Ever since he took over as CEO of Best Western Hotels & Resorts in 2004, David Kong has been a man on a mission to transform the company, and the process continues with the recent acquisition of WorldHotels, which added 300 hotels to its global portfolio. In Singapore for the first time, the soft-spoken, self-assured hotelier spoke to Yeoh Siew Hoon about Best Western’s journey and what’s ahead, as well as his views on technology, OTAs and alternative accommodation.
Q: How would you describe Best Western today, from what it was when you took over in 2004?
It’s a different company today. In 2004, it wasn’t keen on expanding globally, the quality of hotels wasn’t that great, the brand was moving downstream and as a midscale player, it was struggling to keep up. One condition of my joining was global expansion, building quality and rebuilding the company.
Q: What were the first steps?
We focused on quality. In a 12-year time span, we separated from 1,200 hotels as part of our commitment to quality. We took a big hit but that gave us the quality foundation to grow from. We hired top talent and we started focusing on things important to grow revenues – e-commerce, revenue management – we rebuilt all the revenue engines.
This team has stayed intact all this time and that’s critical – once you get the right people on the bus, you can get going.
We started evolving the brands and now have a total of 16 brands including boutique brands such as Viib and Glo.
Today, half of the portfolio is outside the US – which is mind boggling – and Asia is a big part of that growth. (The company operates over 4,100 hotels and motels worldwide.)
Vīb Best Western Sanam Pao in Bangkok (image credit: Best Western Hotels & Resorts)
Q: Technology was a big part of the transformation, I understand.
Yes, we distinguished ourselves in the area of how we managed technology. We were the number one website but we threw that out, and started from scratch. It wasn’t built for the future, wasn’t flexible enough for how fast things move nowadays. It took us a year to rebuild the whole platform and now we have a globally responsive site – one platform that powers everything, tablets, smartphones, regardless of screen, it is optimised and served from the same content repository.
We built it in Phoenix using the Adobe platform, and we do a lot of AB testing. The “Amazon Purchase Now” button, we copied to see if it converts more. We don’t mind saying we mimic Amazon – they are the e-commerce leader and other companies like Walmart and Target are doing the same thing.
The Adobe platform gives us wonderful analytics and we’re data-driven. We’ve embraced Google Street View and provide VR for every hotel in North America to inspire customers. We are experimenting with Watson AI for booking, and we are using AI for training as well – there’s an avatar for training front desk staff to sense how they interact with guests. The avatar senses how you are conversing; if you start to laugh or be nervous, it will correct you if the situation warrants it. We use chatbots for Best Western Rewards to provide customer service and that’s working very well.
We’re proud to say that Fast Company gave us the distinction of being one of the six most innovative companies in the world in the usage of AI and VR.
Q: You can go overboard with technology though, can’t you?
Yes, you have to be mindful of what people want to use. Maybe mobile check-in, check-out, room key, messaging – people bring their own devices today. In Asia, there is more pervasive mobile behaviour. This then ties into the Internet of things. How many connected devices are we going to have? We tested Alexa in our hotel rooms and found that only 20% connected, the rest disconnected. Satisfaction was not high either among those who used it. I am glad we tested that before we rolled it out.
Q: One area that’s changing the most and fast is revenue management technology. How are you dealing with that?
We work with a systems provider but we have been doing so much tweaking ourselves. The whole revenue management model is changing so fast, you can’t take learnings from the past, you have to look at the future and optimise different mixes. Booking windows change all the time.
Is there a better way? We are looking at working with Amazon through their Amazon Web Services to start experimenting – how we can use Amazon machine learning capabilities.
What we held sacred in the past is no longer true.
Q: I guess that applies to OTAs as well and their relationship with hotels?
Yes, look at how they have changed and the consolidation that has happened. Expedia is getting into corporate travel with Egencia; things are just not the same anymore. You supply rates and inventory to wholesalers, but so much business is powered by OTAs. You can’t predict where your customer mix is coming from.
