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HB EXCLUSIVE: Developing Story: Wyndham’s new strategy for new-builds leverages LQ’s expertise for Microtel’s growth

Less than a year ago, Wyndham completed its acquisition of La Quinta. Since then, Wyndham has been evolving its overall development strategy by leveraging La Quinta’s expertise in new-construction and applying it to its prototypical, new-construction brand—Microtel.

“Now, bringing the focus on development and new-construction development to Wyndham, it’s only natural that we focus on our only new-construction brand,” said David Wilner, SVP of franchise development at Wyndham Hotels & Resorts. “There’s never been a better time, in my opinion, for a product like this, given what’s going on in the industry with our competitors and also with the guest changes that are out there.”

Coming from La Quinta, a brand known for its focus on new-builds and high-quality conversions, Wilner, who joined Wyndham after the company acquired La Quinta in early 2018, leads a team entirely focused on new-construction—which Wyndham hasn’t had in nearly 10 years.

“We’re only nine months into being a stand-alone hotel company, and being a stand-alone hotel company, we are thinking long term,” he said. “We are thinking strategically, and the best way to position our company and all of the brands in our portfolio for success is by doing high-quality, new-construction deals and high-quality conversions.”

With his team, he’s bringing what made La Quinta successful to Wyndham. “Number one is having a strategic and disciplined approach to our development, ensuring we’re doing the best deals with the best people in the best locations, but it doesn’t stop there,” Wilner said. “That’s really just the beginning.”

This strategy pairs with the construction resources Wyndham already offers owners.

“We have a very robust design and construction department that will assist the owners throughout the planning process and construction process to ensure that they’re building the hotels to the prototype specs, and opening up on time and on budget,” he said.

Wyndham also has a franchise support team for its owners. “[They go] every step of the way in order to make owners successful through local sales and marketing, revenue management, best practices within their market, so that they can ramp up and gain their fair market share,” Wilner said.

For Wyndham, if its owners aren’t successful, the hospitality group as a whole isn’t successful—period.

“One thing that’s unique with Wyndham that has become a competitive advantage is we have great leadership—everyone from Geoff Ballotti [president/CEO] to Tom Barber [chief strategy and development officer]to Keri Putera [VP of operations for Microtel by Wyndham] to Chip Ohlsson [chief development officer]. They are highly accessible people who don’t treat our franchise partners as a number,” he said. “We truly want to look after their best interests, and we’re driven by looking after their best interests.”

Value adds
The La Quinta team had an “obsession with quality and an obsession with delivering the best experience for the franchisees, and truly looking after the best interest of those franchisees,” Wilner said. “That is a culture we didn’t only live and talk, but we executed upon.”

That’s a mindset the former La Quinta construction executive has brought with him to Wyndham and plans to continue. “When Wyndham acquired La Quinta, they didn’t just acquire the brand; they acquired the expertise, the personnel and the commitment to delivering on the franchisee promise,” he said. “Our design department that was with La Quinta is now with Wyndham. The franchise service directors that are responsible for making the franchisees successful are now Wyndham employees. It was more than just acquiring the brand. It was acquiring the personnel that created that culture that made La Quinta unique and so special.”

La Quinta also learned from Wyndham after the acquisition. “You truly learn that size does matter, right?” he said. “The resources our franchisees can now tap into by being part of the largest franchise hotel company in the world is tremendous. Cost of OTA commissions has gone down. Now, being part of a company that has best-in-class technology is phenomenal. La Quinta had a hugely successful loyalty program. Now, that successful loyalty will get that much bigger and that much more successful by being part of Wyndham Rewards, which is an industry-leading loyalty program that has 60 million-plus people in it. You learn that size does matter, and the resources the size brings really does help the owners deliver to the bottom line.

“What’s important to a franchisee is that they have a relationship with a franchisor who really does care about their revenue, that cares about what’s happening in their individual marketplace and has the opportunity and accessibility to head leadership of that company,” Wilner said.

Leveraging La Quinta’s expertise in new-construction, Wyndham turned to its prototypical, all new-construction brand—Microtel.

“It was just a natural progression for us to look at Microtel and prioritize this added opportunity for us to grow it very similar to what we’ve done with La Quinta,” he said.

The Microtel journey
As for how Microtel’s franchisees feel about the processes and people from La Quinta, there’s a level of excitement. “We are all working so closely now as one entity and one family within Wyndham,” said Putera. “The Microtel franchisees who have been with us and worked with us for years couldn’t be more excited about the future of the brand because of what we’ve tapped into. We’ve taken the successes of what we’ve seen with La Quinta and really brought them to life to bring Microtel to the next level, so I think it’s this perfect marriage in terms of support and people.”

