Midprice, Econ. Hotels Consolidate
Recent acquisition, merger and launch activity in the crowded midprice and economy categories are the latest signs of intense competition and change in these sectors.
La Quinta Corp. last month announced it acquired Baymont Inns & Suites, a chain of 86 midprice without food and beverage hotels, and Cendant Hotels Group said it was merging two of its economy brands, Villager and Knights Inn, under the Knights Inn brand. Additionally, Choice Hotels International in May announced it will debut in 2006 a new midprice without F&B all-suites brand.
Multi-price point hotel companies' midprice brands, such as Hilton Garden Inn, Four Points by Sheraton, which is part of Starwood Hotels & Resorts Worldwide, and Courtyard by Marriott, have experienced rapid expansion during the past few years. They have benefited from their parents' existing relationships with corporate buyers. Facing that competition, such companies as La Quinta, Cendant and Choice are under pressure to grow.
The acquisition of Baymont, which has a significant presence in the Midwest, makes Irving, Texas-based La Quinta, which is strong in the Southwest, a stronger national brand with 178 hotels, containing almost 17,000 rooms in 32 states. The deal, which includes eight other similar hotels also owned by Baymont parent, the Marcus Corp., was valued at $395 million. Rather than convert the hotels to the La Quinta name, the company intends to manage them as a separate brand.
In announcing the deal, Butch Cash, La Quinta president and CEO, cited Baymont's expansion potential, describing it as a "brand positioned for growth."
With 196 locations, Cendant's Knights Inn chain significantly is larger than the 61-property Villager system. "The merger is designed to strengthen the competitive position of the former Villager properties," said Steve Rudnitsky, Cendant Hotel Group chairman and CEO. "At the same time, the move should help us revitalize the Knights Inn brand."
Synergies always have existed between the two brands, Rudnitsky said. Combining them will allow Cendant to leverage those similarities. Post-merger, Parsippany, N.J.-based Cendant will have seven remaining brands, all in the midprice, economy and budget segments, including Days Inn, Ramada and Wingate Inns International.
The new Choice brand has not yet been named, nor is it clear whether the suite concept will entail a true two-room suite or follow the studio suite approach employed by Marriott's midprice SpringHill Suites chain, against which it would compete.
Like Cendant, Silver Spring, Md.-based Choice has a portfolio of numerous other brands in the midprice, economy and budget sectors, including Comfort, Clarion and Econo Lodge.