A few Choice words

Charles A. Ledsinger Jr. of Choice Hotels International talks about the latest developments and initiatives at one of the world's largest franchise companies.

As CEO and president of Silver Spring, Md.-based Choice Hotels International, Charles A. Ledsinger Jr. is in charge of one of the world's largest franchise companies. With more than 3,200 hotels across the United States - including Comfort Inns, Clarion Hotels, Quality Inns, Sleep Inn, Econo Lodge, Rodeway Inn and MainStay Suites brands - the company's goal is to continue expanding its market share. In addition to discussing his short- and long-term goals for the company, Ledsinger touched on two especially timely topics - the Internet and the industry's employee shortage.

Q: What are some of Choice's short- and long-term goals?

Ledsinger: We really consider our franchisees our primary customers. We want to be sure that we're providing services and value-added programs to them. We do surveys and we talk to them all the time. We have been doing a lot of that to be sure the programs we have out there are working. We've done some new things. For instance, for the first time we have a learning center that we built in Silver Spring, Md. It's a state-of-the-art facility to bring in new owners and general managers to train them in what Choice does, how we do it and to show them all the programs available to them. That has worked very well, and it gets everybody on the same page from day one.

We have a new sales focus on new hotels. We send in kind of a swat team prior to an opening to be sure that the pre-marketing is being done properly so we can ramp up the property faster, which is a real plus for a new developer.

Q: What are some of the major trends in the hotel industry these days and how are they affecting choice?

Ledsinger: The Internet is a big trend. I view the Internet as a big positive because I think it can lower our costs of delivery in terms of reservations and it gives us new ways to channel business into the properties. We spent some time looking at some in-room initiatives. I think it's still unclear how that is all going to play out, but I still think it's an opportunity down the road. What you really end up with are opportunities for buyers to be more informed before they make decisions. We are doing a lot more of our reservations through our own Web site, and that is growing over 100% per year, so that is a good channel for us and it's one that will continue, I think.

The other major trend is labor. If you ask a licensee what their biggest issue is, it is usually labor. Most of our properties are limited-service properties, so they don't have extensive food and beverage, although we do at Clarion and Quality. There are fewer employees and they are tough to keep. There are a lot of programs that we try to help the licensees with in terms of retaining labor. It usually boils down to some pretty simple things, like be sure you are treating people right, that you talk to them and make them feel like they are part of a family. For the managers who are able to maintain their employees, the success is not always a matter of how much they get paid so much as how they're treated.

Q: What is the biggest challenge facing your organization, and what are you doing to meet it?

Ledsinger: If you ask the licensees, labor is usually what comes up. Our licensees typically are small business people and they are entrepreneurial. We have 2,300 franchisees, so we have a lot of people who have one, two, three hotels, so it is an issue for them. I think it's a problem in some markets more than others, but when talk to the people who are doing a good job and are holding on to their people, it almost always because the general manager has set the right tone for the property.

Q: How do your marketing and expansion strategies differ for international properties?

Ledsinger: The way we are structured internationally is we basically do our business through master franchise agreements. The way that works is there would be a master franchiser in that market and that entity would have the right to develop our brands in those markets. We have more of an oversight role, we provide reservation systems, delivery services and some marketing programs, but they really are responsible for development. Those [master franchise agreements] are set up usually as agreements that have a time limit on them, and they have to develop quotas so we have a way of ensuring that they are doing what they need to do.

Q: In addition to expanding its existing brands, does the company hope to acquire new brands?

Ledsinger: We are always looking at that. The industry is a consolidating industry, and the environment over the last five or six years has been very good, so there have been some new brands that have started. We're a pure franchising company, so historically we've let others own the real estate.

Also, we've got a lot of hotels and we cover an awful lot of the markets already with our brands. We always look, but there are not a huge number [of brands] out there that make sense for us.

Q: Choice is one of the world's biggest franchisers, and its main niche is the limited-service sector. With so many brands out there, how does Choice go about differentiating its brands from its competitors?

Ledsinger: We have a lot of market recognition. I mean everybody knows what a Comfort Inn is and most people know what a Quality Inn is. Some of the newer brands like Sleep and MainStay, particularly Sleep, are reaching the size where people have heard of it but may not have stayed in it.

There are different kinds of strategies and recognition for each brand. Comfort Inn is the biggest brand - there are almost 1,300 domestic Comfort Inns and then about 270 domestic Comfort Suites - so those are well-recognized brands. I think it's a matter of being sure you are keeping your quality standards up and that you have your advertising out there so you are catching people's eye.

The challenges for some of the smaller brands are more trial related. It's a matter of getting people in the door to begin with. I think overall it really boils down to the quality of the property, and keeping your standards up and being sure guests get a consistent product.

Q: Are there any particular markets Choice is targeting in the United States?

Ledsinger: The system historically has developed mainly because of the smaller-type properties and the smaller franchisees that build mainly in secondary and tertiary markets, and maybe the suburban rings around bigger cities. So we have an opportunity in some of the bigger markets to go and fill in some of the urban areas and downtown areas.

We have a mezzanine fund that we've developed to stimulate growth in those areas. They do very well, but they're tougher deals to do and they take a different type of developer, some of whom we are attracting. We just opened a property with a great franchisee at Boston Logan Airport, which is a great location and fantastic property. We've had some success in Manhattan with some properties and are looking at some others there.

Q: What new initiatives can we expect to see at Choice in 2001 and beyond?

Ledsinger: Technology is rapidly changing. The Internet has added a whole new set of interesting opportunities as I mentioned earlier, such as distribution channels and how people are making reservations, and what they are learning about the hotels and how they learn about them. We have a very good Web site and we have been on the Internet for a long time, so we'll continue with those enhancements. We also are looking at technology as a way to lower labor costs.

Our MainStay hotels have a kiosk, so when you check in, you can check in without a human. It is like an ATM - you check in and swipe your credit card, and it [the kiosk] has your reservation, gives you your key and you go to your room. We are testing that system in some of our other hotels because not everyone particularly cares to go to the front desk if there is a line.

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