00:00Americans were on the move this summer. The White House at least says that travel spending jumped more than 6
00:05% from last year, hitting $122 billion in June.
00:09That bump comes despite some major headwinds for travelers, including higher gas prices.
00:14The national average has remained above $4 a gallon since July 18th, recently reaching $4.14.
00:21For more on the state of the travel consumer, we're joined by Larry Kukulik, CEO of BWH Hotels.
00:28Larry, great to see you. And look, we went through earnings season, and you had a lot of the CEOs
00:33of this very hotel groups, your competitors, talking about a middle class, hoping that it recovers, but facing those higher
00:39gasoline prices.
00:40What are you seeing among the best Western and your other hotel brands? How have consumers been acting this summer?
00:48Good morning. We see travel as being resilient and deliberate.
00:56Travelers looking at the entire cost of the stay, which would include transportation, accommodations, and length of stay.
01:04I would echo the comments that we had a tremendously strong summer in 2026.
01:11Are you seeing a real middle class come back to Donnie's point, Larry?
01:15Or do you think that maybe consumers are just simply trading down for more expensive hotels?
01:22Some may be trading down, which is to our advantage in that we're very strong in the upper mid-scale
01:28and mid-scale segment.
01:29Our summer stays were up 4.3%, with an average daily rate up at least 2%.
01:36We saw that continue through August, where we have a rate up 3% year over year.
01:42Again, I think travel is resilient and deliberate.
01:46People love to travel.
01:48We do see the booking window shortening, though, meaning they're being much more thoughtful with regard to travel.
01:55But they're still traveling.
01:57You know, you've been expanding.
02:00And maybe, like, the core Best Western brand has been shrinking as you push into things like luxury.
02:06And I'm wondering how much of that is an acknowledgment of what Isabella was asking about.
02:11That, yes, the summer was strong, but at the moment, the kind of middle consumer, the one that maybe now
02:18trades down to something that looks like value, isn't a sure bet anymore.
02:21And the business model needs to change to cater towards luxury, which has been holding up.
02:27You know, we acquired World Hotels, our luxury and upscale brand, about six years ago.
02:32You know, that was a very fortunate move on our part in that we do see luxury doing very, very
02:38well.
02:39But at the same time, we have 18 brands across all chain scales.
02:44And we have 4,000 hotels around the globe.
02:47And we also see that balance of travel globally.
02:51But we're very fortunate.
02:52We lean into our loyalty program.
02:54We have over 70 million loyalty program members right now.
02:58And we see our brand contribution of 5.7% over the summer.
03:04So we lean into our strengths.
03:07And mid-scale, upper-mid-scale being that, we also have Surestay brand, which is a value brand.
03:12And right now, they're Rev. Park indexing, which means in their comp set, if 100 is fair share, they're at
03:20127%.
03:22So we do see some trading down.
03:25But those who are less impacted by inflation are traveling and staying at our hotels.
03:32What about your franchisees?
03:33They're facing higher costs and higher labor costs and operating costs.
03:38Talk to us about how the independent owners are maybe just really struggling to make money right now.
03:44Well, they're not struggling.
03:45They're doing well by managing rate and occupancy through, I'll call it, thoughtful revenue management programs.
03:53What I've heard from our hoteliers is that they appreciate the support that we provide them through our model,
04:00by leveraging our buying power through our supply system, by utilizing our revenue management tools.
04:07And, in fact, one of those key costs that are affecting hotels right now is insurance.
04:15And this past year, first of the kind in the industry, we launched our own property liability insurance programs
04:22and general liability insurance programs.
04:25We have great hotels that have great risk management programs that we actually require our hotels to participate in.
04:34And as a result, we were able to partner with an insurance program and launch our own, which greatly reduces
04:41their insurance costs.
04:43Larry, one of the things, though, with this type of model, I mean, like you would in a restaurant that's
04:47doing franchises, for example, right,
04:49is it's harder to control quality.
04:51And for hotels, obviously, that matters hugely because if someone stays in one Best Western and they don't have a
04:56good experience,
04:57they're going to assume that all of them are like that.
04:59How are you ensuring that quality remains the same across all of your various hotels?
05:05We, of course, have a brand management program where we assess our hotels,
05:10but we also lean into a program by which members of our team are in, I'll call it almost,
05:19routine conversations with our hotels as to how they can improve.
05:23We rely heavily on consumer sentiment, and we watch overall experience scores.
05:32We then use AI to, on generally a weekly basis, communicate with our hoteliers with regard to what consumers are
05:41saying about their hotels
05:43and how they need to, I'll call it, react to whatever a consumer's sentiment is with regard to that hotel.
05:52If there is something that needs to be fixed, we want it to be fixed, and we're communicating with our
05:58hotels routinely with regard to that.
06:00But I will say that our hotels are very, very focused on exceeding guest expectations.
06:08And by the way, our number one key performance indicators is our brand overall experience,
06:14which we measure to make sure that we're encouraging our hotels to, again, exceed guest expectations.
06:21Larry, we have around 30 seconds left.
06:23Summer is over, which is very sad, but I guess fall is coming.
06:26Are there any surprisingly red hotspots that people are booking in, especially in the U.S.?
06:33Well, those destinations that do well over holiday weekends, like the one coming up, like beach, coastal, urban cities, are
06:43doing very, very well.
06:45But we are always focused on where consumers are going to travel to, and we watch forward-looking patterns.
06:53We had a strong summer because that's what we do to make sure we're managing yield.
07:00So by way of example, those World Cup cities and those cities that also hosted, I'll call it our 250th
07:07anniversary, this summer, they were up 24%.
07:11You know, we are very thoughtful and deliberate, just like consumers are, with regard to making sure that our doors
07:18are open and we're creating value where they want to travel to.
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