Having served as a U.S. Navy officer in surface warfare and strategic planning from 1987 to 1993, Pat Pacious is no stranger to navigating rough waters with foresight and determination. Serving as Choice Hotels International CEO since 2017, Pacious has recently led the company through one of the most challenging times in the history of the hotel industry, remaining focused on both brand development and enhancing ROI for franchisees, who currently number over 13,000.
As a result of the efforts from Pacious and his team, the company has seen RevPAR growth that has outperformed the hotel industry for nearly three years. This year’s achievements also include the acquisition of Radisson Hotels Americas and an agreement with ServiceStar Capital Management to develop 20 new Everhome Suites hotels, significantly expanding Choice’s presence in the vibrant extended-stay market. Both agreements took perseverance and many years of relationship building, Pacious says.
Relationships with franchisees are also critical to maintain, and Pacious notes that in any great relationship “you must do two things well: listen and communicate.” The company’s attention to the needs and goals of its owners has resulted in one of the industry’s highest voluntary franchisee retention rates. Pacious has personally advocated for small-business support from the government, working with industry partners to bring about tangible results. He has also helped to pave the way for minority entrepreneurs to succeed, and over the last 19-plus years, the company has awarded and financially supported more than 325 franchise agreements with underrepresented minority and veteran entrepreneurs, including 17 deals awarded in 2022 and 24 in 2021.
For his leadership, visionary brand development, focus on diversity and inclusion, and government advocacy, we’re proud to recognize Pat Pacious as our 2022 Person of the Year. In the following discussion with LODGING, Pacious not only overviews the company’s successes, but also the priorities, practices, and personal qualities behind the achievements.
How has your service as a U.S. Navy officer informed your business leadership approach?
As an officer on the USS Josephus Daniels at the age of 23 in charge of 150 engineers, you grow up fast. Military servicemen and women come from all walks of life, and I quickly learned that successful leaders must listen to and respect all of their shipmates, especially those whose expertise and experience differs the most from their own. To make good leadership decisions, you must constantly engage with your people and be present on the deckplates—this was a concept known as Management by Walking Around.
There is another wise military principle I learned: You get what you inspect, not what you expect. On the Josephus Daniels, every day I made it a point to walk the ship and engage with my entire team, from the bridge down to the boiler room. This is a valuable lesson I still use every day at Choice Hotels. In today’s world, it means setting clear goals and partnering with others to drive the desired outcome. The “ship” is now clearly larger and more widespread. Outside of our corporate offices, I make it a point to visit our franchisees in their offices and hotels and our franchise support teams out in the field to see firsthand the hotel rooms our guests experience all around the world.
The Navy also taught me that at some point you will be expected to lead your people through a crisis—uncharted territory where there is no standard operating procedure and no playbook to guide you. Six years in the Navy, including time in the Persian Gulf and in strategic meetings at the Pentagon, provided me with a multitude of these character-building crisis scenarios. I think about the opening scene of Saving Private Ryan, when a young soldier yells at Tom Hanks through the fog of war on Omaha Beach, “What do we do now, sir?!” Those are the times when leadership matters: when you have to set the direction, instill confidence, and just start moving forward!
In my business career, I have leaned on the wisdom I gained in my early days in the Navy. When the pandemic struck, I was in many respects better prepared for the crisis as a result. The quick and decisive actions we took in the early days set the stage for our complete commitment to helping our owners keep their hotels open—which we did through those early tough months—and our commitment to being the first hotel company to recover from the pandemic—which we did last year.
Can you elaborate on the results of your small-business advocacy efforts with Congress during the pandemic?
In late February 2020, I traveled to a new Comfort Suites outside of Houston to meet with the owners and its general manager, who turned out to be a fellow Navy veteran. As I was leaving, the GM came rushing out to the parking lot to give me a small gift, a U.S. Navy lapel pin.
That was to be my last hotel visit for some time, as in early March the pandemic in the U.S. began to unfold. A couple of weeks later, I found myself with an invitation to the White House to discuss, alongside many of my colleagues, what the government could do to help the lodging industry. My team and I immediately sat down to identify specific ideas we believed could provide both short- and long-term relief for our hotel owners in the wake of the economic shutdown. As I sat directly across the table from the president of the United States, in my pocket was that lapel pin—a reminder of the thousands of small-business entrepreneurs and their staff across our system who were counting on us at that moment to help them through the looming crisis.
