Trent Fraser, Choice Hotels

Q: Ibisworld reports that declining wages spend and streamlined processes are boosting profits. How does this equate to the Choice Hotels experience, and what is the policy for boosting future profits for franchisees?

TF: Technology has had a huge impact on streamlining processes in the hotel industry, and it is something we’ve seen driving change in our franchisees’ businesses. Staff wages have increased as well as the cost of utilities, and room rates in some markets have not reflected this. To balance these cost increases, technology has helped create efficiencies in distribution and front-office management. It plays a far greater role in the day-to-day business of hotels than ever, and we have to embrace technology and use it to combat other rising costs.

We’ve also seen franchisees embrace job-sharing and cross training in their teams, which is ultimately a win-win for both the business and employees. It means more fulltime work for employees, job security, efficiencies and greater diversity in employee skills and learning opportunities.

Q: While domestic tourists are 55 per cent of the market, 20 per cent of tourists are from Asia Pacific, particularly China. In total, 1.1 million visitors spent 43.2 million nights in Australia last year. How does this resonate with the various Choice brands, and where will the greatest growth occur?

TF: Our biggest driver of business is domestic leisure and domestic corporate, and this is likely to remain the most important part of our property’s business given the regional locations.

However, there is significant growth in the international market, in particularly China, which is the largest international market and has surpassed New Zealand in nights booked and in terms of spend.

Interestingly though, India grew at the fastest rate in the past 12 months with a 15.2 per cent increase versus China at 12.2 per cent. As the international sector evolves it will grow at a faster rate than domestic business, but it will be a long time before it catches up to the volume of domestic bookings and spend.

We’ve seen international travellers start to venture out of the major cities and explore more regional areas of Australia. We’re seeing this trend with visitors from China, where it might be their second or third time in Australia and their confidence is growing. Instead of booking tours they might hire a car and drive to the regional tourist destinations. This is becoming more popular, and we need to ensure that all our properties, including the regional locations, are prepared for this.

Q: According to Austrade, overnight spend is predicted to reach $131 billion by 2020, with growth in international spend outpacing growth in domestic spend. What is happening with prices in the Choice portfolio?

TF: We have launched an innovative Revenue Management for Hire offering, an extra service for our franchisees which sees a team of revenue-management specialists manage the yield and pricing for franchisee properties during demand periods. This is a result of the technology evolution in the hotel sector and something that would not have existed five years ago. Our specialists analyse market data and competitors to ensure a property’s room pricing reflects market demand, and that they are maximising every dollar from a rate point of view.

We have 20 properties signed up to the program, which has been running for six months now, and hotels in the program are seeing an average 16 per cent revenue increase compared to the previous year. This is significant and invaluable to a property, showing just how important it is to embrace the data and technology available.

Q: Growth is predicted at a fairly low 2.9 per cent for the next five years. What is the strategy to stay competitive within the Choice brands?

TF: We’re seeing growth, and there is optimism in the market. To ensure we’re continuing to reach new audiences, drive bookings to properties and stay competitive in the market we are using various strategies. One of these is Choice Hotels’ Needabreak.com platform, which aims to engage travellers in the planning and consideration phase of their trip via inspiring content where customers can research destinations, activities and driving routes. It targets the leisure market to help balance out Choice Hotels’ strong corporate customer base, and also helps drive direct bookings to properties, increasing value for franchisees and direct business over time.

Q: What challenges face the hotel sector over the next five years?

TF: The rising cost of utilities is one of the challenges facing the industry, as it accounts for 6 to 10 per cent of a hotel’s expenditure. This is significantly higher than several years ago and its impact is being felt by hoteliers. It is also hard to manage as guest usage is hard to control, so efficiencies need to be made elsewhere.

Technology is where some of these cost savings can be made, but it’s also presenting challenges in the sector. There has been a huge change in how technology is used in the hotel industry, and in future we’ll see bookings via PCs and laptops reduce. I believe that in just five years most bookings will be made via handheld devices, if not all.

The number-one challenge, however, remains the cost of distribution from the online travel agencies (OTAs), which charge significant commissions to generate business for properties. While it is important to work with OTAs, we need to get the balance right and ensure we’re driving an equivalent amount of direct business for franchisees through Needabreak.com and other proprietary channels.

Across Australia, massive growth in airline capacity to key gateway cities

continues to see international travel set records on a monthly

basis