As part of the Americas Lodging Investment Summit’s Patron sponsorship program, ALIS asked G6 Hospitality President & COO Greg Juceam eight timely questions as we prepare for the 20th annual event July 26-28, 2021, at the JW Marriott/Ritz-Carlton Los Angeles L.A. LIVE. Following are his responses.
You’ve been on both sides of the fence as you’ve worked for ownership and management companies (BRE, Interstate) and brands/franchisors (G6, IHG). Your current job is with G6—a company that owns, operates, and franchises. Let’s start with franchising: What one lesson should franchisors take from the pandemic and use as the recovery begins to take shape?
Times of significant industry stress, including this pandemic, remind us that franchisors need to offer a compelling and clear benefit to their franchisees—or they will lose market share as recovery begins to take hold. Franchisors are best advised to “double down” on communication to their owners and managers during the down cycle, while consistently touting their differentiators and demonstrating their competitive advantages.
Franchisors that do not have solid relationships with their franchisees – or who hunker down defensively during times of distress, will inevitably pay the price. Strong franchisors gain ground during industry downturns; I am seeing this play out again in real time in 2021.
Now, the second part of that equation: What one lesson should owners and operators take from the pandemic and use as the recovery begins to take shape?
For owners who invest other people’s money, cash flow should out-factor ego. I concede that ego has its place when it comes to owning “irreplaceable destination” real estate because there will always be an interested buyer when the time is right. But, for the vast majority of hotel investments, the best return has been for properties that provide steady cash flow with lower-cost operating structures.
COVID-19 showed that the full-service sector is subject to pandemic risks; hotels that require higher labor, operating, and fixed expenses plus heavy capital investment may not be the best bet, depending on the timing of the owner’s hold period. As an example, since 2011, hotels in the economy and midscale segments fared comparatively better when it comes to demand outpacing supply, lower volatility, and positive investment economics. There is significantly less new economy segment supply on the horizon – which should further buoy this segment in the future.
What’s the most common current issue that G6 owners, developers and franchisees ask you to address—and how do you respond to them?
Most Owners want two basic things from hotel brands:
1. a flag that drives leading revenue performance and topline programs they can understand and support, and
2. a sense of pragmatism when implementing new standards to enhance guest satisfaction - in a way that isn’t unsympathetic to the owner’s investment.
Motel 6 brand awareness exceeds 95% ... so this has always been a strength. Following hundreds of millions of dollars invested in recent renovations and newbuilds, we’ve turned awareness into revenues by improving guest reservation conversion. We redeployed chunks of our traditional advertising budget into an upgraded website and mobile app - with more tactical, lower-funnel marketing to influence the point of sale.
As for being pragmatic on costs, we are unlike most brands because we still own and operate 125 properties; we don’t implement standards that we haven’t piloted or aren’t willing to pay for throughout our owned portfolio.
What challenges and opportunities will emerge in the Americas during the next 12 months from a development standpoint?
There is this odd “push and pull” today between the flurry of individual brands that have been created in the past three years amidst the increasing consolidation that has occurred amongst the major brand families. Most hotel guests can’t keep up with all of the noise and so they will likely just revert to location, budget, and online feedback as their main booking decision drivers.
The economy segment has been the most overlooked and under-reported phenomenon of the past year. There is essentially no new supply coming into a segment that has been outperforming the industry in demand vs. supply and many other key investment metrics over the past decade. There are some major opportunities that are being missed for institutional players to invest and to scale in economy, even before the tailwinds that made this best performing industry segment during the pandemic.
What silver linings have emerged for hotel owners, operators, and developers as a result of the pandemic?
There is an old statement attributed to novelist James Lane Allen that says: “Adversity does not build character, it reveals it.” To me, the silver lining has been the way the entire industry pulled together (even while apart) and revealed its very best character.
Whether it was the way that AHLA represented us so thoughtfully during our darkest hours – or the selflessness of hotel owners who offered their properties for vulnerable populations and vaccine locations – or our dedicated employees who stood with us during a time of unprecedented furloughs. The list of inspiring actions goes on and on.
As the industry recovers, my only hope is that we continue to compete with the same civility, compassion, and sense of purpose as we have demonstrated since last March. Our industry is at its best when we fundamentally learn, lead, and serve together.
What do you see in terms of transactions and investments in the hotel industry during the next 12 months?
There was a widespread assumption that there was going to be a major opportunity for buyers to scoop up distressed assets; this remains to be seen as there generally is still a major spread between buyer and seller pricing expectations.
But there is no law that says that every transaction needs to be a “grand slam.” A lot of capital has been raised to provide for solid yields that can be accomplished through a series of “singles and doubles.” Some owners may decide to transact individual assets prior to the next renovation cycle as many PIPs have been extended and will come due in 2023 and 2024.
On the M&A front, I expect consolidation to remain a trend – but more so with smaller and medium-size players who can strengthen their leverage through scale and shared expertise.
What data point or general trend is the best indicator that a recovery for the hotel industry is near, and why is that so important?
There has been a lot of talk about pent up leisure demand – but the industry cannot reach anything that looks like a “true recovery” until business and convention travel is back in high volumes. There will be no return to prior peak without a strong Monday-Thursday night stay pattern.
This means that the world will need to get beyond limitations on gatherings and public sentiment that group meetings and special events are safe again. Groups and Special Events are what causes ADR compression and ancillary spend that not only helps hotels – but the entire travel eco system that supports communities and generates local tax revenue.
What’s the one takeaway people should know about Greg Juceam?
I’m thoroughly addicted to our industry.
I’ve been fortunate to have done a bit of everything in my first 25 years in hotels. First, taking on property, regional, and corporate roles in the management side of our industry. Then, jumping into real estate as a portfolio manager and owner’s representative. These days, I serve as a brand leader in a company that also owns and manages properties. In my spare time, I’m an Officer of the Board of AHLA and Chair of the Board of the AHLA Foundation. Every aspect of my industry journey has been an enjoyable experience.
I don’t know what my next 25 years will bring but I am looking forward to the road ahead. Despite all of the recent headwinds, I have never been more optimistic about the future of the hotel industry because we are all united to persevere and to lead.