Choice Hotels International, Inc. (CHH): Business Model Canvas

Introduction

The hospitality industry is one of the fastest-growing industries in the world. In 2021, the global hotel industry revenue was estimated to be over $600 billion, and it is expected to continue growing at a CAGR of 4.3% between 2021 and 2026. The industry is seeing rapid growth due to factors like a rising number of travelers, changing consumer preferences, and advancements in technology.

Within the hospitality industry, franchising has become an increasingly popular business model for companies like Choice Hotels International, Inc. (CHH). CHH is a hospitality company that offers franchising, brand management, and reservations systems to its franchisees. The company's value proposition is to offer high-quality, affordable hotels under a range of brand names, backed by the support of a global franchising network.

In this blog post, we will explore the business model of CHH and its impact on the hospitality industry. We will also examine how the company generates revenue, its customer segments, key partners, and resources, as well as its key costs and revenue streams.

Industry Overview

The hospitality industry has seen significant growth over the years, with the advent of new technologies and changing consumer preferences. According to a report by ResearchAndMarkets.com, the global hotel industry revenue is expected to reach $702.74 billion by 2026, growing at a CAGR of 4.2% from 2021 to 2026. This growth is attributed to factors like an increase in business travel, growing disposable income, and the rise of the middle class in emerging markets.

• The global travel and tourism industry is one of the world's largest industries, with a total contribution of over $7.6 trillion to the global economy in 2016.
• In 2020, the COVID-19 pandemic had a significant impact on the hospitality industry, resulting in a massive decline in hotel occupancy rates and revenue. However, with the distribution of vaccines globally and the easing of travel restrictions, the industry is slowly recovering.
• Mainstream hotels account for over 60% of the global accommodation market, with budget hotels accounting for the rest.

Key Partnerships

Choice Hotels International, Inc. (CHH) has established several key partnerships with various entities to drive business growth and expansion. These partnerships include:

• Franchisees: CHH partners with franchisees to expand its brand presence globally. The franchisees provide the resources required to manage and operate hotels under the CHH brand.
• Technology Partners: CHH works with technology partners to enhance its online presence, distribution systems, and mobile capabilities. These partners help CHH provide its customers with efficient and convenient ways to book rooms and manage reservations.
• Travel Agencies: CHH partners with travel agencies to distribute its hotel inventory and promote its brand. These partnerships enable CHH to reach new customers and increase its revenue streams.
• Credit Card Companies: CHH partners with credit card companies to offer exclusive deals and discounts to customers who use their co-branded credit cards to book rooms. These partnerships help CHH attract and retain customers and drive brand loyalty.
• Local Communities and Governments: CHH partners with local communities and governments to establish new hotels in strategic locations. These partnerships help CHH to secure land, permits, and other resources needed to build new hotels and expand its brand presence.

Overall, CHH's key partnerships support its mission of providing affordable, comfortable, and convenient hotel stay experiences to its customers. Through these partnerships, CHH aims to strengthen its brand, drive business growth, and increase customer satisfaction.

Key Activities

Choice Hotels International, Inc. (CHH) is a hospitality company that offers franchise opportunities to hotel owners and operators. Key activities that CHH undertake to operate its business effectively include:

• Franchise Recruitment: This involves promoting the CHH brand to potential hotel owners and operators to achieve franchise recruitment targets, vetting applicants to ensure they meet the company's standards, and ultimately negotiating and closing franchise agreements.
• Brand Development: To ensure that CHH continues to be competitive in the highly-competitive hospitality industry, the company invests heavily in brand development. This involves building brand awareness across traditional and digital channels, communicating the value proposition of the CHH franchise model, and engaging in brand partnerships to further promote the CHH brand.
• Content Development: To attract potential franchisees, CHH must have quality content available that can convince them to join the CHH brand. This includes developing a comprehensive franchise manual that explains the CHH model, creating marketing materials such as brochures, and building educational resources to help franchise owners operate their hotels effectively.
• Operations: CHH is responsible for ongoing operations that are critical to maintaining the CHH brand identity. These activities include training for franchise owners, providing marketing support to promote the CHH brand, and developing technology solutions to streamline and automate back-office activities and reporting.
• Quality Control: CHH places a high degree of importance on ensuring that its hotels meet quality standards established by the CHH brand. Thus, CHH has put in place operational procedures and quality control measures that maintain the integrity of each franchise property. Quality control activities involve regular inspections of franchise properties, evaluation of customer feedback, and implementing corrective actions to ensure customer satisfaction.