In that meeting, I provided the president with the specific solutions my team and I had identified to soften the economic impact of the pandemic on our hotels, and he listened.
Our team worked tirelessly during that time to successfully change several Small Business Administration rules limiting access to relief programs, allowing our hotel owners to retain their workers and meet their debt service. Alongside our industry partners, AHLA, U.S. Travel, AAHOA, and the IFA, we met with the leadership in the House of Representatives and in the Senate, with key committee chairs and members, and with senior Administration officials including the labor secretary, the treasury secretary, and other members of the Cabinet. We used these opportunities to support financial relief for all small businesses struggling to survive.
As a result of these industry efforts, Congress and the Administration swiftly implemented the Paycheck Protection Program, saving jobs and allowing our small-business franchisees to keep the lights on and the doors open. We also advocated for a second round of PPP loans, expanded loan forgiveness, enhanced lender flexibility, broader eligibility for Economic Injury Disaster Loans, and liability protection.
I continue to work with elected officials at the federal and state levels to advance priorities important to our franchisees. And I’ve kept that lapel pin with me as a constant reminder of the many small-business owners and their staff that depend on us.
What is your approach to maintaining a great franchisor/franchisee relationship?
Our company’s purpose statement puts our franchisees at the center of what we do—and that has been our guiding star for 80 years. We’re proud to have earned the trust of so many small-business owners by demonstrating consistently that, though they may be in business for themselves, they’re never by themselves. Our franchisees are entrepreneurs who, in many cases, started with nothing, but may now own multiple hotels. Today, we are seeing second- and third-generation hotel owners become part of the Choice family as these owners pass down their businesses to their own families.
Our goal is and has always been to connect directly with our franchisees. During the pandemic, we mobilized our regional and local teams—our area directors and other personnel in the field, and our teams at headquarters—to make sure we were reaching out to all our franchisees directly and working to respond to their immediate needs. We conducted more than 49,000 individual consultations with hotel owners and operators to help them with their business during that time.
By listening to our owners, we have known for years that rising operating costs are a major concern. We were already working on our successful cost-saving Housekeeping Upon Request program even before the pandemic began. In September of this year, we launched Your Key to Profit, a program that provides a range of property-specific opportunities to help hoteliers lower their total cost of ownership while helping fuel profitability regardless of brand segment. This tool is just one example of how we’ve proactively evolved our technology to enhance the hotel ownership experience, helping drive our industry-leading voluntary franchisee retention rate.
What would you consider to be your most significant accomplishments in brand development?
My brand focus over the years has always been twofold: improving the return on investment for our hotel owners and adding new, innovative brands. In the 17-plus years that I have been with Choice, our team has revitalized our legacy brands, launched two growing upscale brands, and since I became CEO in 2017, we’ve introduced two new distinctive midscale brand offerings as well as acquired 10 brands that complement our portfolio.
Within the last decade alone, along with our franchisees, we invested $2.5 billion into refreshing the company’s flagship Comfort brand and unveiled an exciting new prototype, we have reinvigorated our legacy extended-stay brands, and we significantly improved our business delivery to our entire portfolio of hotels by over one third—driving owner ROI higher.
Our new brand launches have been tailored to meet the changing demands of owners and guests alike. The Cambria and Ascend Hotel Collection brand launches positioned Choice to be a leader in the upscale segment. Cambria is having its best year ever, growing to more than 60 Cambria hotels open with 69 more in the pipeline. And Ascend, the industry’s first soft brand, continues to attract unique independent upscale hotels seeking the power of our distribution engine.
In 2018, we successfully launched Clarion Pointe, a midscale lifestyle brand, that now has over 50 hotels open. And in 2020, we launched Everhome Suites, a new-construction midscale extended-stay brand that marries Choice’s eight decades of midscale expertise with our proven extended-stay operating model. Everhome Suites is now on the cusp of significant growth. The first property opened in Corona, California, in September of this year, and we now have more than 55 hotels in the pipeline.
