DENVER—RLH Corporation (RLHC), based here, has filled a void in its brand offerings by relaunching GuestHouse International as GuestHouse Extended Stay, an upper-economy extended-stay offering. All existing GuestHouse hotels will be grandfathered into the new brand.
While one might think the brand was concepted in response to the fact that extended-stay has been the top-performing segment during the pandemic, it actually was expected to launch in March before COVID-19 ran rampant in the U.S.
“We did this by design; it’s not in reaction to COVID. It was always part of the plan, and we just so happen to launch it now,” said Harry Sladich, EVP of lodging development & franchise operations for RLHC. “We were ready to go and then we had our CEO leave us, so we took a pause. John [Russell, the current CEO] was hired as an interim, so we showed him what we were doing and he said, ‘Let’s just wait until the final decision is made.’ When he was made the formal CEO, we then got the green light from him and the board to proceed with this product.”
The GuestHouse name was a natural fit for the extended-stay offering, according to Russell, who lost the interim tag in June.
“When we went through our portfolio—the eight brands—and we did a pretty deep dive into being sure there was clarity within each brand, that there were signature moments that when you close your eyes and think of Knights Inn, you know exactly what you’re going to get, or an America’s Best Value Inn (ABVI), you know exactly what you’re going to get, all the way through,” he said. “When we get to GuestHouse, it’s got a great name. One of the categories we weren’t in was extended-stay and Guesthouse lends well to extended-stay just by the name itself, but we also knew that we were looking for opportunities for our owners and franchisees to get better return on their investments. Traditionally, extended-stay hotels have higher RevPARs than traditional hotels, and they also can operate a lot more cost effectively due to less manpower because of the longer stays.”
The move to extended-stay also finds a place for a somewhat lost brand in the RLHC portfolio. “We bought GuestHouse in 2015 and the play was to start expanding the footprint of Red Lion. We also then bought Vantage, and I think the mistake that was made was there never was a plan for where GuestHouse was going to go specifically,” said Sladich. “As we added another 900 hotels and then we bought Knights Inn, I think it kind of got swept up in that activity. We always liked the name, and the development team felt that we had a great portfolio except extended-stays. We were losing deals to other brands that had an extended-stay offering. We always had one missing out of our bag.
“We spoke to a lot of our owners last year. You know, the mom and dad came to the country. They bought their first hotel. It was an ABVI or a Knights Inn,” he added. “Well, the third generation said, ‘You know what? I don’t want to be that anymore. I want something more aspirational. I want something cooler.’ We have Signature Inn for those exterior properties, and we designed it specifically for that. Now, we have this extended-stay conversion so they could take their existing property and they could convert it and change the mix—the length of stay, the ADR—and really compete against folks that they probably been slugging it out with for the last five years.”
Russell pointed out that one of the things that will make GuestHouse Extended Stay different from other extended-stay brands is that it will have everything other Red Lion brands have, which are “probably the lowest cost franchise alternative out there today. Do you want to pay 12 to 14% off the top for some of our competitor brands when you might get ours for 5 to 6%? So, it’s a lower-cost alternative option, and it provides all the same services that our competitor does.”
He added, “We have our marketing and our operations with all sorts of training. We also have 25 to 35 programs today that either increase revenue or decrease operating costs. So, we have all that for a lot less skin in the game.”
RLHC has also made some changes that make GuestHouse Extended Stay, and the company’s other brands, more attractive to franchisees. “I think the reason we were losing a lot of franchises in the last couple of years is we were not franchise friendly,” Russell said. “We implemented brand standards that were onerous to the type brand we were. I’ll use this example: Why did we put a 55-in TV in a Knights Inn room? The TV is bigger than the room. So, I think we were a little bit onerous on that without talking to the franchisees and getting their opinions before decisions were made.
“The same thing with fees. Once the acquisitions were done, whether they left Wyndham or came over from Vantage, I think there was a rush to judgment on increasing fees—again without including the sentiments and the opinions of the franchisees,” he continued. “We recognized that they were unhappy. We’ve corrected that. We looked at all of our fees. We got rid of some and reduced others. We also looked at all the brand standards. We’re not onerous anymore. We also relaxed stringent property improvement plans. We want to make them more realistic and give a little more time to do it. So all of those things have been occurring over the last 10 months.”
While there will likely be owners who will look to build a GuestHouse Extended Stay hotel from the ground up, Sladich expects most of the brand’s portfolio to be conversions. So, he and his team went about making the conversions as smooth as possible.
“My team is out there telling [prospective franchisees]that this brand was designed by hotel operators, not hotel designers,” he said. “The items that are in the room are practical; they’re not aspirational. We’ve got storage and a high top table that puts you up high with all the electrical. The kitchenettes—only 10% need to be full kitchens—can be with or without a sink and are on the side of the wall that’s opposite of the bathroom. So, you’re not running any additional plumbing. You can tap into the plumbing that’s already in the room. When we do this conversion, we’re looking at a room cost of about $6,600 bucks, excluding the bathroom. If the bathroom is in good condition and it’s been recently renovated, we’re going to leave it alone. They have to have our signature shower head, our signature bath products, our curved shower rod and the lighting.”
He continued, “When you look at owners who, right now, are so risk averse—they’ve been through hell—the last thing they want to do is take a risk. So, we’re saying flat fee—they know what they’re going to pay. We’re going to tell them that they’re going to do some things in the room that make sense and some of it can be left alone. We’re going to help them to activate their lobby in a way that makes sense financially. And we’re going to promote and help them differentiate themselves with the tools that every other brand has.”
Every GuestHouse Extended Stay hotel will have what Sladich called “signature moments”—guestroom amenities, gym, laundry, etc.—but also different features that will make each one unique.
“The room design is going to be non-negotiable,” he said. “So when you walk in a GuestHouse room, it has to be there. There are signature moments in each of our brands primarily around the things that guests care about the most.”
However, “when it comes to outside, or even the lobby design, we want to get the flavor of whatever area the hotel is in,” said Russell. “If you’re in Florida, you’ve got the beach. If you’re in Colorado, the mountains. If you’re in Providence, RI, you’ve got the nautical feel. We encouraged that because that’s what the consumer wants. And, quite frankly, the owner wants to look like the community he represents.”
Before the brand’s launch was announced, the company had six new-build opportunities and 15 conversion prospects in the pipeline in areas such as southeast Texas, Arizona, Florida and Washington state. It was due to the efforts of Sladich’s development team.
“We reached out to owners and said, ‘What do you think about this?’” he said. “There were a lot of folks that knew we were exploring the space, and they said, ‘Once you’re ready to go, let me know.” In fact, the developer and architect on two separate projects were looking at some of our other brands when they inquired about an extended-stay product, and this was last year. We said, ‘Funny, you said that. We’re penciling this out.’ So, they actually have a lot more information than a lot of other people have because we didn’t want to lose them.”
As for expansion, Russell said that the company has a strategic plan in place: “I think this has the ability over five years, assuming we’re 75 to 85% conversion, this brand will grow to about 350 hotels.” HB