Each of these key activities plays an important role in driving CHH's success. By investing in all these areas of operations, CHH can continue to position itself as a leading provider of hotel franchises to owners and operators who want to enter the hospitality industry or expand their existing portfolios.

Key Resources

The success of Choice Hotels International, Inc. heavily relies on a set of key resources that are essential for the company's operations, growth and profitability. Some of the key resources that the company relies on include the following:

• Brand Reputation: Being an established player in the hospitality sector, Choice Hotels capitalizes on its reputation for quality and consistency in delivering excellent services and customer satisfaction. This reputation has enabled the company to attract and retain customers, creating a recurring revenue stream for the company.
• Franchise Partners: Choice Hotels has a diverse network of franchise partners who operate hotels under the company's brands, which include Comfort Inn, Comfort Suites, Quality Inn, Sleep Inn, Clarion, Cambria Suites, MainStay Suites, Suburban Extended Stay and Econo Lodge. These franchise partners provide the necessary investment and local market knowledge to help the company expand its operations in different regions.
• Digital Technology: Choice Hotels invests heavily in digital technology to streamline its operations, manage its inventory and reservations, and interact with its customers. The company also provides franchisees with digital tools and training to facilitate their day-to-day operations and improve the guest experience through various channels such as mobile apps and social media platforms.
• Human Capital: Choice Hotels' employees are an invaluable resource to the company. From the management team to the cleaning staff, each employee plays a crucial role in the delivery of quality services that meet the company's standards. The company invests in employee training and development programs to improve their skills and expertise, ultimately enhancing the guest experience.
• Real Estate: Choice Hotels' portfolio of hotels is one of the largest in the industry, with over 7,100 hotels in more than 40 countries. The company acquires, develops, and leases properties that meet the company's standards, then partners with franchisees to operate these properties under the company's brands.

These key resources form the backbone of Choice Hotels' operations, helping the company to achieve its strategic objectives, and grow its market share in the hospitality sector.

Value Propositions

Choice Hotels International, Inc. (CHH) delivers a unique value proposition to its customers through a set of key benefits offered by its wide network of hotels, which includes economy, mid-scale, and upscale properties.

• Brand recognition: CHH’s portfolio of brands, including Comfort Inn, Quality Inn, and Clarion, is widely recognized by consumers and business travelers alike, providing reassurance and trust that they will have a high-quality and seamless stay wherever they go.
• Affordability: CHH’s competitive pricing strategy allows for affordable rates across all of its brands, making it an attractive choice for budget-conscious travelers who still expect comfort and quality.
• Choice Privileges Rewards: CHH’s loyalty program, Choice Privileges, rewards customers with points that can be redeemed for free nights, airline miles, and other benefits, encouraging loyalty and repeat business.
• Exceptional guest experience: CHH’s commitment to providing personalized and exceptional guest experiences ensures that guests feel valued and taken care of throughout their stay, leading to positive reviews and word-of-mouth marketing.
• Flexibility: CHH’s diverse portfolio of properties allows for flexibility in meeting the unique needs of different types of travelers, whether they are looking for a budget-friendly option, a high-end experience, or something in between.
• Innovative technology: CHH invests in technology to continually improve the guest experience, including mobile check-in and digital room keys, making the guest’s stay more streamlined and convenient.
• Sustainability: CHH is committed to sustainability and has implemented environmentally friendly practices, such as reducing water usage and energy consumption, to minimize its impact on the planet.

Overall, CHH’s value proposition is centered around providing a wide variety of affordable, high-quality, and personalized hotel options with exceptional guest experiences, brand recognition, loyalty rewards, flexible accommodation options, innovative technology, and an environmentally friendly approach to hospitality. These factors combine to create a compelling value proposition for travelers of all types.

