyer is that you just don't care about their business. It's a part of your reputation, respecting the RFP. Even if you don't get the business, you try so that they know you're in the game. And it’s your reputation, with regard to knowing you care about that customer and also provide a solution. Even if it doesn't match up directly, not only can we respond to that RFP, but I would expect somebody from the sales team to reach out to that customer and say, ‘We can come really close, we can still be the solution [you’re] looking for.’ If you can answer eight of those 10 needs in terms of nights, in terms of grade, in terms of breakfast availability and meeting space, reach out and, and see if what you can offer can meet their needs, because you may be better at something else, even though you can't match up perfectly. Your rate may be better than someone else—you can compensate in that regard. It's about providing a solution that at least shows you you're trying.
BTN: What distinguished this recovery after the pandemic from prior recoveries is the ascendancy of rate even before occupancy. Is Best Western experiencing that same dynamic? And how are your corporate customers responding to that?
Cuculic: The answer is yes, absolutely. We've told our hotels to competitively push rate, and they have. In the face of their operations costing more, they absolutely have to. It's those costs that all consumers are feeling that puts pressure on rate. It's that cost of doing business. And while we can push rate, it has to be something that a consumer says, ‘I understand why it costs money.’
I talked about post pandemic, how there was pent-up demand. People realized how important it is to travel and to be with others and to have the experiences that they missed during that period. So, yes, rates are up, and costs are up. And so there has to be this confluence that takes into consideration what's fair and reasonable and everyone says, ‘yeah, that makes sense to me.’ The value proposition of travel has changed, and I think that's the same for businesses as well. People like doing business face to face. ... I think businesses now realize that. And as soon as one business realizes that the others say, ‘Well, I better get out there too, otherwise I'm going to lose the business.’
BTN: Let's talk about growth. Where are you concentrating investments in brands and regions? Extended stay is another area that's really hot, and Best Western has the Executive Residency brand. Is that a place where you're looking to do some investing?
Cuculic: [At the Best Western] convention, we launched Home by BWH. We think the extended-stay market is going to stay tremendously important to travelers. Through the pandemic, I think it was like a 16-point lift of extended stay versus traditional hotels. We have Executive Residency and we [explored] the dual-brand concept where half the building is Residency and other half is Best Western. I think consumers want a commitment to what that hotel is. So Home by BWH and that extended-stay product is really important.
We just put out a press release on Aiden, which I think is a huge opportunity for us. We already have nearly 20 of those… and we just signed a deal for about 30 in Scandinavia. It's to our advantage to focus on the conversion market, which Aiden is. It's [designed for] somebody who wants to reposition their hotel and be able to command a higher ADR, but it has to be in a market that's right for that brand. … The corporate buyer may need one type of hotel for his C-suite executives, but then they may have crew business. So we can look at that RFP, we can look at the business they need and say that we can satisfy your travel.
BTN: How about regionally? You mentioned Scandinavia for Aiden, and China is percolating again.
Cuculic: Yeah, it is percolating. We just signed some very large deals in Vietnam. A huge opportunity in Japan [was] just signed. We were focused on South America, but politics have changed slightly in the past couple of weeks. You have to look at the evolving landscape of where you think you can operate. I talked about France [as] a huge opportunity for us. France contracted during the pandemic because so many of our hotels were in Paris for the large metropolitan cities—that's coming back tremendously. And we have a great partner in France who is focused on that, and he's also growing his sales team tremendously. That's part of the recipe of success. We recognize sales is also important, not just development.