Outsourcing Boosts Extended Stays

By Linda Humphrey / September 15, 1996

<H1>Outsourcing Boosts Extended Stays</H1>- Linda Humphrey

BTN hotel editor Linda Humphrey recently caught up with Choice Hotels International president Don Landry in Alaska and Colorado, finding the 3,600-property franchise company on the verge of launching the extended stay brand MainStay Suites and a new meetings program.

At the helm for a year and a half, the New Orleans native oversaw a record 436 new franchise agreements over the past fiscal year for the Comfort, Clarion, Econo Lodge, MainStay Suites, Rodeway, Sleep Inn and Quality Inn brands.

BTN: How is the industry changing?

Don Landry: One of the dramatic changes we see, related to corporate downsizing, is that companies that may have had a specialist in each headquarters have decided to have one headquarters with people who will travel and cover the whole country.

What results from that-and from the downsizing where total disciplines are now outsourced-is that you have more businesspeople doing extended job assignments.

They will spend three weeks in an office doing a job that a full-time employee once did year-round. That creates a demand for an extended-stay product, so we created MainStay Suites. It's a mini-apartment with a full kitchen, huge work area with phone and dataport, and even little things like Bulletin Board/Forums. It has larger closets and irons and ironing boards, so it feels more like an apartment than a hotel room.

Rates will be about $55 to $60 a night-as opposed to [Marriott's] Residence Inn, which is about $85 to $95 per night. The first MainStay will open in September in Plano, Texas.

In my 29 years in this business, I've never seen an opportunity this big. You have Residence Inn, Hawthorne Suites and Homewood Suites, which are all around $80, and then it drops way down to the Suburban Inns and the Homestead Villages.

BTN: Hotel analysts at the NYU Hospitality Investment Conference in June said that the extended-stay market is thin and that growth will be nowhere near what we've seen projected.

DL: The hotel investment community was also leery about the concept of limited-service hotels. They were leery about the concept of all-suite hotels. The hotel investment community being leery about extended stay is not a surprise at all.

The extended stay market demand is eight times greater than supply. There are a couple of dynamics involved here. If you use the definition of five nights or longer, the extended stay market is very, very large. A lot of people use traditional hotels simply because there is no extended stay alternative.

Companies are using more consultants now to do what were once in-house jobs. Those consultants travel, usually on extended assignments. At the same time, we're seeing the greatest growth in start-up businesses in the history of the United States. The growth is a combination of serving the extended stay demand that was always there and meeting the rising demand that's being created from some of these business dynamics.

BTN: Will extended stay properties cut into the market for corporate apartments?

DL: Very possibly, because many corporate apartments require a 30-day minimum stay. And many of these assignments certainly are not intended to last 30 days.

Corporate apartments have really worked primarily for relocation. MainStay is more targeted toward the consultant on an assignment, although I'm sure we will get relocation as well.

BTN: Do you have any other new brands in the works?

DL: We are doing research now on a midpriced, all-inclusive resort product. Carnival and Royal Caribbean cruise lines have made midpriced all-inclusive a popular concept. They've been very good at marketing to the middle-income American, and we feel that opportunity flows very well into the midpriced all-inclusive resort.

BTN: What are your plans for targeting corporate meetings at the Clarion brand?

DL: We'll be announcing a new meetings program called Explore the World of Clarion at our convention next month. We will have a 100 percent satisfaction guarantee, which is unique for a meetings program. We now have 50 people in the field to sell the hotel, compared with just 16 a year ago.

BTN: We've heard that more meetings attendees are checking out of hotels early, leading to the advent of the early-departure fee. Now that most major chains have adopted the fees, will you consider adding them as well?

DL: Early departures aren't a new problem. We don't have an early-departure fee, and our properties probably will not add them. The business traveler is certainly subjected to lots of abuses, and they don't need one more.

BTN: What are the latest developments with your other business travel brand, Quality Inns?

DL: We're adding free local calls, in-room coffee makers and a 100 percent satisfaction guarantee to the Quality Executive Rooms by Sept. 1. We've also developed a new mattress with Serta, called the Quality Sleeper, which will roll out Jan. 1.

BTN: How much can we expect rates to go up next year?

DL: I suggest that you plan on hotel room rates escalating at about 5 percent a year.

BTN: What is your latest international expansion strategy?

DL: We've been overseas for about nine years now and have about 600 hotels outside the United States. The first phase was to plant the flags and establish beachheads in countries. Now our focus is very intense on key countries. Last year we focused on Canada, and we grew to 206 hotels there, which makes us the largest hotel chain in Canada. Over the past two years we've also focused heavily on France, where we now have 165 properties. This year we're focusing on Mexico, the Caribbean and Germany.

BTN: What are your plans for Germany?

DL: We would like to do in Germany what we just did in the U.K.: partner with an existing hotel company that is solidly established as a national chain. In the U.K. we purchased a percentage of ownership in Friendly hotels and converted all the hotels to either Comforts or Qualitys. And we'd like to do the same thing in Germany-take a national hotel chain and turbo-charge it with the global marketing power of Choice.

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