Raising The Red Roof

In the coming years, the hotel industry should expect to see a lot more red � as in Red Roofs.

The economy chain based in Columbus, Ohio, has made franchise growth one of its main goals of 2011. Red Roof plans to add to its portfolio of nearly 350 properties and pursue its first international expansion. To that end, it plans to announce its first franchise to Canada by the end of the month and has development offices scouting opportunities in Europe, China and India. Red Roof President Andy Alexander and Rob Wallace, executive vice president, brand operations and franchising, discussed the plans with Hotel Interactive.

In its first international expansion, Red Roof recently opened a business development office for Canada as well as hired a franchise development director for Canada. Alexander said expanding to Canada seemed natural because many Canadians are familiar with Red Roof from their travels to Buffalo, Erie, Detroit, Seattle as well as Florida.

He said the goal is to start four to six conversions this year � the first likely to be in Ontario � and sign on a similar number of new builds, which will take about 18 months to complete.

"People in Canada have had the opportunity to experience the brand already," Alexander said. "It's always easier to grow your brand where you're well known." Alexander said development teams also are looking for opportunities to grow in Europe, India and China.

Domestically, Red Roof has added two U.S. developers, one targeting the Northeast and another targeting the West. "We have lots of space to grow in the West and opportunities for franchisees to jump on the brand. It's a logical expansion and a way to build band awareness," Alexander said. New properties will benefit from the brand's new NextGen design. The NextGen interiors feature upgraded linens, bathrooms with granite countertops, vessel sinks and rain-flow showers and broader in-room TV entertainment. The exterior design appears more earthy with rock and wood tones and textures.

The interior changes are part of property improvement plans for franchisees, so soon all properties will feature the NextGen standards.

"We worked with franchise partners on the design and engineering the cost," Wallace said. "It's been very well received. While a lot of other brands have talked about launching new prototype designs, we're actually executing it. It provides us a leg up on the customers, and we've hit the mark with the design." New properties in Beaumont, Texas, and Locust Grove, Ga., recently opened with the exterior and interior NextGen design. Red Roof also celebrated the reopening of a Columbus property near its headquarters that featured redesigned rooms.

Other design changes include Red Roof's new Super King Rooms. They have larger interiors and include a microwave, mini-fridge, coffeemaker and updated workspace. Members of the RediCard loyalty program also receive a USA Today. The target guest for this room is the business traveler.

"We're getting back to basics in terms of quality in service," Alexander said, "and we're also looking to get back to our roots. We were founded by Jim Trueman in 1973, and one of the major components of the brand was to emphasize what the business traveler needed: a big room with lots of desk space. That continues today, but the business traveler also looking for the microwave, the fridge, the free Wifi, free upgrades and a newspaper." One constant challenge is balancing the amenities with the rate. Since Red Roof owns or manages 200 of its hotels, Wallace said, it is sensitive to value.

"If you offer the amenities, you have to make sure you get a corresponding rise in your occupancy and ADR," he said. "We're not the type of brand to add amenities just to add amenities." Alexander agreed.

"We spend a large amount of our management time re-engineering and looking for better alternatives at a lower cost so we can pass that on to the consumer," he said. "In order to reach the consumer, we know we have to give them more for less. We worry about pennies and make sure we have brought all of those pennies to bear." The strategy seems to be paying off. Red Roof reported that in 2010, it maintained a premium of 14 percent RevPAR over the competitive set in the economy lodging segment.

The numbers are a welcome change after the recession. "The hardest hit and first hit were the luxury and upscale segments. For the beginning of the recession, we weathered the storm in a much more gentler way," Alexander said. "We saw people trade down and had people try our brand. As we hit last summer, instead of trading down, people traded out of travel altogether. All segments were equally hit." Alexander said 2009 was the low point, compounded by rate compression that particularly hit the economy segment. But in 2010, business started to turn around.

"While the luxury segment was leading, we had a couple of months late in the year where our RevPAR performance beat every segment of the industry including upscale and luxury," he said.

Red Roof took away lessons from the recession, Alexander said.

"In the economy segment, we have price-sensitive customers," he said. "We need to deliver a product that has the value they're looking for. The value can dip low when there is compression with the mid-scale group. We made sure we satisfied the customers, retained them as loyal Red Roof customers, and now we're seeing those customers stuck with us through the recession and are coming back to our product." One key to retaining customers, particularly those who tried Red Roof for the first time during the recession, was to target cuts away from areas that impacted the guest. Wallace said the company sought out operating efficiencies instead of reducing service or diminishing the quality of the product.

"We've been hard at work," he said, "and we think we have a great plan and strategy in place to ride the wave and reap benefits as the economy rebounds and the hotel industry rebounds."

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