- The Washington Times - Monday, January 3, 2000

The president and chief executive officer of Choice Hotels International is taking big steps to prepare the company for the wave of technology that is hitting the hotel industry.

From on-line reservations and on-line purchasing programs for Choice's franchisees to in-room Internet access for hotel guests, Choice Hotels, which has 4,179 properties under the brand names Comfort, Quality, Clarion, Sleep Inn, Rodeway Inn, Econo Lodge and MainStay Suites, is taking the steps to stay on top of the new technology trends.

Since joining the company in August 1998, Mr. Ledsinger has jump started efforts to get Choice Hotels plugged in.

Question: What were your goals and plans for the first year? And did you meet them?

Answer: Initially it was to assess the strategic direction of the business and either agree or disagree with the direction the company was heading. I liked the basic fundamentals of the plan that were in place tightening the brands, having brand definition clearer to the consumer as well as the franchisee and raising the quality level of the brands.

The other thing was using the size and distribution of the [Choice] system to our advantage. What that really means is just leveraging your size to try to drive economies to your licensees, getting better deals on national contracts or for services from vendors. We have accelerated that.

One of the things I have started aggressively since I have been here is the whole world of electronic-commerce and the Internet and what we are doing in that front.

Q: How important is e-commerce and the Internet to Choice?

A: We look at it on several different levels in terms of what the advantages to our business can be driven by e-commerce. The first is the way in which people make reservations and how you can use that to advertise and drive business to your properties.

The Internet is becoming a bigger distribution channel in the way people make reservations at hotels. It is still a small part of the overall, but it is growing in big chunks. For us, it is a very efficient way to make a reservation because frankly it avoids the call center, where you have to have people there to answer the telephone. This is more of a direct approach.

On the second level, we developed a program called Choicebuys.com, which is basically an on-line purchasing program for our licensees. If you are a Choice licensee, you can log onto our proprietary system, and it's all negotiated contracts for the best pricing. It takes the middle man out of the distribution channel. You are going directly from purchaser to distribution. Nine hundred of the licensees are signed up and increasing at a 100 people a month or more.

The third level of it is more the business-to-consumer side, which is what is happening in rooms with the Internet. That is a rapidly changing environment. We've done some tests with four of our hotels where we have literally put computers in every room because we wanted to find out what the behavior would be.

Q: What have you found?

A: People love it and they use it a lot and they're willing to pay for things. We're trying to decide what the best business model is. I think a lot of people would use a computer in the room, but either they don't have or don't care about carrying a laptop around with them.

A lot of the applications in hotels are just "plug and play." We are experimenting with a model that has some in-room computers and some with just access and seeing what the right approach is going to be. We're still determining what the best method is. We're moving quickly.

Q: Will you have decided within the next year?

A: Within the next few months. When you think about a hotel room, it's kind of an interesting retail outlet. Most people spend a lot of time in hotel rooms and there's not much to do in there except watch TV or read.

One of the things we found is that a lot of people like to have a TV on while they're on the computer. So therefore, some of the approaches have the TV as the monitor, and we didn't feel that was the best way to go. It's all a matter of cost and what people are willing to pay for it.

Q: What do you think consumers are willing to pay for Internet access in their rooms?

A: They are certainly willing to pay for it to go to certain sites and they're willing to pay for software. What's happening now in some hotels is that the hotels are not wired properly, so if you go into your room and plug in your laptop, you are tying up the phone line. Some hotels are charging for even a local call beyond 30 minutes.

Some of the new technology doesn't tie up the phone lines. It uses the existing wiring but doesn't tie up a line. I think people will pay for high-speed Internet access. At least they will today. Over time it will become like an amenity for the hotel, sort of like cable TV.

Q: How do you differentiate between the Choice brands?

A: We have changed the way in which we advertise. If you look at our ads now, first off they are specific to a hotel. You'll see a Quality Inn ad or a Comfort Inn ad and you'll see when you look at that ad the attributes of that hotel. There was a long run of very popular suitcase ads where celebrities would pop out of the suitcases, which was great at capturing people's attention but wasn't real great at helping the consumer understand what the brand was. They were good at getting the Choice name out.

But now we've got a much more targeted rifle shot at marketing. The media is much more targeted for the primary customer of that hotel. The good news is that it gets out very specific messages about the properties.

Q: How does the industry stand heading into the next century?

A: From the hotel standpoint, the industry is very healthy. The franchisees are very healthy. Trends are good. People are traveling more than they ever have. All the signs are very positive.

It's a matter of meeting customer demand and being sure that you have products. I spend a lot of my time thinking "where do we want these brands positioned three, five years out in the future." For us to do that, we need to be consistent. We need to have high quality and we always need to freshen them up.

Q: Is it difficult to keep consistency among the different properties considering they are owned and operated by different franchisees?

A: There are standards. If they don't meet those standards, we get rid of them. We don't want to lose properties out of our system. We want to work with our licensees to help them be better operators. Your good operators are always going to keep their properties up. There are some that choose to live on the fringe, and those are the ones you spend a lot of time with.

You try to continue to keep those quality levels high. We've raised the bar. We've terminated more properties this year than we have in, I don't know, maybe ever, because we've been pushing the quality level up of our hotels.

Part of that has to do with the brand definition. Each new property that comes into the system has to meet a pretty strict criteria. We're striving toward more consistency as we move forward.

Q: What is the future strategy for Choice in terms of expansion?

A: We've got very good brands that are very well positioned and have lots of opportunities to grow. On the hotel side, it will be a continuation of what we've done this year, and that is: continuing to tightly define the brands, continue to raise the quality standards and continue to grow our business.

There's a couple of other really important planks for growth for Choice. One is the hotel business, which is both domestic and international. There's a big opportunity to grow internationally. Frankly I think we're just starting to scratch the surface there.

The second is e-commerce and how that fits into our business. And that's both as a revenue source and as a way to take some costs out of our business.

The third is our strategic partnerships, which is using our size and scale to not only drive value and lower prices to licensees, but also as a revenue source for us.

We're thinking about the business differently and looking at growth opportunities.

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