Jameson Signs Off On Signature Acquisition
<B> Jameson Signs Off On Signature Acquisition</B>
By Bob Curley
<I>Indianapolis</I> - Committed to spending $100 million on expansion in 1999 and 2000, Jameson Inns Inc. last month accelerated its growth with the acquisition of Signature Inns, a 25-property chain with a total of 2,977 rooms in six Midwestern states. Jameson owns or operates 85 limited service properties (totaling 4,095 rooms) in six Southeastern states.
The stock and cash deal will combine corporate operations under Jameson Hospitality LLC, but the newly acquired properties will continue to operate under the Signature name.
Jameson Hospitality president and CFO Craig Kitchin said the Signature brand has a big following in the Midwest that Jameson currently lacks. On the other hand, the acquisition gives Jameson entrée to new markets as the chain's expansion plans move forward, he noted. Plans call for construction of approximately 15 new Jameson Inns in 1999, totaling 1,000 rooms, at a cost of $50 million.
The company also will spend about $50 million in 2000 on new Signature Inns. Both Jameson and Signature Inns could have a presence in some larger markets, Kitchin said.
Rolfe Shellenberger, a senior consultant with Runzheimer International, said Signature would have had a hard time growing without an infusion of capital from a company like Jameson.
The deal also strengthens Jameson's presence in the business travel market. Unlike Jameson Inns, for example, all Signature Inns include meeting facilities, typically accommodating up to 100 attendees. Corporate meetings represent about 5 percent of Signature's business, Kitchin said.
Business travelers also will benefit from a combined reservation system, and the company is considering expanding Signature's frequent traveler program to include the Jameson properties.
Jameson chairman and CEO Thomas Kitchin said the merger with Signature was a good strategic fit because neither chain is franchised. "This allows us to continue to be able to focus on providing our hotel guests with more consistent and predictable lodging than our competition," he said.
Both Jameson and Signature target "price and quality-conscious business and leisure travelers," according to a company press release. Jameson Inns compete with chains such as Hampton Inns and Comfort Inns; Signature competes with these brands as well as more up-market marquees like Courtyard by Marriott and Fairfield Inns.
Shellenberger said the Jameson acquisition could help Signature compete with Courtyard and Fairfield if the new owners invest some capital into Signature properties. That's likely to happen, said Craig Kitchin, acknowledging that "there's probably some room for updating and further refurbishment."
The merger between Jameson and Signature is evidence of the continuing consolidation in the hotel industry, Shellenberger noted. "If they can brand these properties and set up consistency of management, they probably can improve revenues," he said. The bad news, though, is that consolidation often leads to higher rates.
But Kitchin said that while increases may happen in the course of normal business trends, "we have no plans to raise rates because of the merger."
Combined, Jameson and Signature Inns generated $81.2 million in room revenues in 1998.