Interviewed by Dustin S. Klein | [email protected]
With more than three decades of experience in the lodging industry, including the last seven years as president and CEO of LQ Management LLC, the company that owns the La Quinta hotel chain, Wayne Goldberg is a man on the move. The company’s two major brands, La Quinta Inn and La Quinta Inn & Suites, are in major expansion mode: La Quinta had 425 hotels at the end of 2005; today, it has more than 800, with 9,000 employees. The growth has been fueled in part by technological innovations that enable La Quinta’s customers to make fuller use of the technological devices with which they travel.
Goldberg recently talked with Smart Business about the technological modernizations and some of the other strategies he has used to drive La Quinta’s growth over the last few years.
SB: Let’s talk about innovation. How are you becoming innovative leaders in your space — not just in the properties, but how you market yourselves and build your brand?
WG: I’ll start with technology, because what I like to say is that I view us as the little engine that could. We have done some things that we’ve received a lot of recognition for. We were recognized this year by Technology Innovator magazine as Technology Innovator of the Year. In our little company of 845 hotels, we have done some very creative things.
First of all, what I would tell you is that the world has changed. It used to be that it was all about giving the guest the technology that they needed and wanted. You would make that technology available and put it in the room, whether it was a fax machine or the delivery of bandwidth to the room. The actual hardware and software — you gave the guest all of the technology they needed.
Today, it isn’t about giving them technology. It’s about giving them the capability of using the technology that they’re traveling with.
We’ve taken a different approach. We’ve done a number of firsts. In 2012, we launched a new mobile site, the first of its kind. On this site, we launched a platform called LQ Instant Hold. When you go to book a room, you’ll see a banner that says LQ Instant Hold. If you click on it, we will hold a room for you for up to four hours. All you have to do is enter your phone number. It’s unique.
We launched this in February, and by June, 40 percent of all our mobile bookings were coming through LQ Instant Hold.
SB: Are your properties franchised or company-owned?
WG: It’s a combination. It’s a different model than most of our competitors. In my view, this is another point of innovation; we own and operate 400 of our 845 hotels. We are significantly invested in the real estate and in the operation of our business, which I think is a big positive for us because we have real skin in the game.
We are going to our partners and saying, ‘Look, you need to change the bandwidth from 1.5 megs to 3 megs as a minimum standard. By the way, we can show you the return on the investment and the improvement in guest satisfaction. We can show you the reasons you should do it. And we’re doing it at 400 hotels. We’ve invested millions on our corporate side.’
All of a sudden, we have more credibility than someone just brand-building and telling people to increase profitability by spending money.
We don’t ask our partners to do anything that isn’t economical. It’s all about doing the things that are economical, and if it makes economic sense, then you can get the troops around those issues and initiatives and really make progress. But if you’re doing it just for the brand, where is the real economic value? And why would I do it?
I can tell you that being a franchisee of another brand — which we are — we see this all the time. We’re asked to do things and invest capital [where] there is no economic value. And, by the way, some of our competitors make money every time they require their franchise partners to do something by making them use certain vendors and products and then by taking a percentage of everything you’re buying. There’s a little bit of conflict of interest in that type of approach.
SB: Would you discuss your brand from both an ownership standpoint and a franchise standpoint. How has your brand changed and evolved?
WG: What I would tell you is that in 2000, we were 99 percent company-owned. We owned and operated 298 hotels, and we had one franchise property. What we have done over the last several years is our entire focus has been to leverage the brand, not the balance sheet.
For us, what that means is that we started the franchise business, and we decided we were going to grow our way out of a challenge we had of owning a large amount of older real estate.
Many of our owned assets are some of our older assets. In many cases, they were our inns. We’re one brand with two products. We have La Quinta Inns, which are limited-service hotels that operate in the upper end of the economy segment, and then we have the La Quinta Inn & Suites, which operate in the middle to upper end of the midscale category.
As I said, we wanted to grow our way through some of the challenges we have with our own real estate, so we have sold some older hotels. We have identified hotels that we felt were obsolete or at the end of their life and took them out of the system and sold them.
We’ve done this a number of times. From 2000 to 2006, prior to our acquisition and public-to-private transition to Blackstone, we were 99 percent company-owned, approximately 70 percent of our properties were Inns, the average age of our hotels was 26.1 years, and about 70 percent of our properties were exterior-corridor.
