With its portfoliowide renovations of recent
years finished at last, Extended Stay America now is focusing on selling and
franchising existing hotels and franchising new-construction properties.
CEO Gerry Lopez said during ESA's second-quarter
earnings call that the company is "at the term sheet phase" with
eight owner-operators or hotel developers to buy and franchise approximately 90
of ESA's more than 625 properties. The company expects to sell and franchise a
total of 150 properties within the next five years, Lopez said. Unrelated to
any franchise activity, the company sold four properties for $60.7 million in
May.
ESA also is franchising new construction hotels,
a process Lopez described as "very active" following the release of
ESA's franchise disclosure document in June. He said the company expects to begin
construction on 85 or more properties using ESA's new prototype during the next
few years. That is in addition to the hotels ESA expects to construct and own
itself using capital gained from the sale of its existing properties. Lopez
said the company has four purchase agreements signed for land to build the new owned
hotels, and he anticipates it'll sign four more in August.
During the second
quarter, ESA saw revenue per available room increase 2.4 percent year over
year. Corporate sales growth was 2 percent to 2.5 percent slower than the
company expected. That softness, Lopez said, isn't an industry-specific demand
problem but a geographic demand problem. Corporate demand in the western U.S.
was softer than in other regions. Net income declined 19 percent year over year
to $49.7 million, impacted by a one-time tax benefit the company received in
2016 and by a loss on its sale of hotels.