Corp. Housing Providers Switch To Franchise Model

Two major U.S.-based corporate housing providers, Marriott ExecuStay and BridgeStreet Corporate Housing Worldwide, seeking new ways to grow, are adjusting their longtime business models. Rather than directly owning or managing the apartments, they increasingly are working with franchisees that own and manage the inventory.

The additional inventory is an advantage for travel managers who include corporate apartments in their hotel programs because they can arrange for apartments in more markets as part of a single negotiation. This especially is convenient when many of the required destinations are in secondary or even tertiary markets. In addition, should buyers have national account status with either Marriott International or Interstate Hotels & Resorts, BridgeStreet's parent, their corporate housing negotiations can be folded into their larger hotel negotiations for transient room nights at regular business hotels.

Marriott now has franchise agreements in 24 markets. The two most recent, which were announced in February, involve apartments in St. Paul and Minneapolis, Minn., and Baltimore and Annapolis, Md.

BridgeStreet has made deals with 17 franchisees in its licensed global partner program. Five deals that were announced in January include locations in Albuquerque, N.M., Denver, Nashville, Raleigh, N.C., Richmond and Tidewater, Va., and Stamford, Conn.

"The increased inventory should allow us to better meet client demand," said Joe Lavin, Marriott ExecuStay executive vice president and managing director. "That's what's driving the new strategy. Now when a travel manager comes to us at the last minute and says, 'We need apartments in 10 cities for our interns this summer,' we'll be better equipped to fill the request."

Marriott's franchising push reached a milestone in January, when the company signed a deal with Wichita, Kansas-based Suite Options that covered apartment inventory in 11 mostly secondary cities, including Tulsa and Oklahoma City, Kansas City, Mo., Little Rock, Ark., Des Moines, Iowa, Dallas, Houston, San Antonio and Austin, Texas, and Jacksonville, Fla., in addition to Wichita.

With 24 markets covered across the country, Marriott is approaching critical mass. "We're trying to create a national distribution network," according to Lavin. "Not only will this assure buyers—and travelers—that they can expect certain standards of customer service, but we'll be able to operate more efficiently by amortizing administrative and marketing expenses."

Yet, for as active as Marriott and BridgeStreet have been in pursuing these opportunities, a third major corporate housing provider, Oakwood Corporate Housing, has opted to steer clear of franchising. "We're sticking with an ownership or management model," said Monica Ramos, global travel account manager.

By contrast, Oakwood intends to grow through internal development. According to Ramos, the issue for the firm is quality and consistency. "We're still managed by the original team that founded the company. The desire is still there to be centrally managed as a way to ensure travelers have a consistent experience across all regions," she said. Most of the inventory is controlled under master leases that Oakwood signs with a building landlord and then manages as a corporate apartment.

In approaching potential locally based franchisees, Marriott and Interstate promote the value of ExecuStay and BridgeStreet, respectively, as well-known brands with high name recognition. According to BridgeStreet president Lee Curtis, the name recognition particularly is important today as the economy struggles to rebound and buyers have a variety of choices. Unlike ExecuStay, BridgeStreet operates outside of the United States in Paris, London and other cities. Marriott Executive Apartments operates internationally.

Marriott clearly is familiar with franchising, which has become the dominant way it expands many of its brands, but especially its midprice Courtyard, Fairfield Inn and SpringHill Suites flags and its two extended stay chains, Residence Inn and TownePlace Suites. Many of its corporate apartment franchisees, in fact, are franchisees of other Marriott brands. CSM Lodging, for example, its partner in St. Paul-Minneapolis, has 26 Courtyards, SpringHills, Residence Inns and TownePlace Suites in its portfolio.

Corporate apartments are intended for bookings of 30 nights or longer, compared with extended stay hotels that cater to stays of five nights or longer. Many corporate apartments are booked for months at a time, if not years. Buyers typically book these fully furnished accommodations for travelers on long-term training or consulting assignments.