Today, we’re 53 percent franchised and 47 percent company-owned, we’re 70 percent Inns & Suites, the average age of our properties is 15 years, and we’re 70 percent interior-corridor. And it absolutely enhances our brand when we move to interior.
SB: Let’s go back to wireless service. How is your company innovating with the delivery of wireless to La Quinta customers?
WG: For Internet, bandwidth has been and continues to be the key issue. We embarked on a program two years ago where we fundamentally changed the way we deliver bandwidth to our properties and changed our brand standards.
For most of our competitors in our space, the typical bandwidth requirement for a property is 1.5 (Mbps), so to speak. We began about two years ago integrating circuits, and now it’s almost like delivering bandwidth “on tap.” So you’re not paying for extra bandwidth that you’re not using. We’re only buying and using what is needed.
What we do is integrate circuits with a multitude of providers, and we deliver bandwidth to the hotels based on what is actually being used. It changes based on the usage, so that the bandwidth being delivered is sufficient for the property.
We also changed our minimum from 1.5 to 3 megs. On average, we’re closer to 6, and we actually have a property with 19 megs of bandwidth. Now, that property is a hotel where we have a contract with a dorm, and they have a whole building, and there are two students per room and they’re on the Internet 24/7, so in order to give them what they need, we deliver 19 megs. So that is an extreme and an exception. But we basically doubled our minimum.
And what we watch for is 90 percent of the capacity being used. When that happens, then you move and integrate an additional circuit and additional bandwidth.
SB: So you basically have bandwidth on demand and there’s a trigger point where you flip a switch and it’s on?
WG: Well, it’s a little more complicated, but we would change the bandwidth for that property based on what the usage is over a period of time.
SB: So it’s not just for a day or a week? You bump it up because you’re seeing the trends?
WG: Correct.
SB: How are you gauging and monitoring the system?
WG: We monitor the percentage of what is being delivered and the usage of what is being delivered.
SB: Is there a correlation between that and the room occupancy rate?
WG: It plays a part, and it’s a significant correlation, but it also has a lot to do with the demographics of the property. For example, if you’re in a location next to a technology park and you’ve got a sophisticated, technologically advanced consumer staying with you, they will be using more bandwidth, so you have to deliver more.
What happens in this industry and what used to happen with us is that there are small percentages of people using a large percentage of the bandwidth. What most of our competitors are still doing today is when folks are streaming video and using an inordinate amount of the capacity, they bump them off the system basically to make room for the folks that are just checking email. They’re not allowing people to use the kind of bandwidth they may require. ●
How to reach: LQ Management LLC, (214) 492-6600 or www.lq.com
The Goldberg File
Wayne Goldberg
President and CEO
LQ Management LLC
Education: Bachelor’s degree, University of Louisville
Goldberg on fee-based franchising: We have very strategically focused on growth through our franchise fee-based organization. Today, we are 70 percent Inns & Suites, and if we take our pipeline and take some things we’re going to do with additional assets, where we have identified some noncore assets, we’re going to look to divest.
In 2014, those numbers will change. The breakdown between Inns versus Inns & Suites will be 75 percent Inns & Suites. If you look at the average age in 2000 — 26.1 years — today, it’s 15 years, and in 2014, it will be 13. The average age has come down dramatically because the bulk of our new franchise fee-based has been new construction. Even the ones that aren’t new construction are much newer properties, because we’re not allowing anything out of the system.
Goldberg on growth: We were recognized in 2012 as the fastest-growing limited-service hotel brand. If you look over 10 years, we have grown 166 percent. Our closest competitor, Holiday Inn Express, grew 62 percent. And in addition to begin the fastest-growing brand in the segment over 10 years, we’re also the fastest-growing brand over five years. According to Smith Travel research, we’ve grown 62 percent over five years. The closest competitor is Hampton Inn at 43 percent.
Goldberg on evolving the company’s brand: Speaking to the evolution of the brand and the product and the positioning of the organization, last year we were recognized by Forester Research. We were recognized across all brands, full-service brands included, on customer experience. They asked how easy the company was to transact with, and whether you would transact with them again. We ranked No. 2 in consumer experience among all brands, one point beyond Hampton Inn & Suites.
