The Internet is rapidly becoming the primary vehicle for in-room entertainment. How do you help your hotels keep up with the bandwidth demands?
One of the big advantages of having a truly SaaS-based environment [in ChoiceAdvantage and SkyTouch] is that we don’t need a T1 line to pipe in the property management information, so the bandwidth is fully available for Internet traffic. Now, there are issues with bandwidth and certain devices, like when you have a guest who uses a Slingbox, for example, it will chew up a lot of bandwidth. But for the most part, we’re able to satisfy almost all of our customers. Where there are issues, we’re able to bring more bandwidth instead of throttling it. Over time, if we see more customers looking for faster connections, we’re going to give it to them, but that should be a revenue opportunity. If you’re doing email, the Internet connection should be free. But if you’re chewing up half a T1 line, then it’s going to cost you.
Switching gears a bit, can you explain what’s going into Choice’s second wave of investment in Comfort?
What we’ve decided to do is double down on everything we’re doing with the brand. That starts with a more aggressive pruning of the existing system. About two years ago, we started culling out the bottom end of the brand and over the next couple of years, we’ll be taking out a lot more properties that don’t fit the system anymore. At the same time, we’re putting in place an aggressive replacement strategy with a major development incentive for new builds. We anticipate a significant reaction to this incentive from our franchisees. There are a lot of people who have been sitting on projects for a while, and they feel like now is the right time to get these projects going. We’re providing major incentives for folks who start them quickly.
Comfort is still a dominant brand. It runs big premiums in the right markets. But there are hotels in the system that don’t belong, and there is a need to build new properties in new markets. There’s also a replacement strategy that we’re going to follow, and we’re doing a lot of other things. We’re significantly investing into initiatives that drive mid-week business. It’s time for us to put a universal initiative around Comfort to make it an incredibly relevant brand for the next 20 years. This is a major investment by the company on top of the $40 million that we’ve already made as a renovation incentive for existing [Comfort] properties. With that we were targeting the properties that have the biggest impact. We had 1,000 people apply for it, and we gave it to 375, and some of them are already done. We’re hoping we’re going to get a healthy pop to the bottom line through this.
Now’s the time to do them. If we get them done in the next two years, they’re going to do well. Our goal is to have that brand look and feel different to the consumer in the next two to three years.
How much are you looking to invest into Comfort new builds?
You should think of the money we’re looking to put out—and we’ll see what the take rate is—in terms of tens of millions of dollars. That’s to help with the start of the development process to get people a chunk of the equity that’s required, but they’re only getting it if they start their project in a hurry. We’re going to go hard at it for the next two years and then we’ll see after that. Comfort is somewhere on the order of a $1 to $1.5 billion asset so putting $50 to $60 million into it over the next 20 years seems like a pretty good investment to us.