Monday, August 9, 2010


We see that Choice Hotels are planning to expand into the New Zealand motel market under its budget 3.5 star Econo Lodge brand. 

So far, Econo Lodge has signed up one property, Canterbury Court in Christchurch and hopes to have 20 properties operating  in New Zealand within three years. Currently the franchise has 13 properties in Australia.

Many moteliers are experiencing tough economic times and there will be an appeal aligning to a maternal marketing organisation that promises a new market of travellers through international advertising and marketing. 

In particular, some moteliers may be attracted to a marketing group that promises to tap into a seam of those lucrative Australian travellers that continue to be the rising stars of New Zealand's inbound tourism.

Although similar chains have a token domestic program, the focus has always been to clip the ticket in the wholesale accommodation market. The wholesale market in an area that the motel product has traditionally struggled in. There are good reasons for this.

Ideally, properties that are serious about participating the in wholesale market should be setting their published tariff at a level to sustain a 20-30% commission. Average motel tariff has stagnated for many years and continued industry low published tariff levels will make it difficult for moteliers to participate sustainably within the wholesale model.

Wholesale business can be a valid market for many accommodation providers, however in order to make it work, properties need to sustain high published rack rates, maintain a high volume of business and have the ability to upsell other services such as restaurant, bar sales etc. Hotels seem to thrive in this market, motels do not.

In the wholesale market, management costs and marketing are always much higher than operating in the domestic market. To add insult, the accommodation provider needs to carry the cost of credit and is always the last to be paid. To depend on this market takes a lot of dedication, hard work and time. 

Time will tell if Econo Lodge can give long term value to the motel industry that will need to bear the high cost of top heavy management, low net rates, little opportunity for reciprocal business and dependence on the volatile wholesale market.

Motels that join Econo Lodge should not hope for a quick fix. They should be keeping a close eye on the sustainability of their net rates and overall ROI as they trade out of a depressed economy.

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