Thirty years after Microtel’s first location, which opened in 1989 in Rochester, NY, the brand has nearly 350 locations—the majority of which can be found in the United States and Canada. (The brand has locations in the Philippines and Mexico, too.) “Our strongest footprint goes down the East Coast and that corridor down from the Northeast, down through Florida,” Putera said. “We do have a nice footprint in Texas and out through the Mississippi-Alabama-Tennessee area, as well.”

Geographically, the biggest opportunity to grow the Microtel brand in key markets is distribution throughout the Midwestern United States and Canada.

Even though Wyndham has parted ways with an unknown number of Microtel properties not meeting brand standards over the years, the brand has grown. Wyndham purchased the economy brand from Hyatt Hotels Corporation in June 2008. At the time of the deal, the brand had around 290 hotel properties.

“We’ve really focused on quality for this brand,” she said. “As we’re opening hotels, we’re also really focused on making sure that we have the highest level of quality and consistency because Microtel is an all new-construction, prototypical brand. We cannot bring in conversions on this brand. We really focus on the consistency and the quality of the product, so when we did buy the brand, that was our primary objective—to make sure the quality and consistency was there.”

The previous prototype (shown here) included a gabled roof and bump-outs. Eliminating those will realize cost savings for owners.

Arguably, the economy hotel brand’s focus on providing guests quality has paid off over the years. Microtel ranked number one 15 out of 17 times in guest satisfaction in the American-based global marketing information services company J.D. Power’s North America Hotel Guest Satisfaction Index (NAGSI) Study.

“That’s not a brand survey,” Putera said. “That’s really our guests commenting on the quality and service from our owners, so that’s really where the pride of ownership for Microtel stands really strong.”

Microtel’s executive attributes the brand’s success to the pride in ownership Microtel’s owners typically feel after building properties from the ground up; there’s a connection with the hotel.

“We were built on the promise of efficiency, simplicity and value, so that has been our platform from day one,” Putera said. “We want to build upon those roots and that foundation that has made us so successful thus far.”

The 30-year-old economy brand took its values and applied them to the new Microtel prototype.

Prototypical story
“All prototypes continue to evolve on a yearly basis,” Wilner said. “You have to look at what’s going on in the marketplace and how your guests and competitors are changing. You have to continue to evolve and adapt.”

Wyndham began developing the new Microtel prototype about 10 months ago. “Our goal as we developed a new prototype was to take what we’ve done very well in the past and optimize it,” Putera said.

For feedback, the brand tapped into its franchise advisory council, but Microtel’s team isn’t stopping there.

“We’re developing a developer advisory council,” Putera said. “This is something that is a first time for Wyndham—to create a group of developers. There are a few developers who are currently Microtel owners, who are continuing to build with us, and we really wanted to reach out to a very reputable group of developers in the industry to add to that group in terms of engaging them and getting their involvement in reviewing and giving input on our new prototype.”

The group is expected to be made up of 12-14 developers across the industry. “We really want to understand what is important to the developer and what is important to the operator,” Wilner said. “They are the tip of the spear, and we learn more from our franchisees on a daily basis than we can ever pretend to understand from sitting in a boardroom.” The goal is to launch the group in March.

Wyndham hired Dallas-based architect Hoefer Wysocki to design the prototype. This particular firm was chosen because it delivered the highest-quality prototype design proposal at the best competitive value. Wyndham’s teams also felt the firm demonstrated the strong understanding of the brand’s needs. The Microtel prototype is the first project Hoefer Wysocki has designed for Wyndham.  

With its gabled roof, and bump-outs and cuts in and out of the building, the current Microtel prototype looks a bit residential, which “worked really, really well for us for years,” Putera said.

While the brand is designed to provide owners with an option for an economy-priced property from a development standpoint, it delivers midscale returns and profits to owners, the brand’s executive said.

“It’s the perfect time to take the Microtel brand and create a modern prototype that looks, feels and delivers on that midscale experience that our owners are experiencing and giving that to our guests,” she said.

What’s new?
The goal with the new prototype is to make it more efficient, reduce costs for developers, and modernize the look and feel of the brand. “We flattened the roofline,” Putera said. “One of the things on Microtel, and I just find this so interesting, is if you look at a current Microtel, you cut in and out of the building somewhere near 130 times. That, obviously, is a huge cost.” To mitigate these additional construction costs “dramatically,” the new prototype reduces the need to cut in and out of the building.

Wyndham also made changes to the Microtel lobby. “We have found more efficient ways to put the front desk right with back of the house, so your front desk person, checking people in, can also be folding laundry when it’s not busy,” she said.

Microtel also made changes to the standard guestroom. “In the guestroom, we’ve moved to platform beds, so you don’t have to vacuum under them, or have a box spring, and you don’t have to have a bed skirt to iron—it’s all about the efficiencies in that room. We’ve gone to roller shades.”