(Image credit: Best Western Hotels & Resorts)
Q: Airlines are fearful about commoditisation, as are hotels. What can you do to prevent this downslide towards commoditisation?
You can’t give up fighting it. What’s overwhelming is how fast everything changes. The biggest frustration is Google driving up marketing expenses tremendously. They are the biggest search engine in the world. If there are five places you can advertise, you have to be in all five, otherwise you get hijacked by the OTAs. But how do you keep up with that, the amount the OTAs spend on Google?
So you have to do a good job of managing the customer journey – recognise how they are searching, conversion rate, booking and maintaining the relationship once they have booked.
Pre-arrival is an opportunity. Our new digital platform is an attempt to stop the commoditisation. OTAs are good at taking market share, they are so powerful, but the new website stemmed some of that attrition.
We know OTAs are powerful and we want to be on their good side. It doesn’t benefit to fight them openly, there’s no reason to fight with them. That’s why we don’t openly advertise things like, stop clicking around.
Q: Net rates are a big problem in Asia. What’s your view on that?
It’s a problem. OTAs are so powerful in Asia – they are 15% of the business in the US, 20% in Europe and 40% in Asia. Over time, hotels will see deterioration of rates, on top of paying commissions. It’s a downward spiral, and it’s very troublesome.
We try and remind our hotel owners as to why they have a brand and the benefits of having a brand, and try to find alternate sources of business. Why give lower rates to the OTAs and have higher rates in your own brand channel – that’s shooting yourself in the foot.
Q: So let’s talk about WorldHotels and why the decision to acquire it?
It was about three years ago that I met the WorldHotels CEO and we spoke about forming an alliance and allowing WorldHotels to tap into our platform and giving Best Western the ability to grow in scale and distribution.
It didn’t work at the time but since then, I have been paying a lot of attention to WorldHotels. I am a big fan because of its high quality hotels in distinctive locations around the world. So we jumped at it when the opportunity arose this time.
It’s a very good fit. WorldHotels can modernise their solutions and systems to be more competitive. We can drive business to WorldHotels and achieve economies of scale; it’s compelling value for both.
WorldHotels is now at 300 hotels, with this, can we grow to 600?
(Image credit: WorldHotels)
Q: One challenge is dealing with the individual ownership of WorldHotels properties. You have to convince each and everyone of them that this acquisition is a good deal for them.
Best Western is a membership association since day one. We excel in communications and engagement, and we are used to dealing with individual owners. We bring compelling value – more revenues, competitive fees, and they also have a voice. Where else would they find that? Of course, ultimately we have to deliver business. The first integration is with our loyalty programmes – we have 40 million Best Western Rewards members and we will create a sister programme for WorldHotels using the Best Western platform.
Q: But the brands will be kept separate?
Yes, we will keep the brands separate, we will keep the entire team of WorldHotels and run that as a separate company, and go for synergies through the backend. We are excited about this development – WorldHotels is strong in APAC. I don’t believe hotel owners here leverage the brand as much as they should and distribution is a prime example of that. There are about 80 WorldHotels in APAC and Best Western has 254 running properties in APAC with 30 more signed under construction. It’s a good fit.
Q: Scale is critical in hospitality, which is why you did the acquisition. What else keeps you awake at night?
I am awake all the time. I worry about everything. Only the paranoid will survive. What can someone do to me? You need to have that mindset, things change so fast. I was looking at a list of CNBC’s top disruptors and I recognise maybe 12 of them. Everyone of them will change our world, so we have to think like a disruptor and rethink everything all the time. For example, we have created these brands but is it enough to compete for the next generation of travellers?
Q: One disruption has been in alternative accommodation and that’s appealing to a new generation of travellers.
Yes, it will be only a matter of time before major hotel groups get involved in home sharing and hostels. Think about what’s lacking in the space – Airbnb filled a big void with their tech and marketing, but what they can’t provide is assurance. Hotels can provide that assurance.
• Featured image credit (Best Western Palmyra Inn & Suites, New York): Best Western Hotels & Resorts