GuestHouse to add loyalty program, HSIA - News

Nashville -- Now that GuestHouse International has cleansed its system and converted more than 20 Shoney's Inn properties, the brand has a solid base on which to grow, according to company executives. Expected growth includes adding 10 properties to the system by the end of the first quarter and adding high-speed Internet access and a guest-loyalty program by the end of the year.

Jim Grout, president of GuestHouse, said there are about 20 properties in the system that want to continue to fly the Shoney's flag.

"They do good business and don't want to spend the money to change the signage," Grout said. "GuestHouse International won't publish a directory of those hotels. The contracts on many of those hotels are up in three years. At that point, GuestHouse will have a heart-to-heart [talk] and strongly urge those hotels to convert to GuestHouse."

"We're not forcing anybody to do anything," said Bennett Greenberg, v.p. of franchise operations for the brand. "That's not the type of chain we are."

Greenberg said about 30 properties were cleansed from the system.

"It took us a little longer to merge the two brands together and clean up the garbage," he said.

"We weeded out a few more than we had hoped," Grout said. "We have a much better base now. We're a stronger brand now that we terminated more than 20 hotels. The overall quality of the chain is better."

Ron Marcou, executive director of development, said there are 22 realistic potential franchisees who could join the system this year.

"We would like to have owners/operators--the kind that lay in bed at night worrying about the mortgage and their employees--in our system," Marcou said. "We aren't looking at numbers and then realizing that there are properties in the system that shouldn't be there. We have financial programs in place to help franchisees and potential franchisees."

Marcou, who joined the brand during the fourth quarter of 2003, told franchisees that when he was hired by Grout, the president of the brand told him, "I'm looking for quality, Ron, not quantity."

"We hoped to have more numbers by now," Grout said. "That's a concern of our franchisees. We'll get there."

Marcou said he will visit each property before accepting an application for a new franchise.

A small chain isn't for everyone, Greenberg said.

"Bigger chains have more rules and regulations," he said. "The entrepreneurial spirit drives us. There has to be another impetus other than reservations to join a chain. We provide more bang for the buck. Our fees are one-third of the big boys. What we do have is personalized service; what we don't have is great distribution."

George Bradley, manager of a 112-room GuestHouse Inn in Aiken, S.C., said there's little interference by the company with the operation of his hotel.

"There are very few rules that would affect my operations," Bradley said. "They have the rules and the personnel that I enjoy."

Greenberg said it's a double-edged sword for a small franchisor.

"When you're on a corner with Marriott and Hilton, who have thousands of hotels, we're competing with the big boys [and] we're not the big boys, but our franchisees pay one-fraction of [their] fees," he said. "It can't be numbers, numbers, numbers. That's a recipe for failure."

Brand enhancements

Baldev Bath, chairman of the brand's franchise owner's council, said main issues franchisees are developing are a guest-frequency program, establishing a signature point of difference at hotels to distinguish the brand from the competition, and installing HSIA as a brand standard in all hotels.

"We're committed to going with high-speed Internet access," Marcou said. "We're going to give franchisees the option of installing it in all the rooms or just a portion of them and will give them the option of choosing two vendors."

Nick Patel, owner of the 109-room GuestHouse Inn & Suites & Conference Center in Houston, said HSIA is a great amenity.

"Having high-speed Internet access is like having a coffee maker," Patel said. "Everyone has to have it. Nobody is walking around without a laptop. Franchisees don't have to stick with the two vendors if they don't want to. They can go to a local vendor."

Marcou said a five-person committee is coming up with suggestions for a guest-loyalty program and will present all costs to franchisees. He said the brand will have a loyalty program in place by the end of the year.

Patel said the guest-loyalty program will feature a free night after a guest stays 10 nights.

Grout said that during 2003, the brand issued a stricter quality-assurance guide, implemented more hands-on training than ever before, refined the franchise service manager program, and added three new franchise service representatives.

Marketing

Bradley said the GuestHouse sales and marketing staff is good about reviewing ideas to help the hotel.

"There are a lot of brands that would charge extra for what GuestHouse does," he said. "If I need something done, GuestHouse comes and does it--for example, market research."

Kenna Balch, v.p. of sales and marketing, said the brand doesn't have enough funds for an effective national advertising campaign.

Balch said 75 percent to 80 percent of each property's business comes from the local market.

"Until we hit a critical mass, we won't do a national ad campaign," she said. "We're looking at regional co-ops and sales blitzes in a targeted area with the help of corporate."

GuestHouse performance--year-end 2003

Occupancy                               48.2 percent *
Average daily rate                         $51.42 *
RevPAR                                     $24.70 *

* (80 percent of the properties in the system reported numbers)

Number of GuestHouse guestrooms             5,205
Number of GuestHouse properties               71
Number of Shoney's guestrooms               1,454
Number of Shoney's properties                 15
Total guestrooms:                           6,659
Total properties:                             86

Source: GuestHouse International

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