February 1, 1998 in Nation/World

Franchise Fever Hits Lodging Industry Hotel Operators Turn To Franchises To Gain An Edge

By The Spokesman-Review
 

The sun set on the Suntree Inns name in January.

The three properties surrendered to the horde of lodging franchises that has surged into the Northwest over the last decade.

Independent motels can’t match the name recognition and resources a franchised property can offer, said Tanya Guenther, vice president of GMCO Inc.

GMCO owns the three former Suntrees, as well as the Ramada Inn near the North Division Y in North Spokane and the Super 8 near Spokane International Airport.

At Hospitality Associates Inc., President Terry Wynia said he would not get involved with a project without franchise participation.

His Spokane Valley company operates almost 60 properties in 10 Western states, he said. As many as a dozen more could be added this year.

Another Valley-based company, kVc Development, also manages properties all over the West.

Wynia and Guenther said they admire the Barbieri family for taking Cavanaughs Hospitality Corp. public. The additional resources from the sale of stock, Wynia said, should enable the family to establish the chain as a strong regional franchise that the Northwest has lacked since the Red Lion Inns were bought out.

“A lot of people prefer to do business with a locally held chain,” he said, comparing the response to the migration of accounts to community banks as mergers create superregional behemoths.

Spokane has not been immune to the wave of consolidations. In just the last 3 years, for example, the downtown Sheraton Hotel became a Red Lion, then a Doubletree Inn, a chain owned by Promus Hotel Corp., the third-largest hotel franchise system in the United States.

Holiday Inn and Marriott, No. 1 and No. 2 nationally, are also in the market.

Fighting that kind of muscle was a losing battle for GMCO, Guenther said. Travelers are less willing to take a chance on a name they don’t know when they’re in an unfamiliar town.

“Brand names are just where peoples’ thinking is,” said Guenther, who said that focus was not so strong when Suntree was launched in 1985.

As of Jan. 1, the Suntree 8 at 123 S. Post became a Ramada Limited, she said. The property at 211 S. Division is now a Howard Johnson Motor Inn. And the motel at 3705 W. Fifth in Post Falls is a Howard Johnson Express.

The Ramada in North Spokane was a Best Western until six months ago. Guenther said GMCO officials decided to change the affiliation because there were six other Best Westerns in the Spokane area.

“You don’t want to have that much of one product,” she said.

Before branding its properties, Guenther said GMCO was approached by numerous franchises that wanted a place in Spokane. But the company wanted to be sure its partners would not oversaturate the market.

GMCO is spending a substantial amount of money to upgrade the former Suntrees, she said, because adopting a national brand commits the company to maintaining the quality standards that chain’s customers expect.

And the franchises will get a solid percentage of revenues in return for plugging the Spokane and Post Falls units into a national reservation system.

The payoff for the newly converted properties won’t be known for some time, Guenther said, but GMCO has noticed an increase in bookings at its Ramada.

The company, she added, is excited about introducing the Howard Johnson name to the Spokane market. New here, the company has operated for generations in the East.

Wynia said Hospitality Associates operates its properties under one of eight franchises that specialize in its niche - midsized, limited-service motels.

Wynia said as many as 40 chains cater to consumers who want that particular kind of accommodation. Dozens of other chains target market segments, he said.

Wynia, who has been in the hospitality business 38 years, said the industry did not begin to fragment until the 1980s. At the same time, he said, franchises began to move into what until then had been a region dominated by independent operators.

Rob Wilson, vice president of North American development for Best Western, said franchise activity in the Northwest remained low for an unusually long period because an overbuilt industry did not have the resources to take on strong regional players until the business cycle began to turn around 1990.

But once the invasion began, he said, the buildup was swift. “Everyone had to catch up,” he said.

Wilson said Best Western’s growth, which has averaged about 4 percent nationally since 1990, may have been as high as 6 percent over the same period in Washington, Oregon, Idaho and Montana.

Best Western is a nonprofit association in which members share advertising and other services, he noted. For-profit companies typically expand more aggressively because fees from new properties help satisfy shareholder demand for a return on their investment.

Many offer to become joint-venture partners, or provide seed money for construction, Wilson said.

Wynia said franchises mostly act as go-betweens who introduce hospitality specialists to owners of real estate or existing hotels who want help developing their property.

“There are a lot of ways to put deals together,” he said.

Wynia said Hospitality usually has about a 50 percent interest in a property it manages. The company has a very small staff, only eight, and hires out everything from accounting to architecture.

Despite the boom in hotel construction, Wynia said he does not expect a slowdown anytime soon. Industry surveys, he said, show building is barely staying ahead of the demand for rooms, in part because many of the properties that date from the 1950s and 1960s are nearing obsolescence.

The opportunities, he said, remain tremendous.

, DataTimes


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