“When we show existing franchisees the draft of this prototype and the direction that we’re heading, they are absolutely thrilled about it,” Wilner said. “They’re actually ecstatic about it.”

Existing franchisees aren’t the only ones who are excited about the new prototype. “There’s also others who’ve just heard about us launching this prototype,” he said. “Those who are already in the industry—whether they’ve built other Wyndham brands or brands from our competitors—they’re learning about what we’re planning to do, and they truly want an efficient build that can dominate a market and give them the best returns, so a lot of people are hearing about the news before it’s even really been officially released.”

Development strategy
Wyndham is going out to market with a holistic approach for Microtel, which includes the new prototype and guestroom, the new-construction sales team, and the developer council—all of which are designed to incentivize developers to build more Microtels (which take about a year to build).

“We are really taking a strategic approach to growing the brand—not an opportunistic approach—to ensure we’re doing locations with the right owners who can maintain the high-quality standards that guests expect with Microtel,” Wilner said.

By focusing on the right owners in the right locations, Wyndham expects to “really position owners for a great long-term success,” he said. The goal is to position them for success from the day they sign.

“The way that we treat owners who are investing in this brand—we view them, in large part, not just as our owners or our partners but even beyond that, our employers,” Wilner said.

Dallas-based Hoefer Wysocki designed the prototype.

When a franchisee is awarded a location, Wyndham views the partnership as a long-term relationship. “The relationship is hugely, hugely important,” he said. For the hospitality company, the right owner is aligned with the “true value proposition of what the brand brings and a commitment to doing what’s right for the guest and that brand,” Wilner said.

Wyndham doesn’t take the relationship it has with its owners lightly; the company is entrusting its owners with the brand’s identity.

“For that reason, we have an obligation to ensure that the investment that they make in the brand is not compromised,” he said. “The way that we ensure the integrity of that investment is also by ensuring that the future developers of Microtel are aligned with the vision, the culture and the expectation of the guest experience delivery.”

Aligning the brand with the right partners has never been more important. “We’re starting to see the next generation of owners coming to the Microtel brand,” Putera said. “What’s really exciting when I go out and visit these hotels—I probably have visited 150 Microtels in the past 10 months—it’s the next generation of owners who’s taking over and seeing the need for increased technology, more available outlets and enhancing breakfasts; it’s just that next generation understanding the need of the customer in terms of really embracing that new guest that’s coming in.” As the brand’s owners are changing, so are the guests.

Guest-driven segment
With the new prototype, Microtel is targeting millennials. “It’s the millennials who are going to be traveling more and going to be a huge part of our audience and our guest segment over the next few years,” Putera said.

Stereotypically, millennials often go for a minimalist experience when they’re traveling.

“Microtel fits that category perfectly,” she said. “We’re all about that efficiency, that simplicity, that smart, clean design and value, so we really felt like it was the perfect time to create a prototype that speaks to that audience—that matches what we were built on to begin with—and also reduces cost of construction and increases the efficiency for our owners and operators.”

Being a prototypical, all new-construction brand, Microtel, unlike some of its competitors, can deliver consistency to guests. “I think, historically, the economy segment has always been a segment defined by inconsistencies,” Wilner said. “Inconsistency in product. Inconsistency in cleanliness.”

This is why Wyndham believes the Microtel brand can position itself as a midscale product to guests.

“I think Microtel really has a unique position because there’s some midscale product out there where Microtel can go in and compete against them and beat them at a lower cost of development. So, when you’re putting up a new Microtel in a market with midscale, the guest will see this in many ways as a midscale box; however, what the owner is building that hotel for will give him some great returns because they’re getting midscale returns by building it at an economy price,” he said. “That enables them to go into markets and pay less for land and to build a hotel for less money; when someone has the choice to get the same returns but by having a lower cost basis, any smart developer will always choose the same returns at a lower cost basis.”

What’s ahead for Microtel
As for when the industry can expect to see a Microtel property with the new prototype opening, Wyndham is busy getting the paperwork in order. “We are working on a few executed deals right now, where our design and construction team is definitely working through providing them all the elements they need from a land perspective and laying out the architectural side,” Putera said. The hospitality company is sifting through initial feedback, sketches and final designs.

What Microtel is up against is other brands. “There’s a lot of brands out there that exist today that didn’t exist two or three years ago,” Wilner said. “I think one of the greatest things about Microtel is that we are really the pioneers of the efficient hotel build. Being the pioneers in that category, and now evolving, gives us a competitive advantage against the competition because we’ve been doing this for many, many years and now we’re continuing to evolve what we’ve already done.”

As with other hotel brands, Microtel is facing many of the same industry challenges. “Going back to increased construction price, increased labor costs, increased land prices, many developers might see that as a challenge, but with Microtel, it is a product that is better suited to overcome that challenge by delivering best returns,”
he said.
HB


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