Extended Stay America president and CEO Jonathan Halkyard,
who on Jan. 1 succeeded
former CEO Gerry Lopez, said he intends to prioritize three areas in the year
ahead: renewing the company's focus on value-conscious business travelers who
stay a week to multiple months; simplifying internal processes in order to
streamline operations, improve efficiency and fuel organic growth; and increasing
the pace of its franchising.
That first point marks somewhat of an about-face for ESA's
revenue-mix strategy; in recent
years it had been working to attract higher-paying guests staying fewer than
six nights. Halkyard, who spoke to analysts during the company's fourth-quarter
earnings call, said this transient segment has been a growing share of ESA's
revenue since those efforts began but the growth for that segment has probably
reached its apex. "That's because there is still a deep pool of demand
from extended-stay customers, many of them part of our larger corporate
accounts that I think our model is ideally suited to serve," Halkyard
said.
He said ESA's growth in recent years also has created complexity
for the organization and, at times, slowed its decision-making, which he
intends to address via an internal working team. Halkyard said he led a similar
overhaul at Caesars Entertainment and, having also served for two year's as ESA
COO, he feels confident the company can execute the plan. Within this same
vein, he has tasked ESA's chief development officer with reducing the cost of the
prototype the company unveiled in 2016 as part of its ESA
2.0 development plan. "A lower-cost prototype will allow expansion
into a larger number of markets and provide improved financial returns to our franchise
partners and ourselves," said Halkyard. "That work is already
underway, and we expect to complete it in the next couple of months."
Finally, Halkyard said he's building out ESA's franchise
team to accelerate its dealmaking in that space. The company on Tuesday
announced it is offloading 25 owned properties to Three Wall Capital. Those
properties have been re-signed into the ESA portfolio under a 20-year franchise
deal between ESA and Three Wall. Halkyard expects ESA to execute between 10 and
20 additional franchise deals in 2018.
Earnings Results
Fourth-quarter average daily rate increased 4.7 percent year
over year to $67.33, while occupancy declined 1 percentage point to 69.8%. For
the full year, ADR rose 1.3 percent to $67.21 and occupancy increased 0.5 percentage
points to 74.6 percent. Fourth-quarter net income totaled $40.2 million, up 33
percent year over year. Full-year net income reached $172.2 million, up 5.5
percent year over year.
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