Best Western CEO Looks to Corp. Travel to Buttress Growth

Best Western’s Larry Cuculic explains:

• The possibility and effect of an economic recession
• The importance of high room rates
• Regional prospects for business demand

Best Western emerged from the pandemic by announcing a new extended-stay brand and plans to double the portfolio of upscale Aiden. Best Western CEO Larry Cuculic, who assumed the role in December 2021, said he is focused on positioning the company for global growth in both leisure and business travel. Cuculic spoke to BTN’s Elizabeth West about performance, strategy and the importance of responding to requests for quotations. Edited excerpts follow.

BTN: There is much talk about labor shortages and a possible recessionary environment. Are these big trends affecting Best Western, and what other trends are driving your strategies in 2023?

Larry Cuculic: Our first strategy is development. We focus on attracting hotels that appreciate the value we can add as a brand to their hotels. We now have 19 brands ranging from luxury to [what we] Call Premier Economy. Development is key, but in order to develop, especially when there’s this uncertainty about the ‘R-word’, you need to be able to show hotels that you can add value and generate good revenue. So, we focus on brand contribution and loyalty program revenue. … development must be a key in view of our recession. You need to factor this potential into your decision making, in terms of marketing budgets, in terms of our hoteliers and the business we can bring to them. Luckily we are a very strong leisure brand and we still see that pent up [demand]. There was this pent-up demand [and] that remains.

BTN: Not seeing any calming down in the leisure business at all? That’s interesting because I hear a different story from others.

Cuculic: This past week I just saw the results, they look stronger than ever in terms of occupancy and [average daily rate]. Both were remarkable. Our December exceeded our expectations, our January exceeded our expectations. … We’re seeing an increase in leisure travel and an increase in business travel — some primary market but a lot of secondary market and the tertiary markets have been very strong. We are enormously strong in the crew business. That keeps increasing.

We will see more business as this infrastructure is built. I’m optimistic about who we are, what we stand for and who our guests are, but you always have to be careful. I’m a cautious investor personally and before the deal myself so you can’t ignore it, but we haven’t seen its impact yet.

Our sales team does a really great job bringing business trips back. Since March last year we have exceeded the sales level of 2019. And our sales don’t just include business travel, but business and leisure travel, because we sell both. We already exceeded the level of 2019 in April last year. And this trend continued.

BTN: Some hotels really go for group business because as a contract business it’s a bit more permanent than waiting for passers-by. Is that something you look at?

Cuculic: Absolutely. We concentrated on the group and team business. That’s why we formed our sales team about 10 years ago. So we haven’t seen any change in what I call an “attack on this market” from the pandemic. We stayed really strong in that regard because we had already built those relationships. a crew [segment] may be a group that still needs a small meeting room – this business is going ahead. Our Best Western Plus hotels are required to have meeting rooms, so take care of that group business. Our sales team is actually structured to take care of this business – so we always have it [and] will always. When I look at our sales team and look at their scorecards, midweek business is on that scorecard. And part of that is group business. I know we’re going to have great Friday and Saturday nights. I want us to play great on Tuesdays, Wednesdays and Thursdays – that’s a focus of this team, so much so that it’s on their scorecards. What gets measured gets done and I want them to focus on elite business.

BTN: Some hotels are struggling to meet the demand for meeting business to respond to the number of quote requests. Is that something your team experiences?

Cuculic: Not at all. We have a department within the sales department that specializes in this and whose sole responsibility is to manage RFPs and communicate with our hotels. The last thing you want is to ignore an RFP. If an RFP says, “I’d like a business” or “I need a place to stay in Houston,” and you don’t respond… for that buyer, it could potentially mean that you just don’t care about their business. It is part of your reputation to respect the RFP. Even if you don’t get the deal, try to let them know you’re in the game. And it’s your reputation to know that you care about that customer and also offer a solution. Even if it’s not a direct match, not only can we respond to that RFP, but I would expect someone on the sales team to reach out to that customer and say, “We can get very close, we can still be the solution.” [you’re] Looking for.’ If you can answer eight of these 10 needs in terms of overnight stays, class, breakfast availability, and meeting room availability, reach out and see if your offering can meet their needs, as you may be better at it are something different, even if they can’t be a perfect match. Your fare may be better than someone else’s – you can compensate in that regard. It’s about providing a solution that at least shows you’re trying.

BTN: What differentiated this post-pandemic recovery from previous recoveries is the rate increase even before occupancy. Is Best Western experiencing the same dynamic? And how do your corporate customers react to this?

Cuculic: The answer is yes, absolutely. We told our hotels to keep prices competitive, and they did. Given the higher operating costs, they absolutely must. It is these costs that all consumers feel are putting pressure on the price. It’s the cost of doing business. And while we can push the rate, it has to be something that a consumer says, “I understand why it costs money.”

I talked about the post-pandemic period, how there was pent-up demand. People realized the importance of traveling and being with others and getting the experiences they missed out on during that time. So, yes, prices have gone up and costs have gone up. And so there has to be that confluence that takes into account what’s fair and reasonable and everyone’s like, ‘Yeah, that makes sense to me.’ The value proposition of travel has changed, and I think the same is true for businesses. People like face-to-face business. … I think companies have realized that now. And as soon as a company notices that the others say: ‘Well, I’d better go out there too, otherwise I’ll lose the business.’

BTN: Let’s talk about growth. Where do you focus investments in brands and regions? Extended stays are another area that’s hot, and Best Western has the Executive Residency brand. Is this a place you want to invest in?

Cuculic: [At the Best Western] Congress we launched Home by BWH. We believe the extended stay market will remain hugely important for travelers. During the pandemic it felt like a 16 point step up for longer stays compared to traditional hotels. We have executive residency and we [explored] the two-brand concept where half the building is Residency and the other half is Best Western. I think consumers want a commitment to what this hotel is. So Home by BWH and this extended stay product are really important.

We just put out a press release on Aiden, which I think is a huge opportunity for us. We already have almost 20 of them… and we’ve just signed a contract for about 30 in Scandinavia. It is to our advantage to focus on the conversion market, which is Aiden. It is [designed for] someone who wants to reposition their hotel and be able to achieve a higher ADR, but it needs to be in a market suitable for that brand. … The corporate buyer might need some sort of hotel for their C-suite executives, but then they might have crew deals. So we can look at those RFPs, we can look at the business they require and say we can accommodate your journey.

BTN: How about regional? You mentioned Scandinavia for Aiden, and China is leaking through again.

Cuculic: Yes, it percolates. We just signed some very big deals in Vietnam. A huge opportunity in Japan [was] just signed. We’ve focused on South America, but politics have changed slightly in recent weeks. You need to look at the evolving landscape that you think you can operate in. I was talking about France [as] a huge opportunity for us. France tightened up during the pandemic because so many of our hotels in Paris were for the big metros – that’s coming back tremendously. And we have a great partner in France that is focused on that and they are also growing their sales team tremendously. That is part of the recipe for success. We know that sales are also important, not just development.