Customer Relationships

Choice Hotels International, Inc. (CHH) focuses on building a strong customer relationship with its guests by providing personalized experiences and exceptional guest services. CHH understands that customer satisfaction is crucial to the success of its business, and therefore, strives to offer innovative solutions to enhance customer experience. Customer Segments: CHH serves a diverse group of travelers ranging from budget-conscious guests to business travelers, families, and leisure travelers. CHH has designed customer-centric programs such as Choice Privileges loyalty program, which offers exclusive benefits and rewards to frequent guests, and Choice Hotels mobile app, enabling easy bookings and access to hotel information. Customer Channels: CHH leverages multiple channels to reach out to its customers, including its website, social media platforms, mobile app, and customer service centers. CHH offers 24/7 customer support, enabling guests to report issues and provide feedback on their experience. Customer Relationships: CHH aims to create a long-lasting relationship with its guests by focusing on their needs and preferences. CHH offers customized packages to cater to the specific needs of different guest segments. CHH also continuously seeks feedback from its guests to improve its service quality. Key Activities: CHH ensures that its staff is well-trained to offer seamless guest experience through training, providing resources and tools for staff, and regular performance reviews. CHH invests in technology infrastructure to enable frictionless guest experiences. Revenue Streams: CHH generates revenue through room bookings, franchise fees, royalty fees, and marketing and reservation system fees. Cost Structure: The primary costs for CHH include overhead costs, marketing expenses, IT infrastructure maintenance, and franchisee support. CHH optimizes its operational costs by automating its core business processes and continuously monitoring its expenses. In summary, CHH values its customer relationships and aims to provide exceptional customer experience by leveraging innovative technology solutions and customized programs.

Channels

Choice Hotels International, Inc. utilizes various channels to reach its target customers and promote its services. These channels include:

• Direct Bookings: Customers can book their rooms directly through Choice Hotels International, Inc. website or mobile app. This channel allows the company to own the customer relationship and gather data for further marketing purposes.
• Online Travel Agencies (OTAs): Choice Hotels International, Inc. also partners with OTAs such as Expedia, Booking.com, and TripAdvisor. These partners allow the company to reach a wider audience with minimal marketing costs but they take a commission on each booking.
• Call Centers: The company operates call centers that provide customer support for reservations, customer queries, and feedback. The call center agents are trained to provide high-quality customer service, which can lead to repeat business.
• Franchisees: Choice Hotels International, Inc. has a network of franchisees who promote Choice Hotels' brand and services to their local communities. They can offer promotions and special deals to attract customers.
• Corporate customers: Choice Hotels International, Inc. has a sales team dedicated to serving corporate clients, including travel management companies and business travel departments. The sales team reaches out to these customers to provide customized offers and discounts to gain corporate business.
• Social Media: Choice Hotels International, Inc. uses social media channels such as Facebook, Twitter and Instagram to promote its brand, engage with customers, offer promotions and showcase its hotels and services.

By using these channels, Choice Hotels International, Inc. is able to reach a diverse set of customers and provide them with a range of booking options to fit their preferences.

Customer Segments

Choice Hotels International, Inc. (CHH) caters to a variety of customers, catering primarily to middle-class travelers.

• Families: CHH provides family-friendly accommodations with amenities such as swimming pools, free breakfast, and in-room kitchenettes that appeal to families traveling on vacation.
• Business travelers: With over 6,900 hotels dotting more than 40 countries, CHH has a global presence, making it suitable for business travelers who rely on staying in upscale hotels to meet their work needs.
• Group travelers: CHH's hotels have ample space and group rates, enabling them to cater to sports teams, school trips, and other similar groups.
• Solo travelers: Budget-focused solo travelers that are looking for safe, clean, and affordable accommodations while traveling frequent CHH.

CHH also targets customer segments based on interest, such as budget-conscious travelers, extended stay travelers, pet-friendly travelers, and environmentally friendly travelers. Such niche segments allow CHH to provide personalized hospitality offerings that better meet the specific needs of those customer segments.