We have also selectively acquired a complementary set of brands in the last four years, including WoodSpring Suites in 2018, which we have developed into the fastest-growing brand in its segment and grown its RevPAR an astounding 27 percent since 2019, and this past August, the Radisson Americas’ nine brands, which encompass more than 600 hotels and approximately 67,000 rooms in attractive destinations. The transaction is the latest chapter in our history of doing smart acquisitions that bring our best-in-class franchising platform to adjacent hotel segments and to a new set of hotel owners. I am confident our focus on owner ROI will significantly benefit these brand owners moving forward.
Choice Hotels is a different company today from when I started working here in 2005, with an expanded upscale and upper-upscale presence, a leadership role in extended stay, and a proud legacy as an industry leader in midscale, upper midscale, and economy.
What personal qualities do you feel have been essential to driving the company’s recent growth?
When you look at our company’s many successes over the past two to three years, it has been largely due to two attributes: perseverance and a team mindset built on deep, enduring relationships.
In 2022, Choice took a significant leap forward in both our competitive position in the industry and our future growth potential. For 11 consecutive quarters, our hotel portfolio’s RevPAR growth has outperformed the hotel industry, confirming that our strategy of focusing our investments on driving new business to our hotels is paying off. The perseverance we demonstrated in 2020 allowed our hotels to recover faster than the rest of the industry, and we exceeded our pre-pandemic performance in 2021. We have built on that strength this year and are confident that the changes we are observing in both leisure and business travel behavior—all of which favor our brands—will enable our hotels to maximize their growth opportunities well into the future.
For me personally, the Radisson addition this summer spans many years of effort and embodies the famous quote: Perseverance is not a long race; it is many short races one after the other. The combination of Radisson and Choice always made strategic sense. Beginning in 2016, Radisson ownership changed hands multiple times, and over that time we made several approaches to acquire the brands. Each attempt became its own short race in a longer journey to achieve that goal. One of those unsuccessful past attempts involved a 26-hour round trip flight to Singapore for what was expected to be several days of discussions that in fact turned out to be a five-minute meeting for me, as we discovered upon landing that the seller had decided to go in a different direction. Each time we came up short, we overcame the disappointment, developed personal relationships with the new owners, and kept a strategic dialogue open. After we finally completed the transaction on our third try this year, the seller reminded me that our personal relationship began at a meeting we had had 12 years ago. When you hang around the hoop long enough, you might just get what you are seeking.
Our agreement with ServiceStar is another great example of the power of alliance building. It began four years ago when their leadership met ours at our key client event. They quickly recognized the value of our WoodSpring Suites brand and have become one of our largest owners. Through a lot of hard work on both sides navigating the changing supply chain and hotel financing dynamics, that relationship has now blossomed into a mutually beneficial agreement to grow Everhome Suites by an additional 20 hotels—an exciting opportunity to grow the next generation of hotels in the midscale extended-stay segment.
What initiatives have you recently launched that promote diversity and inclusion within the Choice portfolio?
In 2020, we launched the Choice Hotels Owners African American Alliance (CHOAAA)—the hotel industry’s first franchisee-focused group dedicated to Black and African American hoteliers. CHOAAA provides ongoing representation, support, and advocacy for these underrepresented entrepreneurs. In 2022, we developed the newly enhanced HERtels by Choice Hotels, a program that leverages a multifaceted approach to advance and empower women hotel ownership.
How would you describe the outlook for Choice Hotels in 2023, as a franchisor and an employer?
The future has never been brighter for our brands, our franchisees, and our associates. Our brands have been outperforming the industry in RevPAR growth for nearly three years now, demonstrating that we have successfully moved our entire system into a stronger competitive position.
In 2023, we will complete the Radisson brands integration into our world-class business delivery engine, vastly improving the performance of these brands while expanding our consumer reach and the number of attractive destinations for all our franchisees and guests.
Our associates are very optimistic as well. They recognize that Choice Hotels is a unique company: it is small enough to know that what you do here makes a difference; and large enough to know that what you do here matters to so many guests, owners, and their staff. Emerging from the pandemic in this stronger role, we are now a talent magnet for a diverse set of professionals who punch above their weight and are challenging and winning against the larger players on several new fronts. From technology innovation to revenue management to brand growth leadership, our associates are breaking new ground and setting the pace for the rest of the industry. And the exciting growth of our business is opening doors to new opportunities for them as they grow their careers in 2023 and beyond.