Cost Structure

The cost structure of Choice Hotels International, Inc. (CHH) is mainly focused on operating costs and franchise fees. The company's revenue comes from franchise fees, royalty fees, and other fees from hotels under its franchise system. To maintain the brand image and customer loyalty, the company invests heavily in its marketing and advertising initiatives.

• Operating Costs: CHH has to invest in various areas, such as market research, employee salaries, technology, and infrastructure, to maintain its service quality standards. The company has to invest in maintaining its hotels, including renovation, repairs, and maintenance. These costs can pose as a significant burden on its cost structure.
• Marketing and Advertising Costs: CHH relies heavily on its brand image to attract customers. As a result, the company has to maintain its marketing and advertising initiatives to promote its services and brand. These initiatives are geared towards retaining existing customers and capturing potential customers. The company's marketing costs include online and offline promotion, publicity events, and strategic partnerships.
• Franchise Fees: As a franchisor, CHH earns revenue from franchise fees it charges to franchisees who wish to operate a hotel under the company's brand. The franchise fees charged cover inclusion in the company's loyalty program, access to the company's reservation system, training and support, and other essential services. The company's royalty fees comprise a percentage of the franchisee's revenue, ensuring that the company has a significant revenue stream.

In summary, the cost structure of CHH is centered around maintaining service quality standards, advertising and marketing initiatives, and supporting its franchisees. These costs are essential to maintain the company's brand, attract customers, and retain its market position in the hospitality industry.

Revenue Streams

Choice Hotels International, Inc. (CHH) generates its revenue through the following streams:

• Franchise Fees: The company earns revenue through the collection of franchise fees from its franchisees. These fees are paid by the franchisee to CHH in exchange for the right to use the company's brand name, business model, and support services such as advertising, training, and procurement. The franchise fee structure includes an initial fee paid when a franchise agreement is signed and ongoing fees paid as a percentage of the franchisee's gross room revenue.
• Royalty Fees: CHH also generates revenue through the collection of royalty fees from its franchisees. These fees are a percentage of the franchisee's gross room revenue and are paid to CHH on an ongoing basis for the duration of the franchise agreement. Royalty fees are typically lower than franchise fees and are intended to cover the ongoing support and services provided by CHH to its franchisees.
• Marketing and Reservation Fees: CHH generates revenue from marketing and reservation fees paid by its franchisees. These fees are typically a percentage of the franchisee's gross room revenue and are used to fund CHH's marketing and advertising programs as well as its central reservation system. These fees ensure that CHH's brand is marketed effectively and reservations are centralized, making it easier for consumers to book rooms at CHH properties.
• Other Revenue Streams: CHH also generates revenue through other channels, such as the sale of proprietary software and systems to its franchisees, the licensing of its brand name for use in other industries, and other ancillary services such as consulting and training. While these revenue streams may be smaller than franchise, royalty, and marketing fees, they are an important source of diversification and growth for the company.

Conclusion

Choice Hotels International, Inc. (CHH) is a well-established hospitality company that operates several franchise brands across the globe. Through its unique Business Model Canvas, CHH has been able to achieve its goals of expanding its market share, driving revenue growth, and creating value for its stakeholders.

With its customer-centric approach, CHH has successfully positioned itself as a leader in the hospitality industry. Its strong brand recognition and diverse portfolio of hotel brands give it a competitive edge over its rivals. Additionally, CHH's use of technology to improve customer experience and streamline operations has proved to be a game-changer.

In conclusion, the Business Model Canvas of Choice Hotels International, Inc. highlights how an organization can achieve success through sound strategic planning, customer focus, innovation, and a commitment to delivering value. Through its continued efforts to transform the hospitality industry, CHH is poised for sustained growth and success in the years to come.

• Key takeaways:
• CHH's unique Business Model Canvas has helped it achieve its goals and remain competitive in the hospitality industry
• Customer focus, innovation, and a commitment to delivering value are essential to the success of any organization
• CHH's use of technology has helped it streamline operations, improve customer experience, and gain a competitive edge
• CHH's strong brand recognition and diverse portfolio of hotel brands give it a competitive edge over its rivals